The independent commentary on British political affairs.
The independent commentary on British political affairs.
May 2008
Vol. 11, No. 11
A People's War: Brenda Boardman | The shadow over Brown's plan's to change the way we are governed: … More…
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In all the furore about house prices, one of the least mentioned causes has been the lack of balanced economic growth across the UK economy. The development space in the North is a major asset for the UK, and is another reason why attention needs to be paid to the economic performance of the North of England.
Since 1997 substantial work has been done on regional, sub-regional and city economies in the UK. New government bodies and significant funding have been put in place to tackle economic growth rate disparity. There has been a lot of progress, not least in our understanding of what needs to be done and by whom.
One of the more interesting developments was the launch of the Northern Way in 2004 by the three northern Regional Development Agencies (RDAs). Northern Way’s role is to work at a supra-national level to close the £30bn productivity gap between the north and the south, through improved analysis, policy-making, better use of existing public expenditure, enhanced co-operation between the regions, and promotion of the north to foreign direct investors.
Its success will lead to a more economically sustainable, wealthier and more equitable UK — its knock-on effects should reduce the overheating of the south’s house prices. Any strategy to tackle house prices should pay attention to this broader agenda, long-term though it is.
To find out more, I went to see Northern Way’s new director, Andrew Lewis, at his Newcastle HQ. He is an economist, with a background in the Treasury and more recently at the government office for the north east, where he led on economic issues. The focus of his new job is helping to redress the imbalance in policy-making, traditionally centred on London. This involves making sure that the voice of the north is heard in Whitehall, and that policy takes account of the often very different challenges in the north — housing markets that are failing, greater long-term economic inactivity, lower skills levels, lower rates of business start-ups and a dearth of venture capital.
The goal consists of a progressive agenda of building the economy on skills, innovation, transport and bringing people into the labour market across the north.
So where does this differ from the agenda elsewhere in the UK? ‘Presently we have excellence but no critical mass in the north. We have scope to support innovative processes in business — bringing together expertise in universities and in business clusters’.
The Northern Way strategy focuses on eight city regions as the core drivers of the northern economy: Manchester, Liverpool, Central Lancashire, Tyne and Wear, Tees Valley, Leeds, Sheffield, and Hull and the Humber Ports. These represent 90 per cent of economic activity in the north. Narrowing the productivity gap will be a result of increased productivity in these areas. The strategy allows greater local buy-in, and is more sensitive to local needs, aims and possibilities. It also fits nicely into the government’s sub-national review of economic development.
There are very different policy challenges in the north and the south. In the south, housing supply needs to be expanded; in the north, the focus is on widening the diversity of and improving the housing offer and market renewal in certain areas. In the south transport, through congestion and strains on capacity, is a drag on the economy; in the north transport can be an economic driver and is key to the aim of raising economic performance. This, Andrew Lewis says, will be characterised by faster city rail connections between the cities of the north, particularly across the Pennines — Leeds-Manchester and Sheffield-Manchester up to Newcastle and on to Scotland. This will not only add to competitiveness, it will help these cities to compete together for investment and as a location for venture capital, one of the areas that is holding back the north. Leeds-Manchester would have quite a pull for investors. ‘Our job is to help the sum parts of the north to be cohesive, to pull together to gain critical mass, whether that is getting their voice heard in London, or Brusssels, or among investors in the US or Australia — two areas where we have seen a lot of success. We have to avoid fragmentation in our efforts’. Pan-regional co-operation helps create the maximum economic return for the north, whilst also ensuring that each region plays to its strengths: Tees Valley was never going to win the UK’s largest biotechnology research centre, but its industrial skills base makes it the prime location for the National Industrial Biotechnology Facility — recently launched at Wilton.
The Northern Way has a particular role in providing analysis of the difficulties obstructing development in the north and prescribing policy responses based on research. A prime example of this analysis and response is the identification of business leadership as a problem for the north. In response, Northern Way inspired and funded the launch of the Northern Leadership Academy in 2006, a collaboration between three northern business/management schools. It brings coherence to what was a crowded field and makes the best expertise in the world available through one web portal.
The north has a higher proportion of people on incapacity benefit than other areas of the UK. The approach Northern Way has taken is to use local pilot projects to improve the evidence base. These join up health and employment services and facilitate training. It has revealed that whilst unemployment is a significant problem across the north, there is considerable sub-regional variance. Once this was understood, a best practice was established and lessons passed on to central government, influencing the Pathways to Work programme.
Andrew readily acknowledges that the problem the Northern Way set out to address — the productivity gap of £30bn — is persistent. Nevertheless there are encouraging signs of progress: the north east was the fastest growing region in England in 2006, and according to Treasury analysis in 2006 the gap in growth rates between north and south is starting to narrow. This is a long-term plan — 20 years at least. Looking around the world, he sees numerous places that have undergone similar processes of de-industrialisation as the north, which are also bouncing back. Barcelona/Catalonia, the Ruhr and the Basque Country are stimulating examples. ‘We are on the same trajectory that they took. The core drivers of economic growth, the core cities, have experienced a renaissance and are increasingly seen as dynamic and able to play in the European Champion’s League of European cities. Even the brand of the north is improving and the BBC’s move to Manchester will accelerate this.’
Will they make it? ‘Who would have thought that the southern states in the US would manage an economic turnaround? Yet they have done so. The north was a major driver of the UK economy in the nineteenth century — and we can be so again’, he says. Achieving this would deal with many of the issues that Brown wants to address, including higher and more sustainable economic growth, equity and a move towards a more stable and affordable housing market.
Roderick Crawford is editor of Parliamentary Brief.