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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The problems with ending encryption to fight terrorism

Forcing tech firms to create a "backdoor" to access messages would be a gift to cyber-hackers.

The UK has endured its worst terrorist atrocity since 7 July 2005 and the threat level has been raised to "critical" for the first time in a decade. Though election campaigning has been suspended, the debate over potential new powers has already begun.

Today's Sun reports that the Conservatives will seek to force technology companies to hand over encrypted messages to the police and security services. The new Technical Capability Notices were proposed by Amber Rudd following the Westminster terrorist attack and a month-long consultation closed last week. A Tory minister told the Sun: "We will do this as soon as we can after the election, as long as we get back in. The level of threat clearly proves there is no more time to waste now. The social media companies have been laughing in our faces for too long."

Put that way, the plan sounds reasonable (orders would be approved by the home secretary and a senior judge). But there are irrefutable problems. Encryption means tech firms such as WhatsApp and Apple can't simply "hand over" suspect messages - they can't access them at all. The technology is designed precisely so that conversations are genuinely private (unless a suspect's device is obtained or hacked into). Were companies to create an encryption "backdoor", as the government proposes, they would also create new opportunities for criminals and cyberhackers (as in the case of the recent NHS attack).

Ian Levy, the technical director of the National Cyber Security, told the New Statesman's Will Dunn earlier this year: "Nobody in this organisation or our parent organisation will ever ask for a 'back door' in a large-scale encryption system, because it's dumb."

But there is a more profound problem: once created, a technology cannot be uninvented. Should large tech firms end encryption, terrorists will merely turn to other, lesser-known platforms. The only means of barring UK citizens from using the service would be a Chinese-style "great firewall", cutting Britain off from the rest of the internet. In 2015, before entering the cabinet, Brexit Secretary David Davis warned of ending encryption: "Such a move would have had devastating consequences for all financial transactions and online commerce, not to mention the security of all personal data. Its consequences for the City do not bear thinking about."

Labour's manifesto pledged to "provide our security agencies with the resources and the powers they need to protect our country and keep us all safe." But added: "We will also ensure that such powers do not weaken our individual rights or civil liberties". The Liberal Democrats have vowed to "oppose Conservative attempts to undermine encryption."

But with a large Conservative majority inevitable, according to polls, ministers will be confident of winning parliamentary support for the plan. Only a rebellion led by Davis-esque liberals is likely to stop them.

George Eaton is political editor of the New Statesman.

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