Urban Growth in the UK: a Mancunian Call to Action1

1. IntroductionThe world is urbanising at a rate faster than ever before. More than half of the world's population, 3.4 billion people, now live in urban areas and over the next two decades, this figure is expected to swell by another 2 billion (McKinsey Global Institute, 2011). This is not just an important demographic trend, it has huge significance economically too. Collectively city economies already generate some 80% of global economic output and, as that figure continues to grow, the result will be that increasingly the success or failure of national economies will be determined by the strength of their city economies. In a global context Britain does not appear to be capitalising on the potential strength of its urban economies. The largest 56 towns and cities in the UK account for just 61% of national economic output (Centre for Cities, 2011), a meagre proportion that is even worse when considered alongside the fact that London alone contributes 21% of national GDP. In modern history, London apart, Britain’s cities have not punched their weight on the international stage and have not been able to drive national growth to the extent that seems to be the case elsewhere in the world.

In this paper we argue that successive governments have failed stimulate and support growth in the UK’s major urban areas. The UK’s highly centralised political and economic structures have left cities without the policy levers and revenue raising abilities that most other globally leading cities have been able to deploy to drive growth. This, we argue, has not only impacted on the growth of cities outside London but has had negative effects on the economic performance (and future potential) of the UK as a whole. We argue that a select group of cities have the potential to ride the international growth wave urbanisation presents and improve their economic performance to such an extent that it will improve overall national macro performance. However, unlocking this potential will not be easy and will require a significant departure from the status quo.

Our overarching analysis leads to three interrelated calls to action to achieve this goal. First, perhaps surprisingly, this paper is a call to academic economists, geographers, and researchers from any other discipline with an interest in economic growth to focus relentlessly on analysing and influencing the trade-offs and decisions policy-makers routinely face and to put sub-national issues squarely at the centre of the national economic growth debate. Our experience of working with national politicians and senior civil servants suggests that they do not believe that regional or city regional policy really can make a significant difference at the national scale and this perception urgently needs to be corrected. There is no shortage of research that suggests regional policy does matter but, to date, the collective efforts of academia have not supported sub-national actors in making a resounding case to national decision-makers.

1 This paper is based on a talk given to the Manchester Statistical Society in January 2012.

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Second, this paper is a call to action to the UK Government – politicians and civil servants – to recognise the role that the UK’s major cities have in national growth and to reform national policies and frameworks to support these significant agglomerations to achieve their economic potential. Up until now there has been no spatially disaggregated recognition of growth and therefore no incentive to create it, with public spending decision simply reinforcing the historical position. The first step needs to be recognising that not all places are equal. We argue that a handful of big cities have the potential to shift national economic performance and should be the Government’s economic growth priority. The second step is putting the big policy levers on the table in devolution discussions – welfare, skills and education, planning policy, and international trade all need to be in scope for big cities looking to change their economic trajectory in a way that influences national aggregates. The political implications of this will not be palatable for all, and that’s why the final step will be to involve senior politicians and civil servants in the development of sub-national policy and the devolution process. Too often engagement with cities has been left to junior officials who are empowered only to instigate small scale initiatives, with Ministers brought in too late to sign off agreements headed if not failure then for the archives of missed opportunity. A deeper level of engagement is needed to tackle the cultural norm of ever greater centralisation within the national system and embed an understanding of what is needed to make places work functionally. This in turn needs to be reinforced by a relentless focus on the outcomes of spatially disaggregated policy on growth. Lord Heseltine’s report provides the basis for the policy shift we advocate. This paper might be read as our interpretation of how the report should be understood and implemented.

In the final two sections of this paper we put forward Greater Manchester, with its well evidenced growth potential and mature governance structures, as one of the few places in the UK that, with the right support, could meaningfully support improved UK prosperity in an increasingly urban and competitive world. We argue that a framework is required (including, but not limited to, devolution to the city level) that recognises the different challenges, opportunities and delivery ability of individual places. Greater Manchester’s unique proposition is that it brings together the requirement for a set of tools to deal with growth pressures more familiar in the South East (releasing housing supply in desirable locations, commercialising world leading academic research and so on) with the need for levers to deal with a legacy of decline so common in much of the North (persistency high levels of worklessness, substantial public sector dependency and so on). It should also be noted that while this paper focuses on the growth potential of large cities because of the economic opportunities they present, it is also the case that large cities are the location of a significant proportion of national social spend. Thus increasing growth in large cities also reduces the burden of past economic decline.

Changing policy takes time, and changing cultures takes even longer, so our final call to action is to those already working in Greater Manchester: to use the knowledge and

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powers we already have to maximise the impact of the city. An uncomfortable truth for many is that, for the conurbation truly to realise its full potential, getting discretion from central government even in key policy areas is not going to be sufficient. More integration of strategies, services and, ultimately, finances across authorities is likely to be required. Greater Manchester needs to be bold in following through the logic of the evidence and doing what is necessary to drive growth.

2. The Quest for Balanced Growth and the Flat Earth SocietyWhen considering the role of cities in creating national economic growth there are two dominant broad theoretical perspectives. The first, associated with geographers and regional economists, focuses on economic efficiency. Persistent regional disparities are argued to be inefficient at the national scale, as they reflect the underutilisation of labour and capital in less advanced regions. Regional disparities, it is argued, can also restrict the effectiveness of national macro-economic measures to support growth, with policies resulting in inflation hotspots and employment bottlenecks. Advocates of this position tend to argue for policy aimed primarily at spatially rebalancing growth (see, for example, Harding et al, 2006). The second perspective, associated with economists and, at present, particularly the ‘new economic geography’ movement, argues that regional imbalances and spatial agglomeration of economic activity may be efficient and positive for national growth. As economic activity naturally gravitates towards certain agglomerations – because of their advantages in terms of business density, access to markets, skilled talent pool, universities, infrastructure and so on – policies that favour the regions that go against these natural agglomeration forces in an attempt to reduce economic disparities may be economically inefficient at the national scale (see, for example, Glaeser, 2012. For a full discussion of the debate see Martin et al, 2010).

Whatever the merits of these perspectives, the geographers’ concern for distribution tends to come at the expense of a less convincing account of growth and how and where it can best be stimulated. Conversely, the economists have too little to say about the social consequences – which are profound – of their analysis or the sustainability of the implied growth model. Taken literally, neither helps those of us whose concern is the exercise of policy choices. Economically, socially and politically both the creation and distribution of wealth matter. The key debate is not therefore ‘growth or distribution’ but the trade-offs policy-makers face. Academic economists and geographers need to do more to focus on these real world policy choices so that the insights their analysis raises actually influence the actions of key decision makers. By taking highly theoretical polarised positions, academic economists and geographers of all descriptions risk marginalising themselves in the policy making arena.

Our research and discussions with academia leads us to a hybrid position which seems to balance the arguments and allows us to make a more rounded and plausible set of assumptions on which to base policy. This is grounded in the general consensus that

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economic benefits arise from the spatial concentration of economic activity (Garretson et al, 2011). In the UK, these effects have been largely untapped as successive governments have sought to balance the economic benefit of fully exploiting areas of opportunity against the political risk of creating ‘postcode lotteries’. Our concern, though, is that generally political risk has won out with the result that there has been little differentiation in the policy approach between cities alongside, paradoxically, an increase in regional disparities. The exception of course is London where political risks are routinely ignored allowing it to consistently win implicit lotteries. London really is too big and important to fail. This is not an argument that policy should try to move activity out of London, but rather a plea that research is needed to detail how national policy has supported London to identify what could be replicated elsewhere. As an aside, the recent independent Budget for Greater Manchester found that, while the London economy is six times the size of GM, its devolved transport funding is 170 times greater. £15.7 billion was committed to the cost of constructing Crossrail in 2007, which has a modest benefit to cost ratio of 2:1 under the Department of Transport’s own estimates. The Northern Hub offers a benefit to cost with twice the rate of payback, yet the project has struggled to secure investment of just £0.5 billion. To reiterate, we are not arguing that London should be penalised; it should be supported. But so too should the other major urban economies which could drive growth. Our basic argument is that greater differentiation is needed by policy between places based on their particular strengths and their capacity to deliver. The evidence for our position is less than comprehensive, though we, as a city, have done as much as anyone could ever expect to fill the gaping holes in the national research. We need more and better research from academics and government, starting with an acknowledgement that this is a question of national importance. The rampant urbanisation we see elsewhere in the world ought to be something we can tap into for the benefit of the whole UK.

At present and in the meanwhile, cities are faced with a disjointed mix of national, regional and local policies and programmes which, at best, do not complement each other and, at worst, actively counteract one another. Moreover, these policies are often at odds with what the most important policymakers in HM Treasury and the Department for Business, Innovation and Skills view as ‘real’ economic policy. We advocate a more spatially sensitive economic framework which prioritises the potential engines of growth – the major cities – something successive Government policy has long resisted, as we explore in the next section.

3. (Anti) urban policy in the UKThe UK is one of the most centralised major democracies in the world – to illustrate: the proportion of central government expenditure in a German locality is 19%, in more centralised France it is 35% and in the UK it is no less than 72% (OECD, 2011) – meaning the national Government’s vision for urban development has huge significance for the growth of individual places. The history of ‘place specific’ policies such as land-

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use planning, housing, transport, skills, international trade, welfare, science and technology and so on, is that they have been spread across different central departments and, until relatively recently, there has been little co-ordination among relevant government departments and different tiers of government to address the issues and opportunities associated with different places. Even now it is tentative and relatively weak. Our analysis of the situation today is that at its heart the breakdown is founded on the tension between functioning labour markets on one hand and a national drive for growth on the other. The lack of relationship between the two has resulted in an array of mixed incentives that mean the priority of delivering growth is marginalised. To take three examples: housing – a national crisis that is played out at the city region level – is considered on a locality base, as if it is the same as emptying bins. Skills policy on the other hand has traditionally been prioritised nationally with almost no regard to differing labour market need whatsoever. Reform of public services, if it is considered at all, is a low priority and links only to public sector costs and efficiency not how it could support economic growth.

We argue that this policy disarray is in significant part an outcome of the history of urban and spatial policy in the UK, which can be characterised as anti-urban and poorly co-ordinated. The roots of this run deep. In Anglo-American urban development there has been a strong attachment to suburbanisation and the linking of town and country. In the UK, in reaction to the ‘unhealthy urbanity’ of the nineteenth century, Howard (1902) conceptualised the idea of the ‘Garden City’. These new settlements would bring together the virtues of the town (jobs, culture, opportunities) with the virtues of the countryside (greenery, fresh air, quietude). In Britain, this ideal was taken up as a powerful normative theory of planning in shaping the form of urban growth through much of the twentieth century (Pichler, 2007). The idea of a green belt surrounding the city first arose at this time, although this idea would only gather real traction in post-World War II reconstruction. While the early twentieth century Garden City movement of this time was not especially transformational, its influence has in many ways survived until today.

Much of the 1950s and beyond was a period still marked by the impact of World War II. Urban problems were largely conceived of in physical terms: such as housing redevelopment to counteract wartime destruction and to deal with obsolete stock. The British government invested in planned urban expansion schemes to absorb the overspill from post-war reconstruction, slum clearance programmes in the inner city areas, and to accommodate population growth and rural-urban migrations (Pichler, 2007). The task became urgent in response to the growing needs for new family housing, and these developments often took the form of Garden City-inspired ‘New Towns’, built in lower densities (Power, 1993). The process of suburban development coupled with the relocation of industry resulted in severe inner city decline. Additionally, Green Belts deliberately restricted the natural expansion of cities in an effort to encourage density and the reuse of previously developed land. In practice this often resulted in

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‘leapfrogging’ to less urban, but also less accessible locations, and the rapid growth of New Towns which were unhindered by restrictive planning frameworks and had relatively few costly contaminated sites.

The economic stagnation of the 1970s put an end to the post-war economic boom. The period became synonymous with ‘urban decay’ with significant outward migration experienced from the core cities – a trend which continued into the 1980s and 90s. By the mid-1970s, however, ‘urban decay’ was increasingly seen as problematic which led to a clear shift in national urban policy. The 1977 White Paper on inner cities recognised that the causes of inner urban decline and poverty were located in wider economic and social conditions, particularly deindustrialisation. The response was the Inner Urban Areas Act of 1978, the main feature of which was the creation of partnerships between central and local government in an attempt to harness private capital for urban economic revival (Crowley et al., 2012). It also involved giving local government more powers to aid and attract industrial development. However, this response to urban deprivation was poorly funded and even its modest aims failed to be realised as local budgets were squeezed in a climate of national fiscal retrenchment. Curiously, during this period, the government’s anti-urban New Towns policy was in full tilt, counteracting the impact of the new inner city urban policy. In effect, the government was sucking out activity from cities by promoting growth in New Towns whilst simultaneously attempting to refill these very same areas. The advantages held by New Towns over inner cities – a surfeit of virgin land with limited usage restrictions chief amongst them – and the meagre funding of urban programmes meant that the competition was never a fair one and the decline of the UK’s cities continued.

The election of the Conservative government in 1979 represented a watershed moment in British urban policy and a shift away from public sector led urban regeneration. In the 1980s and 1990s, central government had an evident tendency to give preferential treatment and resources to bodies other than local government, reflected in the creation of policy vehicles such as private-sector-led urban development corporations with planning powers as a leading-edge experiment in making planning more market-sensitive (Haughton, 2012). Moreover, while the Thatcher government’s laissez faire economic strategy of liberalisation, deregulation, and privatisation paved the way for London to become a leading global city, it left other UK cities, most of whom were dealing with rapid de-industrialisation, with little serious national policy support and their decline continued and in many cases, accelerated. The turnaround in London’s fortunes is particularly striking from the period after the financial services ‘big bang’ in 1986. The rise of financial and related services led, from the early 1990s onwards, to London’s performance moving from being in line with the de-industrialising North and acting as a drag on the economy of the Greater South East, to driving the rapid growth of the whole of the South and with that the UK (Gardiner et al, 2012). While the success of London is in large part due to it being able to successfully establish itself as a global financial

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sector, it was not a purely private sector-led phenomenon, with public services employment growing more rapidly in the city than the rest of the UK average from the early 1990s onwards and Government capital investment (and quasi governmental finance such as Private Finance Initiative) also flowing disproportionately into the capital. Again, this is not to argue for policy to seek to shift economic activity from London but for a greater understanding and analysis of what the lessons are from the London experience that can be exported to other UK city contexts.

During the 1990s when London was emerging as an international financial centre, urban policy shifted away from a focus on property and towards a focus on the needs of disadvantaged and deprived groups in local areas. This less narrow focus was the feature of City Challenge and the subsequent Single Regeneration Budget (SRB) programmes, both launched under the Major administration. In 1997, as Labour came to power, the government embarked on a programme to revamp regional policy in the UK, with a focus on ‘narrowing the gap’ between UK regions, as well as reducing inequalities within them. The most significant act was the launch of Regional Development Agencies (RDAs) across England, which had access to significant national and European funds to regenerate the regions and stimulate growth. A number of large area-based initiatives with targeted funding were also launched, including the New Deal for Communities (NDC), Working Neighbourhoods Fund (WNF), and the Local Enterprise Growth Initiative (LEGI). The Local Authority Business Growth Incentive (LABGI) scheme is worthy of particular note, as it is illustrative of the failure of many policies to incentivise growth at the local level. Originally intended to reward local authorities who managed to grow their business base, it was relentlessly watered down so that ultimately all areas received something; the outcomes bore no relation to the funding and the incentives for local areas to promote growth were lost. A similar watering down is now occurring with the localisation of business rates bring brought in by the Coalition Government. It should be noted that this is not just driven by national government but also the generally risk-averse nature of local authorities. Most areas lack the capacity to drive growth or the desire to do so, or indeed both. For most places the incentives to overcome these do not really exist.

During the latter part of the 2000s, at a city region level, there were attempts at forging greater policy coordination across local authorities and government agencies, through the launch of national-local agreements, at first Multi-Area Agreements and latterly in the New Labour administration through City Region Pilots. The importance of cities had started to be more fully understood, but these initiatives were poorly resourced by central government and of low profile. The majority of activity continued to be focused on regionalisation, with a lack of action on cities specifically. The impact of the Labour government’s policies – during a period of sustained economic growth, significant increases in public spending, and dedicated regional programmes – broadly was to stem the decline of UK cities. However, the gap between London and the South East and the

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rest of the UK – and London and other UK cities – actually widened during the Labour government’s time in office (Martin, 2009).

RDAs were abolished by the Liberal Democrat-Conservative Coalition Government more or less immediately after they came to power in the 2010 general election. The Coalition government invited proposals from groups of local authorities to form Local Enterprise Partnerships (LEPs), which were to be based on ‘real functional economic areas’. These ‘business led’ bodies are tasked with creating jobs and driving growth, though they remain poorly funded compared with RDAs, with the majority of RDA functions, including inward investment, sector leadership, business support, access to finance and innovation, being led nationally instead. But it does seem that recently policy has started to catch on to the idea that cities matter. Through the Localism Act, city leaders, alongside LEPs, can make the case to be given new powers to promote economic growth and set their own distinctive policies. These powers remain relatively untested however. A route by which they may be tested is the growth plans that each LEP have been asked to develop by government. While it remains to be seen what impact these plans will have, on the basis of the preceding analysis there is a great deal of history and institutional path dependency and precious little to countervail their impact, suggesting that little will change in practice.

Crucially across the whole period analysed above restrictive land use regulations have remained. Policies of containment and densification limit the supply of land (and also space), not just for housing but for all non-agricultural land use in Britain. It is particularly stark that, across the UK, Greenbelt land alone is one and a half times the total urbanised area. The national system of designated land use categories and development control not only limits urban growth but also imposes considerable costs. Where a full net welfare evaluation has been possible – for a tightly constrained urban area in South East England – it shows that the increased costs of space for housing substantially exceed the value of planning amenities generated, imposing a net welfare loss equivalent to a tax of 3.9% on incomes (Cheshire, 2010).

4. Towards a national spatial growth frameworkIf cities are to be the future engines of economic growth, it will be essential that the UK ensures it is exploiting its urban and suburban assets by developing a targeted local-national framework for its major conurbations. This needs to rehabilitate the planning system so it is not seen as a negative tool and a constraint to growth but a positive framework that provides certainty and catalyses investment and growth. From the work of the Labour Government on statutory city regions through to the current Government's approach to city deals there has been an explicit acceptance at the heart of national policy that different parts of the country have different needs and opportunities and, more to the point, they differ in their ability to respond to these agendas. The Coalition

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Government’s ‘City Deal’ process recognises this transparently, based as it is on the development of customised deals to unlock the barriers to growth in UK cities.

Clearly the economic needs and opportunities of different cities and counties are different. Questions of sustainable growth are pressing in areas such as Cambridge whereas dealing with the cost of previous failure remains the norm in many areas outside of the South East. This necessitates different strategies in different areas that allow for targeted approach both in terms of policy mix and the types of specific interventions used. Greater Manchester’s unique circumstances combine the challenges and opportunities faced by high growth cities with the problems facing places struggling with a legacy of industrial decline. There is no one size national solution that could possibly deal with these diametrically opposed issues.

Yet the particular balance of opportunity and need is not the only difference. Different areas, prosperous and deprived alike, have vastly differing capacities to support the adoption of effective economic and social policies. Reasons of historic legacy, differences in business leadership and a range of other factors mean some places are just more geared up than others to shape their places. This is particularly the case with governance (returned to later in the paper). These differences mean that it is hard to see how sensible urban policy can straddle such vastly different areas covering major centres such as London and Greater Manchester on the one hand, and the smaller provincial centres such as Norwich and Swindon on the other. One size patently will not fit all. The appropriate response to this scenario must be for differential devolution. Differential devolution is also required for the more prosaic reason that Whitehall simply lacks the capacity to be able to deal with scores of local areas (be these LEPs, local authorities, or other bodies) on the same basis at the same time in a credible way.

This points to the need for a combination of a national approach to devolving resources where there has been some experience of responsibility locally or where the relationship between inputs, outputs, and outcomes is reasonably clear and elsewhere, where this is not the case, to an approach which is more in the nature of a pilot. In the second case the aim would be to prove the principle that more radical devolution is possible and desirable. The approach to this second kind of devolution should be based on merit. By adopting a set of principles a threshold could easily be set based on a variety of factors including the size of area, the governance arrangements of each and the track record of working on relevant policy, which would enable a relatively small number of areas to be selected on the basis of a national competition and for bespoke arrangements to be negotiated with each. In the main these pilot areas are likely to be major cities. This would be a significant improvement as, if a handful of large places are targeted, it is likely that within a relatively short period of time the change delivered through these pilots will be sufficiently large to change national aggregates in relation to key metrics such as unemployment, skills and ultimately GDP. The approach also provides the best

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way for Government to pilot new forms of devolution in a real partnership of equals whose aim is to make policy work rather than to maximise grant share. Finally, any pilots could be designed to be replicable and as such encourage other areas to adopt a more robust approach to their own proposals for devolution.

Evidenced capacity for growth and effective governance would be at the heart of this new local-national framework. Size also matters as the aim should be to influence national metrics. Clearly the framework has to include London and we would argue strongly, as we do in the next sections, that Greater Manchester should also be at its centre. This paper does not seek to make the case for the definitive list of 4 or 5 cities that have the potential to drive national growth – clearly Birmingham, Glasgow, Leeds, Oxford, Cambridge and Bristol all have their own cases to be included – but there is a clear need for academia to provide the evidence for Government to differentiate between places and make difficult choices on the prioritisation of investment.

The route by which this framework may emerge was made clearer towards the end of 2012 with the publication of Lord Heseltine’s remarkable report, ‘No Stone Left Unturned’, that comprehensively explored the factors blocking growth in the UK. The report adds significant weight to many of the arguments made in this paper that places like Greater Manchester are stunted in their ability to grow as a result of the UK’s centralised powers and funding mechanisms. There are three notable points from the report. First, this is the first report in modern times that really gets to grips with one of the most significant down sides of the way Whitehall departments have been organised: the cumulative impact of functional departments in places is rarely satisfactory resulting in the whole impact of government policy being very often a great deal less than the sum of its parts. This is not a new finding but it is all the more important that it is framed in the context of something that matters to everyone: the UK’s economic performance.

Second, the report correctly identifies that Government does, always has, and probably always will, pick winners. Academic arguments about the whys and wherefores of picking winners miss the political and practical reasons for its continued occurrence. The UK government’s decades long support for financial services is absolutely an exercise in picking and sustaining a winner, albeit a sensible one given its importance as an industry with huge export income. Crucially the report does not advocate enacting more extreme and damaging actions to support winners, but it is honest that winners do need to be identified without having a head long stampede towards protectionism.

Third, what’s true of industries is true of places. Places with more significant potential (‘winners’ for want of a better word) have to be identified and supported, as we have done with London. A more meritocratic approach to a whole variety of public expenditure decisions will support this. Heseltine rightly identifies the issue that if we want to have a

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more successful economy we need to have a few more successful places and that every place can probably do better than it is doing.

However, the report is not without its flaws. It makes a mistake that has often been made which is to start with the principle that localism is a good thing and then to go on to show how a localist approach would produce better economic results. It is surely the case that devolving to different areas will have vastly different results and that localism does not necessarily equal better in every circumstance. The focus on functional economic areas is sensible in counteracting some of the worst potential impacts of this, although perhaps too much faith is put in LEPs which are still embryonic in much of the country outside places like Greater Manchester where they have been able to build on existing structures.

Heseltine’s aim to ‘reverse a century of centralisation’ is an ambitious one, but it is one that the UK needs to face up to if it is to thrive in an increasingly global and competitive world. It remains to be seen how far Lord Heseltine’s proposals will be taken – or how radical government is prepared to be – but, as we write, the Government’s response to the report has just been released which is, at least in tone, broadly positive and confirms that the broad thrust of the argument appears to have been widely accepted. The Government claim to have accepted 81 of the 89 recommendations (60 in full and 21 part) and rejected 5, with the remaining three relating to the content of the Single Local Growth Fund which will be addressed in the 2013 Spending Review. The Single Local Growth Fund, to be operational from 2015, is perhaps the most significant announcement as it will see funding allocated to LEPs on a competitive basis through “multi-year plans for local growth”. However, the trailed elements do not augur particularly well in the ongoing battle between political activism for devolution and stubborn resistance to serious change to the status quo. Although the Fund will consist of funding for housing, transport and skills, it will only include “some” of these budgets, with large parts of central funding for growth-related activity such as business support, apprenticeships and innovation ruled out. It does not seem that the Fund’s size and scope, or the risk appetite of Government, is at present sufficiently high to do justice to the global opportunity for urban growth.

In the remainder of this paper we make the case for Greater Manchester being at the centre of a new post-Heseltine national growth framework based on its scale, growth potential, unique track record of effective governance and delivery, and its ability to maximise the synergies between these factors at the level of the functioning labour market.

5. Economic growth in Greater ManchesterTo understand Greater Manchester’s governance, it is necessary to understand three key features of its economic and political geography. First, the Manchester city region is

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an undisputed monocentric city region with Manchester city centre (with bits of Salford and Trafford) providing the central core of economic strength and dominating commuting flows across the wider region. This agglomeration of economic activity has (and will continue to be) critical to growth, with surrounding towns and cities benefiting from and complimenting Manchester’s economic power. While many other cities – Liverpool, Newcastle, Leeds for example – all look monocentric to impartial outsiders, it is not universally accepted within the cities themselves. Greater Manchester’s strength is that it has recognised its monocentric nature and evolved a political structure that has allowed it to deal with both the challenges and opportunities this creates.

The second of the conurbation’s innate characteristics is the under-bounded nature of the City of Manchester local authority itself (unlike, say, Birmingham or Leeds which have large geographic footprints). The City of Manchester as a local authority is more dependent on its surrounding areas than other core cities. Manchester local authority district does not contain many of Manchester’s suburbs, and indeed the administrative geography cuts across the city centre with parts falling into neighbouring Salford. As a result it has one of the highest levels of in-commuting in the country, reflecting the lower proportions of residents both living and working in the city. Being a net importer of labour – particularly with high numbers of knowledge workers travelling to work into the city’s professional services – combined with Manchester’s economic weight, means that the city’s travel-to-work area reaches much beyond the narrow boundaries of ‘Manchester’ and extends across all of the rest of Greater Manchester and indeed onwards into Lancashire, Derbyshire, Merseyside and Cheshire. It is not easy to disentangle the direction of causality, but the flows of people, trade and business across borders and the collaboration between public authorities are deeply entwined. These distinctive characteristics mean that Greater Manchester’s local authorities have a more economically interdependent and complimentary relationship than local authorities in most other city regions in the UK. It is these unique features of the conurbation’s economic geography that underpin its strongly collaborative governance.

Despite the relatively anti-urban backdrop described in the previous section, the last couple of decades have seen a significant turnaround in the economic fortunes of Greater Manchester. New industries are emerging and distinctive key assets are now both evident and a focus for investment. As other parts of the country struggled through the recession, Greater Manchester has shown considerable resilience and is significantly better positioned for recovery than it was after previous downturns (New Economy, 2012). The city’s renaissance has been impressive. By the 1980s Greater Manchester had become synonymous with de-industrialisation, as traditional industries declined, factories closed and employment fell, with serious social impacts arising as a result. Since the early 1990s, however, the city has experienced a post-industrial revolution that has seen the conurbation become increasingly attractive to inward investment in the growing knowledge-based service sector. Significant investment has

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been seen in the office and residential property markets and strong growth has been seen in retail and leisure, as well as the city increasingly exploiting its culture and tourism offer. In the decade preceding the recession, economic growth in the city was higher than the national average, with rates of growth matching those seen in London and the South East. Importantly, after decades of decline and stagnation, the city’s population began to grow once more from 2000, especially in the revitalised urban core. Figures from the 2011 Census show that the City of Manchester had the highest increase in population of any local authority outside London. Following strong growth over the past decade, the conurbation generated around £46 billion per annum of total economic output, almost a fifth of the total economic output of the North of England and 4% of national output, and created over 90,000 additional jobs. Its strong higher education sector means it has leading academic excellence as well as over 100,000 students studying at four universities. The result is that Greater Manchester is now the UK’s largest city in both population and economic terms after the capital.

Rees and Harding (2010) identify three ways in which Greater Manchester has been able to achieve its impressive rate of growth in a not especially supportive national policy framework. First, despite the city’s industrial decline over the course of the twentieth century, it retained a concentration of key assets that underpinned its longstanding role as the most important service centre in the North of England. Particularly crucial to the pre-crash recovery were the high level of connectivity it derives from its nodal status within key public and private transport infrastructure routes, private services in the city, and the city’s municipally owned international airport. Second, these advantages grew in importance during the longest recorded period of consistent economic growth in UK history. This period coincided with the strong metropolitan locational preferences of key knowledge-based sectors which encouraged unprecedented private service sector expansion. And third, sustained national economic growth enabled much increased investment in public services, especially during the early years of the current century, which was especially favourable to cities like Greater Manchester that serve key high-level regional public service functions in health, education and public administration. While other cities would have had similar factors, what sets Greater Manchester apart is that it was able to develop a governance framework to capture these benefits. Greater Manchester’s pragmatic approach of working with the grain of national policy, and consistently delivering government objectives, meant that it has been able to secure significant public investment over this period and, crucially, also leverage in private investment on the back on this. While future growth is by no means certain given the weak state of national economic growth and the retrenchment of public spending, Greater Manchester’s governance system remains (and has indeed strengthened in recent years) meaning it is better placed than most to take the difficult decisions needed to drive growth.

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However, significant challenges remain. The Manchester Independent Economic Review (MIER) provided evidence that, although Greater Manchester is characterised by relatively high agglomeration economies, firms in the region do not exploit these as effectively as firms elsewhere in the UK. Firm level productivity is lower than expected given the size of Greater Manchester’s economy, and the region is therefore punching below its weight. Business density is lower than the national average and most EU cities suggesting a below par level of entrepreneurship. Growth has also not been distributed evenly. On the one hand, there is a contrast between the north and south of the city region, based on differential experiences of economic restructuring. On the other, there are marked differences, based on variations in educational attainment and skills and access to labour and housing markets, between the life chances and experiences of residents in the city’s more desirable inner and outer suburbs, who have benefited most from the structural economic change, and those, disproportionately concentrated in poorer quality residential areas, who have gained least (Harding et al., 2010; MIER, 2009). It is a combination of these two elements – opportunity and need – that makes the Greater Manchester proposition so unique. Nowhere else in the UK, arguably, combines at the same scale the upside ‘problems’ of growth with the downside problems (no need for inverted commas there) of post industrial restructuring and its legacy of public sector dependency. To date Greater Manchester has been broadly successful in managing the transition to a post-industrial knowledge intensive economy. It has been able to capitalise on the positive agglomeration effects emanating from its size, density and diversity to reinvent itself and unlock this growth potential. There is much that other cities could learn from Greater Manchester in this regard.

Going forward, tackling its economic and social problems will be a core requirement for Greater Manchester to realise its growth ambitions. However, while Greater Manchester can continue to exploit its key assets – and has taken active steps to add new ones with, for example, the opening of MediaCity:UK, the development of the Airport City Enterprise Zone, and the creation of a new Graphene Hub at the University of Manchester– a broadly supportive national economic growth climate cannot be assumed and the prospect of increased spending on public service seems somewhat distant. It is therefore crucial that, if Greater Manchester is to contribute its full potential to national growth, local and national government do everything in their power to facilitate the private sector to create jobs and grow the economy. This is not about attempting to create labour demand where none is needed but about making more of the city in terms of it being a place where mobile skilled labour would want to come to live, through, for example, improvements to housing, education, and other amenities. Policy has a critical role to play. As the case of Greater Manchester demonstrates, to succeed economically, cities have to exploit and maximise their opportunities, but the policy framework set nationally from central government matters a great deal, as does the nature of central-local relations. Although it is not a straightforward relationship, the international evidence suggests that where cities are given more freedom and autonomy they respond by being

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more proactive, entrepreneurial and successful (Parkinson et al., 2003). We believe that Greater Manchester’s existing governance framework provides a sound basis for such freedom and autonomy.

The final key differentiating factor in Greater Manchester’s economic and political geography is the strength and continuity of its leadership. Initially this was driven by the political and executive leadership of Manchester City Council — which has remained remarkably stable for 30 years with Sir Howard Bernstein and Sir Richard Leese as Chief Executive and Council Leader respectively (Sir Richard was preceded by Graham Stringer from 1984-1996). Under this leadership Manchester has moved from a position in the mid-1980s of entrenched opposition to national government strategy, to a position of close collaboration with national government and its agencies. It is notable that the stability in Manchester City Council’s leadership has been matched by the stability of Greater Manchester’s political leadership, with Lord Peter Smith having chaired the voluntary collaboration since 2000. It is also visible in the public sector’s longstanding relationships with key private sectors leaders within the conurbation.

It is this leadership that has given birth to the collaborative and effective relationships across administrative areas, sectors and partnerships that form the bedrock of the conurbation’s strong economic development over the past decades.

6. Governance looks good: The evolution of the jointly-supported city-regional institutions

Local urban policy has an important role to play in maximising an area’s comparative advantage in a positive sum game that contributes to national objectives. The context for such effective urban policymaking and programme implementation often involves multiple levels of governance. Cities frequently need to collaborate with other cities and higher levels of government – as well as private sector and non-governmental stakeholders – to gain the authority, technical expertise and funding needed for their policy goals. This can require vertical coordination among local, regional and national governments, and horizontal co-ordination among the range of agencies engaged in policy within a local area, as well as among the local governments within a region (OECD, 2010). Greater Manchester is as complex as any other world city in this regard but its governance looks better than most.

Greater Manchester’s collaborative approach is not a new phenomenon. From the 19th century John Bright-led campaign for the repeal of the corn laws, to the building of the Manchester Ship Canal, Manchester has shown public-private coordination and leadership way ahead of its time. Its most recent phase of collaboration has its roots in the establishment of the Greater Manchester County Council in 1974, which – even though it only lasted 12 years until it was abolished by national government diktat – was the first phase of a series of developments aimed at creating institutions within the

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conurbation that can best address the particular needs of Greater Manchester’s functional economic area and its residents. Over time a sophisticated institutional arrangement has been developed. The creation of the Association of Greater Manchester Authorities (AGMA) in 1986 – a voluntary collective of local authorities – was a watershed moment, that led to the more recent creation of a number of bodies that collectively serve the interests of the ten local authorities in the areas of marketing and tourism (Marketing Manchester) inward investment (MIDAS), economic development and strategy (New Economy, formerly Manchester Enterprises) and business support (GM Chamber of Commerce and the newly created Business Growth Company).

Greater Manchester’s most recent phase of city wide collaboration has been supported by the commissioning, and response to, the biggest urban study ever undertaken in the UK (the MIER, published in April 2009). The Review, an 18 month long research programme into the city’s economic strengths, weaknesses and longer-term drivers of growth, was instrumental is identifying and articulating what the city needs to do to improve its contribution to national growth. Following on from the production of the MIER, partners across Greater Manchester came together to produce a strategy for the future growth and success of the conurbation – building on the recommendations of the MIER as well as input from a wide-range of key stakeholders committed to the future of Greater Manchester. After a long period of consultation, including workshops and public outreach events, the Greater Manchester Strategy (GMS) was signed off by AGMA in the summer of 2009.

Both the MIER and the GMS provide a strong framework for economic development delivery across the conurbation. On the back of the long history of partnership working between local authorities and between the public and private sectors in Greater Manchester, the MIER and the GMS also illustrated to central government how Greater Manchester has an unparalleled knowledge of its own economic and social challenges and what was needed to address them. This was a crucial factor in Greater Manchester being announced as the first Combined Authority in the country in April 2011 – for the first time giving Greater Manchester a statutory framework to coordinate key economic development, regeneration and transport functions across the conurbation.

Shortly after the announcement of the Combined Authority, the Government also approved AGMA’s proposal for a GM-level Local Enterprise Partnership (LEP) – a body that is designed to support business and local authorities to grow the local private sector. One of the Combined Authority and LEP's first achievements was the signing of the Manchester City Deal with government. The centrepiece of this deal is the government's agreement in principle to a hugely ambitious "earn back" model, where up to £1.2bn invested in infrastructure improvements by Greater Manchester authorities will be paid back to the Combined Authority as real economic growth is measured. The “earn back”

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agreement is significant because it reverses (albeit only by a fraction) the extent to which the UK is centralised and gives Greater Manchester a tax lever to pull to support growth. Additional agreements on business support, inward investment and skills – alongside the £100 million investment fund that Greater Manchester has created – means that the city now has more weapons in its armoury than most to kick-start local growth. However, arguably, whilst the overall narrative of City Deals is good –“for too long decisions about the future of these proud cities have been taken in Westminster, constraining local leadership and stopping cities reaching their full potential’’ (HM Government, 2011) – and Greater Manchester has already made some significant strides, they do not yet change the local-national paradigm significantly. On balance, the current Government’s, somewhat grudging, devolution programme is certainly movement in the right direction but the evidence to date suggests that it is simply not at a large enough scale to impact national aggregate performance. So, while Greater Manchester’s governance remains good, the national framework in which it operates still limits the extent to which local actors can join up activity to stimulate growth.

Greater Manchester is clearly one of the UK’s recent success stories. Its economy has diversified and grown over a 20 year period, cementing its position as the largest economic unit in the UK outside London. Its governance has evolved in response to the unique economic and political opportunities and challenges the conurbation faces. Its governance framework is now nationally leading, capable of making the tough choices needed to trade-off policy and funding options. Combined, as the MIER found, Greater Manchester’s economic strength, scale and governance mean that it is the best-placed conurbation outside London to increase its long-term growth rate, and therefore critical to raising overall economic growth in the North and the UK as a whole. What is holding it back, largely, is poor government policy support.

7. ConclusionThere is now strong evidence that cities are going to be central to the economic success or failure of national economies. Urban growth is set to continue and the UK needs to ensure it is exploiting its cities and riding this growth wave. The UK already has one of the world’s great cities in London, but to remain internationally competitive the UK needs its other major cities to step up. Or so we argue.

There is very strong evidence that the UK’s approach to development has been anti-urban and centralising, which has damaged the potential of UK cities to drive economic growth. If cities are to reach their full potential, they need consistent and supportive national policies as well as power and resources to shape their economic destinies. In short, they need to be seen as part of the national growth framework.

With regard to Greater Manchester, for all of the foregoing analysis, and despite its good governance and well evidenced economic potential, the raw facts are unavoidable: the

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city does not punch its weight. If cities like Manchester are to be in the select group of globally leading cities that benefit from, and drive, the shift towards urban centric economic growth, as a country we need to focus on unleashing their potential. Economic growth in Greater Manchester needs to be seen as not just an issue for Greater Manchester but for the UK as a whole. The same is true for other major UK cities.

We repeat our call for action then in its shortest form: First, academic researchers need to do more to highlight the national importance in the growth debate of regional policy and to develop better evidence to support policy-makers (locally and nationally) make the difficult trade-offs they face. Second, Government needs a deeper and narrower approach to devolution. Only a handful of places can drive growth at the national scale and also have the capacity to deliver and these areas need to be prioritised and the big policy levels (welfare, skills, internationalisation) need to be up for grabs. Finally, to Greater Manchester our call is to scale up what we are doing and prove that devolution does deliver better outcomes. This will require a greater degree of strategic, delivery and financial integration that currently exists and, if Manchester is to become a nationally leading growth hub, a greater acceptance of risk – both political and financial.

More widely, Greater Manchester’s experience also provides an example for other places (in the UK and, indeed, in other countries) about how the forces of agglomeration can be aligned with good governance to foster economic growth. While the city’s unique assets and opportunities cannot be easily replicated, the Combined Authority structure provides a model that – if other cities can overcome historic tensions and municipal rivalries – provides a democratically accountable structure capable of making the difficult decisions all public authorities are currently faced with. Certainly for the city regions of the UK the Combined Authority model should be an aspiration.

Although far from easy, with the right supportive national framework the UK’s major cities have the potential to become net contributors to national prosperity. In an era when stimulating economic growth is the policy priority for all the main political parties, this is the most important aspect of all.

Mike EmmerichJohn HoldenRaquel RiosFebruary 2013

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