This time last year, I spoke to the former Goldman Sachs economist Jim O’Neill, shortly after he’d launched the independent City Growth Commission, of which he was chair, and which publishes its final report today. “If you look at some of the most successful economies in the world,” he said, “where many cities play a critical role, they enjoy some degree of independence over their finances and policy choices.”
Cities, O’Neill argued, are the engines of economic growth the world over, and the UK is no exception. Between them, eight urban areas—Birmingham, Bristol, Liverpool, Leeds, Manchester, Newcastle, Nottingham and Sheffield—generate a significant chunk of this country’s GDP. But in his view they could be doing even better if they had more control over their spending choices. O’Neill pointed out that there is a great deal of academic research which shows not only that cities benefit economically from the effects of “agglomeration” (the physical proximity of firms, workers and consumers), but that fiscal autonomy—the ability of cities and metropolitan regions to raise their own taxes—matters too.
Since O’Neill and his fellow commissioners (who include the American academic and metro-booster Bruce Katz, his LSE counterpart Tony Travers and Rohan Silva, a former senior adviser to the Prime Minister) began their deliberations last year, this view about the close connections between boosting economic growth and setting our cities free has become almost consensual—you might call it the “Adonis-Heseltine consensus”, after two of the politicians most closely associated with it. Actually, we should probably now refer to the “Adonis-Heseltine-Osborne consensus”, since the Chancellor of the Exchequer seems more or less entirely converted to the economic argument for devolving power to cities or city-regions (there’s a particularly abundant academic literature about the precise scale at which these powers are best set). George Osborne’s recent speech on the need to create a “Northern Powerhouse” stretching from Liverpool to Leeds and beyond echoes what O’Neill has been saying for some time about what he insists on calling “ManSheffLeedsPool”.
The Commission’s report calls for greater “connectivity” (digital as well as physical) between our great northern cities. And when I spoke to O’Neill again yesterday, he insisted, with palpable pride, that Osborne was wholly persuaded of the merits of that case. “One reason this [process] has been exciting is that Osborne has basically embraced our idea. If you look at his three speeches on the topic, in two of them he publicly acknowledged the City Growth Commission.”
He’s no doubt right that Osborne accepts the economic argument (and it’s worth saying that the report is focused narrowly on the economic benefits of awarding “Devolved City” status to places like Manchester, Liverpool and Leeds). But what is less clear, especially in the wake of the Scottish referendum and the three main party leaders’ “vow” to the people of Scotland on further devolution of powers to Holyrood, is whether Osborne and his colleagues will be as enthusiastic about the tight timetable the Commission proposes for the introduction of “Devo Met” (not to mention its recommendation that the cap on “tier 2” skilled migration to this country be lifted).
O’Neill maintains that we shouldn’t “overplay” the extent to which the fallout from the referendum in Scotland will affect the cities debate. “Look at national policymakers,” he says. “They embraced the importance of cities in their policy framework in June. One of the things that does slightly worry me is that people in cities are being a bit lazy about this issue, thinking, ‘Here’s our chance, because of the Scottish referendum.’ If that’s backed up by rigorous suggestions, then they might get somewhere. But if they’re just doing it because they think, ‘Fairness suggests we should get things à la Scotland,’ then that’s the wrong tack.”
He concedes that “the issue of devolution is a hot topic” politically, but I’m not sure the specifically political dimension of the question can be separated as neatly from the economic arguments as he seems to think. And the problem seems to me particularly acute if one begins to think not only about cities and city-regions, but also about Britain’s towns—and not just about towns and “smaller cities” (including the so-called “key cities”) that belong to larger functional economic areas, but more geographically isolated places, too.
When I asked O’Neill about such towns, his response at least had the merit of clarity and cold logic. “I’ve been getting contacted by many of the leaders of such places. Understandably, in the spirit of the Scottish referendum, they’re very sensitive about fairness etc… But we have approached this [inquiry] with a macroeconomic objective… The numbers we play around with translate into an additional 0.2 per cent of GDP growth on average per year up to 2030. If you focused on towns and small cities, you wouldn’t get that result. That’s my first most brutal but honest answer… But obviously on fairness grounds, they have a point.”
They certainly do, and I think we’re going to be hearing much more from the towns and indeed the counties in the coming months as the debate about the way power is distributed in the UK—and in England in particular—continues to unfold.