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.

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A progressive alliance in the Richmond by-election can scupper hard Brexit

Labour and the Greens should step aside. 

There are moments to seize and moments to let go. The Richmond by-election, triggered by Zac Goldsmith's decision to quit over a third runway at Heathrow, could be a famous turning point in the politics of our nation. Or it could be another forgettable romp home for a reactionary incumbent.

This isn’t a decision for the Tories and their conscientious objector, Goldsmith, who is pretending he isn’t the Tory candidate when he really is. Nor is it a decision for the only challenger in the seat – the Liberal Democrats.

No, the history making decision lies with Labour and the Greens. They can’t get anywhere near Zac. But they can stop him. All they need to do is get out of the way. 

If the Lib Dems get a clear run, they could defeat Zac. He is Theresa May's preferred candidate and she wants the third runway at Heathrow. He is the candidate who was strongly Leave when his voters where overwhelming Remain. And while the Tories might be hypocrites, they aren’t stupid – they won't stand an official candidate and split their vote. But will Labour and the Greens?

The case to stand is that it offers an opportunity to talk nationally and build locally. I get that – but sometimes there are bigger prizes at stake. Much bigger. This is the moment to halt "hard" Brexit in its tracks, reduce the Tories' already slim majority and reject a politician who ran a racially divisive campaign for London mayor. It’s also the moment to show the power of a progressive alliance. 

Some on the left feel that any deal that gives the Lib Dems a free run just means a Tory-lite candidate. It doesn’t. The Lib Dems under Tim Farron are not the Lib Dems under Nick Clegg. On most issues in the House of Commons, they vote with Labour.

And this isn’t about what shade of centrism you might want. It is about triggering a radical, democratic earthquake, that ensures the Tories can never win again on 24 per cent of the potential vote and that our country, its politics and institutions are democratised for good.

A progressive alliance that starts in Richmond could roll like thunder across the whole country. The foundation is the call for proportional representation. The left have to get this, or face irrelevance. We can’t fix Britain on a broken and undemocratic state. We cant impose a 21st century socialism through a left Labour vanguard or a right Labour bureaucracy. The society we want has to be built with the people – the vast majority of them. Anyway, the days of left-wing majority governments have come and gone. We live in the complexity of multi-party politics. We must adapt to it or die. 

If the Labour leadership insists on standing a candidate, then the claims to a new kind of politics turn to dust. Its just the same old politics – which isn’t working for anyone but the Tories. 

It is not against party rules to not stand a candidate – it is to promote a candidate from another party. So the way is clear. And while such an arrangement can't just be imposed on local parties, our national leaders, in all the progressive parties, have a duty to lead and be brave. Some in Labour, like Lisa Nandy, Clive Lewis and Jonathan Reynolds, are already being brave.

We can wake up the Friday after the Richmond Park by-election to Goldsmith's beaming smile. Or we can wake up smiling ourselves – knowing we did what it took to beat the Tories, and kickstart the democratic and political revolution this country so desperately needs.


Neal Lawson is chair of the pressure group Compass, which brings together progressives from all parties and none. His views on internal Labour matters are personal ones.