Growing cities: invest now or pay later

Towns which were doing well in 1901 are still the best now; lack of progress is hard to turn around.

Investment in skills and infrastructure has a crucial bearing on the long run growth prospects of city economies. It did in the 20th century and it will in the 21st century. But the UK still falls well behind other countries, particularly the Nordic ones, when it comes to investment in education, and spend on transport has fallen sharply in recent years.

Centre for Cities latest report Cities Outlook 1901 provides new insight into urban economies at the beginning of the 20th century to understand how and why cities have changed, and crucially what policy makers can do to improve the prospects of cities for the future.

It tells us that history matters. Over the course of the 20th century the importance of major ports and manufacturing centres declined as the economy shifted towards services. Liverpool, once the UK’s second city, now ranks in the bottom 20 per cent for overall economic performance.

Cities are not prisoners of their past; urban economies evolve and adapt to changing economic circumstances. But this change often takes decades. Economic outcomes are the result of the complex interaction of many factors, from a city’s skills base and industrial profile to its links with other cities and the nature of global economic change.

Policy nevertheless has an important role to play. One of the most important factors in determining economic success of a city since 1901 was its skills base: towns and cities with higher level skills in 1901 have tended to do much better over the long run. This highlights that government needs to ensure the skills system is fit for purpose and continues to adapt to the needs of a rapidly changing global economy.

Whilst overall the gap has widened between the North and South over the 20th century, several cities have bucked wide spatial trends. Preston, Warrington and Swindon have seen their relative position improve dramatically. Investment in roads, railways, new homes and business premises facilitated the growth and diversification of these economies. And today these cities are some of the best performing in the country.

The overly centralised nature of governance in the UK further compounds the problem as cities have limited ability to respond in ways that reflect their economic history and unique circumstances today. The latest City Deals marks one of the biggest shifts towards greater devolution to cities but there’s still a long way to go.

The findings reinforce the importance of investing in the fundamental drivers of growth to get the UK firmly on the road to economic recovery and growth. The sad fact is though, while it has long been recognised, the UK falls well behind international economies when it comes to investment in these areas. Relative to GDP, Denmark invests 1.5 times more in education than the UK.

In the short-term, spending cuts on these key drivers of urban growth will stifle the UK recovery and cost more in the long run. The UK must invest now or it will pay later.

Tower Bridge, circa 1900. Photograph: Getty Images

Naomi Clayton is a senior analyst at Centre for Cities

Photo: Getty
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How a small tax rise exposed the SNP's anti-austerity talk for just that

The SNP refuse to use their extra powers to lessen austerity, says Kezia Dugdale.

"We will demand an alternative to slash and burn austerity."

With those few words, Nicola Sturgeon sought to reassure the people of England, Wales and Northern Ireland last year that the SNP were a party opposed to public spending cuts. We all remember the general election TV debates, where the First Minister built her celebrity as the leader of the anti-austerity cause.

Last week, though, she was found out. When faced with the choice between using the powers of the Scottish Parliament to invest in the future or imposing cuts to our schools, Nicola Sturgeon chose cuts. Incredible as it sounds the SNP stood shoulder to shoulder with the Tories to vote for hundreds of millions of pounds worth of cuts to schools and other vital public services, rather than asking people to pay a little bit more to invest. That's not the choice of an anti-austerity pin-up. It's a sell-out.

People living outside of Scotland may not be fully aware of the significant shift that has taken place in politics north of the border in the last week. The days of grievance and blaming someone else for decisions made in Scotland appear to be coming to an end.

The SNP's budget is currently making its way through the Scottish Parliament. It will impose hundreds of millions of pounds of cuts to local public services - including our schools. We don't know what cuts the SNP are planning for future years because they are only presenting a one year budget to get them through the election, but we know from the experts that the biggest cuts are likely to come in 2017/18 and 2018/19. For unprotected budgets like education that could mean cuts of 16 per cent.

It doesn't have to be this way, though. The Scottish Parliament has the power to stop these cuts, if only we have the political will to act. Last week I did just that.

I set out a plan, using the new powers we have today, to set a Scottish rate of income tax 1p higher than that set by George Osborne. This would raise an extra half a billion pounds, giving us the chance to stop the cuts to education and other services. Labour would protect education funding in real terms over the next five years in Scotland. Faced with the choice of asking people to pay a little bit more to invest or carrying on with the SNP's cuts, the choice was pretty simple for me - I won't support cuts to our nation’s future prosperity.

Being told by commentators across the political spectrum that my plan is bold should normally set alarm bells ringing. Bold is usually code for saying something unpopular. In reality, it's pretty simple - how can I say I am against cuts but refuse to use the powers we have to stop them?

Experts - including Professors David Bell and David Eiser of the University of Stirling; the Resolution Foundation; and IPPR Scotland - have said our plan is fair because the wealthiest few would pay the most. Trade unions have backed our proposal, because they recognise the damage hundreds of millions of pounds of cuts will do to our schools and the jobs it will cost.

Council leaders have said our plan to pay £100 cashback to low income taxpayers - including pensioners - to ensure they benefit from this plan is workable.

The silliest of all the SNP's objections is that they won't back our plan because the poorest shouldn't have to pay the price of Tory austerity. The idea that imposing hundreds of millions of pounds of spending cuts on our schools and public services won't make the poorest pay is risible. It's not just the poorest who will lose out from cuts to education. Every single family and business in Scotland would benefit from having a world class education system that gives our young the skills they need to make their way in the world.

The next time we hear Nicola Sturgeon talk up her anti-austerity credentials, people should remember how she did nothing when she had the chance to end austerity. Until now it may have been acceptable to say you are opposed to spending cuts but doing nothing to stop them. Those days are rapidly coming to a close. It makes for the most important, and most interesting, election we’ve had in Scotland.

Kezia Dugdale is leader of Scottish Labour.