Brave New World

The growth of urban areas is a world-wide phenomenon, but the publication of figures from the 2011 census showed the largest increase, in terms of numbers, in the population of England and Wales since records began in 1801. The population of the UK, according to the Office for National Statistics, is on course to reach over 73 million by 2035. This will change the dynamic of the country.

While the average national population growth rate is around 7%, London is growing at almost twice that rate, at 12%. In some of the London boroughs it is twice as much again. Manchester has reversed a period of decline and is now witnessing an increase of around 19%.

Coping with over 10 million more people will clearly impact on all forms of infrastructure. Decisions to plan for this forecasted increases need to be taken now and as a matter of priority.

New approach to cities

Part of the government’s answer to coping with these challenges has been to devolve powers to cities themselves so that they can make the choices necessary to deliver a successful future. This is a necessary but not sufficient step. The government needs to realise that cities need more powers and less interference. This has been the direction of travel for government with less ring-fencing of local authority grants and a shift towards the devolution of budgets.

Cities are critical to future economic development and growth, but they also need to be nice places in which to live and work in order to attract the type of skilled workforce they want. Each location will, therefore, need to make tailored decisions that reflects its economic and social requirements and historical setting.

City Deals have been agreed with all eight Core Cities: Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield. Each deal is tailored to the needs of each city and provides the funds, powers and flexibility they need to deliver on their aims.

There are agreements on new finance and investment streams, an emphasis on employment and skills development, and business support services. Transport, and new transport projects, also feature heavily in each of the deals (apart from Birmingham).

The City Deals include the devolution of transport powers and funding as well as powers over rail franchise management. (For more information about the City Deals the series of Briefing Papers from the Centre for Cities provide an excellent starting point).

Different models of governance apply across the cities and these have been chosen to reflect local requirements. Some of these reflect a wider geographical and economic spread of their city region. There is, in effect, a mix of mayors, combined authorities, and local enterprise partnerships (LEPs), which are not mutually exclusive in any one area.

LEPs

LEPs operate across the country and, being business-led, they provide a commercial and entrepreneurial direction to local decisions. They can also feed business needs directly into the decision-making process. However, the government appreciates that the LEPs have been of varying quality and achievement, to date. This means that some areas are less ‘plugged into’ business needs.

The role of LEPs may also influence local decisions such as whether local businesses should be expected to contribute to infrastructure such as transport, which often features as a key business priority.

LEPs have received a further boost with the publication of Lord Heseltine’s report, ‘No Stone Unturned’, which sets out an independent view on economic growth and the country’s ability to create wealth. The report championed the role of the local over the national with detailed recommendations for further devolution. Among Heseltine’s recommendations were more powers and funding to LEPs, establishment of a business support infrastructure, a look at regulation, more ‘urgency’ in planning and an emphasis on better procurement. Heseltine also sought a national growth strategy.

December 2012’s Autumn Statement picked up the themes, if not the detail, of Heseltine’s report and put forward the development of a simple capital pot that LEPs could bid for.

Future challenges

The success of the City Deals is critical for the prospects of further devolution. The government needs to continue to drive the City Deals forward if they are to be successful and this means continuing to let go of previously centrally controlled policies and funding streams. It also needs to ensure that governance models are compatible with existing cross border decision-making structures, such as ITAs and PTEs in transport. Too often, the lofty aims of one government department fail to appreciate the realities of existing policies of another.

There are now two city mayors in place – Liverpool and Bristol. The latter’s election of an independent candidate in November 2012, has yet to have much effect. In Liverpool, though the mayoral system has had longer to bed down and it is clear that the mayor is adopting an approach of constructive engagement while being openly critical and challenging where he believes it to be appropriate. This shows that there are now counterpoints to the dominance of Westminster and Whitehall.

However, there remain a number of challenges that cities and government need to work through.

The whole country needs London to continue to be a leading global city. The challenges it faces include those set out in the McKinsey report ‘Urban World: Cities and the Rise of the Consuming Class’.

London dominates our national economy in a way that few other cities across the globe do domestically. If there is to be a ‘rebalancing of the economy’ and other cities are not to become second class (which would exacerbate this economic issue still further), then we need to look at where investment is made. Much of this is down to national decisions, and if we stick to the traditional way of allocating finance and deciding on projects then spending will continue to go to London and other cities will be fighting for scraps from the table.

How larger-scale projects, such as those in transport (what we used to think of as regional priorities), are to come forward, and who will champion them, has still to be fully addressed. The ‘Duty to Co-operate’ in relation to sustainable development, introduced by the Localism Act, may help but it has yet to have any real impact.

There are also planning and spatial issues to address. These impact not just on accessibility but also the ‘liveability’ of a city, how attractive it is to live and work in, which again impact on the economics of a city. There needs to be a discussion about the way that land is used, urban design issues, and maybe even the role of the greenbelt.

If a ‘single pot’ approach to local finance is to be introduced by government then the competition criteria between LEPs will be critical as will Whitehall’s continued, or otherwise, level of involvement. This is a consistent theme whenever discussions about devolution take place. While governments insist that the local level is the right one for decisions to be made, centrally they retain powers and never fully let go. It is also easy to talk about government being one entity, but it is really a series of separate departments. While centrally devolution may be the approach, departments are often very poor at implementing this, some more so than others.

Implications

The devolution of power to major cities has a number of clear implications for all involved:

• Local authorities: the more that powers and funding are passed down to them, the more responsibility and scrutiny there will be. They will also be expected to have skills and expertise available in new areas of responsibility. In the past, people could be brought in or consultants used but with the tighter financial environment that will be especially difficult.
• LEPs: as things stand, they are the body that government is continuing to put their efforts into. However, there remain issues of size (some have a very large membership), relationships with other stakeholders and of where responsibility actually resides.
• Accountability: turnout at local elections is often very poor and the elections to the Police and Crime Commissioners showed that despite the argument of greater local control, the electorate were not enthused. LEPs are business-led so are largely unaccountable.
• Mayors: the government has suggested that city mayors will be able to draw down additional funding and powers. With only two mayors in place, alongside London which has its own governance arrangements, it will be interesting to see how much prominence the government awards them. The mayors will need to get any ‘bid’ to government right politically as well as in policy and business case terms.
• Procurement: will continue to change at a national and local level. Central government is looking to make changes, and the issues thrown up by the fiasco over the West Coast Main Line rail franchise have still to be resolved. Reading the Laidlaw report into those events did not give a clean bill of health to other government departments, not just Transport, so further change can be expected. Locally, there may also be variations in processes, built to suit local circumstances. That is a potential outcome of a devolutionary ideal.
• Delivery: while the emphasis is on delivery, the resources needed are not solely in local hands. With referendums being triggered by increases in council tax that government deems ‘excessive’, that leaves the Community Infrastructure Levy s106 and, potentially, Tax Increment Finance or Workplace Parking Levies as options. It is not though clear that businesses would find these attractive options.
• Political change: Political change: governments have differing priorities and just as the coalition abolished the regional level of government, a new incoming administration may decide that LEPs are not the way forward. Until the LEPs have time to really bed down and start delivering, they run the risk of being ‘reviewed’.
• Competition: while we are not there yet, there is the potential for increased competition between areas and cities for business investment. The level of business taxation, city environments, etc could all be influences in the inward investment decisions. A ‘single pot’ approach to funding suggests that competition is the preferred option going forward. There is clear question as to whether cities can be allowed to act as a series of sole traders. Central government retains a role in ensuring joined-up thinking and providing a solid base for the cities to compete from. How far government is prepared to allow a postcode lottery approach is unclear.

While significant progress has undoubtedly been made, government needs to continue to consider the powers, structures and funding mechanisms that are needed to address the urban challenge. Otherwise infrastructure will not be up to the challenge and the growth that government desperately wants to see will not be delivered.

Procurement and Outsourcing Journal