Countering the capital orthodoxy

Why Janan Ganesh is wrong about the north and economic agglomeration.

Janan Ganesh this week wrote a column that flew in the face of all the contemporary evidence on the nature of economic agglomeration; the role of mid-sized cities in developed economies; and the role of public policy in addressing contemporary globalisation.

Despite the most rapid growth taking place in the capital city, 57 per cent of net aggregate growth was generated by so-called "intermediate regions" in the UK. The north of England, for example, also produces a quarter of national economic output; it is twice the size of the Scottish economy and if it were a nation it would rank as the eighth-largest in the EU, ahead of Sweden, Denmark and Belgium.

Economists across the world – OECDMcKinseys to name but two – are increasingly interested in the role of mid-sized cities in driving national economic output and it is now widely recognised that the underperformance of UK cities outside London is the cause of a significant drag on the national economy. In fiscal terms, that drag appears through an ever-worsening gearing between tax generation in London and the south-east – supported by apparently "spatially-blind" policy measures - which is then redistributed beyond the capital city in the form of grants and benefits. That gearing needs to change by releasing the potential of Britain’s city economies.

Ganesh is right to name the strong “impersonal forces and historical trends” that have shaped London’s dominance in recent years and had devastating impact on a deindustrialising north and midlands. But to suggest that the north has never punched its weight is to deny the Industrial Revolution ever took place, even if the majority of its spoils – and those of the wider Empire – did end up stoking London’s stock exchange. It is the same trends and forces that led to the financial crash but again the idea that Northern Rock and Bradford & Bingley were somehow that causes of that crash is quite ludicrous – they were simply the first UK casualties of a global phenomenon.

It is also wrong to suggest that public policy has had – and will have – no purchase on these forces and trends. London’s agglomeration has a huge amount to do with it being the seat of political and cultural as well as economic power. Our own analysis of government spending on economic affairs shows that London has consistently received twice the amount per capita as any other region excluding Scotland and that since 2008/9 this amount has increased more than 25 per cent whilst declining in the rest of the country. In terms of transport infrastructure spending, the current National Infrastructure Plan commits £2,595 per head to London and the south-east compared with just £5 per head in the north-east. In terms of R&D, Scientific Research Council spending is three times as much per capita in London than in any Northern region despite the existence of eight world class universities in the North.

Much international evidence shows that agglomeration can be successfully supported by an active industrial policy which spreads wealth around nations such as Germany and Sweden through a range of effective measures. The problem – as Ganesh quite rightly points out – is that such measures in the UK have been relatively weak and ineffectual, largely hampered by the vested interests of an overly centralised bureaucracy as most recently evidenced in the pathetic government response to Heseltine’s Single Local Growth Fund.

His critique of the “Hezza-Prezza years” is though once again without evidence. The fact that London continued to grow faster than the regions is a function of the growth of the financial service sector rather than an indictment of public policy. And the role that Regional Development Agencies have played in the transformation of cities like Manchester, Leeds and Newcastle should not be underestimated. Although those cities and their hinterlands may not yet have fully made the transition to a post-industrial economy, they are a long way further forward and well-positioned to continue to grow.

Ganesh argues that London that needs a “citywide government of its own”. This is true, but it’s not just London. Central government control over economic affairs constrains not just London but the whole country. Indeed, one could argue that in wresting control of transport and housing, the London mayoralty is doing very well. From Travers’ London Finance Commission, to Heseltine’s No Stone Unturned, to last year’s Northern Economic Futures Commission the message is clear – Whitehall must let go: of transport, innovation, skills, welfare, housing and crucially fiscal powers and incentives if the national economy is to thrive.

One wonders what kind of London Ganesh sees as the outcome of his laissez-faire approach. With the lowest quality of life indicators in the country already, Londoners will surely be concerned at the prospect of a new overcrowded Mumbai? And what might be the constitutional implications of a new city-state like Singapore? This is a debate that has a growing urgency, for if recent reporting is anything to go by it may well be that the biggest legacy of the London Olympics will not be a sporting one but that Ganan’s orthodoxy reigns once and for all.

Ed Cox is the director of IPPR North. Find him on Twitter as @edcox_ippr

The Corus steelworks in Redcar. Photo: Getty

Ed Cox is Director at IPPR North. He tweets @edcox_ippr.

Photo: Getty Images
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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.