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To truly tackle regional disparities, we need a new type of devolution

PwC’s Good Growth for Cities Report shows that empowering local leaders is central to closing the economic gap between places.

By Rachel Taylor

As interest rates rise again and food-price inflation is at a 45-year high, people are continuing to feel the squeeze on their living standards. But these costs are not felt equally; disparities across income, employment, health and housing are all driving regional inequalities. To take one example, life expectancy is almost three years lower in the North East of England than it is in London.

Since 2011 PwC has released an annual Good Growth for Cities Index, which ranks large UK cities (those with a population of more than 350,000) across 12 economic success measures: jobs, income, income equality, health, skills, safety, work-life balance, housing, transport, the environment, high-street shops and business startups. It also looks at the public’s priorities across these areas, and which they deem to be most important. By moving beyond traditional measures of economic progress, such as gross domestic product (GDP) and gross value added (GVA), we aim to truly understand varying levels of economic well-being across the UK.

This year’s index, published this week, shows that Oxford is the highest-performing city for the second year in a row, while Bradford is the lowest performing. Major cities including London, Birmingham, Manchester and Newcastle sit towards the bottom, while cities in the South West of England, including Exeter, Bristol, Southampton and Plymouth, sit towards the top. Major cities ranking poorly can be attributed to higher levels of inequality within them, and lower than average scores on safety and jobs, and in some cases, transport.

In terms of people’s priorities, these have shifted from environmental concerns, lifestyle choices (such as where they live and work) and health, to financial well-being. Income distribution is seen as the most important measure, followed by income, safety, work-life balance and jobs. This is not surprising, given the current financial pressures that the public faces.

While large regional disparities persist, our research does also show that the gap between the highest and lowest performing cities is narrowing, with those towards the bottom improving at a faster rate than those at the top. For instance, while Oxford’s high rating can be attributed to its strong performance across income, employment rates and life expectancy, Bradford is improving more significantly across areas such as skills and income distribution.

However, much more needs to be done to narrow the gap at a faster pace. We believe that devolution of power, funding and resources is at the heart of this.

We are calling for ambitious devolution reform that allows for greater fiscal flexibility and innovation, and reshapes the relationship between central and local government, businesses and local communities.

We need a new type of devolution – one that goes beyond simply transferring power from central to local government. It means giving power to the best-placed decision-maker, whether that be a metro or city mayor, an MP, a councillor, or a community leader. This would enable an ecosystem where decisions that impact people’s lives, through access to jobs, housing or education, are made by those who really understand the places where they live.

It also means better collaboration between the public and private sectors, with local leaders partnering with local businesses to unlock innovative funding solutions to drive growth in their regions. According to our Annual CEO Survey, more than a third of UK CEOs (35 per cent) say they do not currently collaborate with national or local government to address societal issues – this is a huge missed opportunity.

Recent trailblazing devolution deals agreed between central government and the West Midlands and Greater Manchester are good models for greater fiscal responsibility and freedom, making use of a single funding package and allowing regions to retain 100 per cent of their business rates. Adopting such an approach nationwide would allow central and local government, businesses and communities to work together as partners to achieve what we call “inclusive growth”. Our Good Growth for Cities report lays out three key areas of focus when it comes to devolution: productivity, the environment, and community well-being.

Firstly, low productivity is a major driver of regional inequalities. The pandemic triggered a rise in economic inactivity, with many people leaving the workforce altogether. It is no surprise that the six strongest performing cities in this year’s index are all located in the South West or South East, which are also the two regions with the highest economic activity rates.

Developing more bespoke place-based strategies is central to improving productivity. In collaboration with their communities and local businesses, local leaders are best placed to develop these strategies, as they will know the specific opportunities and challenges in their areas. They can tailor skills and training opportunities to their specific communities, and can coherently join up transport, housing and employment infrastructure to help more people stay economically active.

Better fiscal devolution will also help local economies move more quickly towards net zero. Cities need to rethink how they use their resources to balance essential areas such as health, income, housing and transport with reducing their carbon emissions. Local leaders will be able to prioritise the right economic projects that can address the needs of their population while shifting to a low-carbon economy at the same time.

Finally, as our index hopes to showcase, good growth is about so much more than economic progress – it’s about creating thriving communities, improving people’s life outcomes and well-being, and creating places that people want to live, work and play in. Local leaders have the ability to co-design public services with the people using them so that they sufficiently meet their needs, offer them opportunities, and make them healthier and happier.

If we really want to truly narrow regional disparities across the UK and drive inclusive growth, we need ambitious devolution and public service reform matched by funding decisions that are simple, significant and certain. To level up the UK, power needs to be in the hands of local people who are best placed to understand local issues and grasp local opportunities for their populations.

Read PwC’s Good Growth for Cities Report in full here.

Listen to a special New Statesman Spotlight podcast, sponsored by PwC, on how placemaking can lead to economic regeneration in cities here.