Five ways a new industrial strategy can make the most of devolution
The launch last month of the government’s new economy and industrial committee – tasked by Theresa May with driving growth ‘up and down the country’ – marked the first shift in economic policy and devolution under the new prime minister.
As the new government decides what policies to keep, what to jettison and what to add, here are five ideas about a new devolution strategy that should be integral part of a new approach to economic growth and industrial policy.
- Ensure industrial policy makes the most of cities and city regions, which are best placed to boost economic growth and productivity
To drive economic growth, the government must boost big city regions. Manchester’s 1% increase in tax revenue over the last decade was nearly as big as the tax generated by the 10 fastest growing smaller cities, demonstrating the critical role that major city regions (including their suburban and outlying rural areas) plan in the national economy. Giving big city regions greater control over transport, skills, planning and finances, will enable them to tackle some of the specific local constraints to growth identified by local businesses and particular local sectors.
The government should also work with the fastest-growing places – not necessarily through devolution deals, but by giving them greater flexibility to invest in the infrastructure that local businesses need. For places where people feel left behind by globalisation, the government should work with them to understand and make the most of their key strengths, their relationships with other local economies, and actions that will make the most difference to local growth and local people.
- Bank the progress already made on metro mayors in big city regions, but relax mayoral requirements for smaller areas.
By May 2017, we should have a cadre of powerful voices for city regions (including towns, rural areas and suburbs) that will be at the heart of improving productivity over the next decade.
However, if the government backs away from mayors in any one area, the agreements elsewhere could be put at risk. Changing these policies could also mean still-sceptical civil servants seize the chance to pull back powers. But keeping big city region mayors does not and should not mean that more rural areas or smaller cities have to have mayors to gain more powers, or that the powers these areas gain need to be the same as Greater Manchester.
- Ensure economic growth policies take decisions at the smallest efficient geography.
Whitehall and Westminster should not be trying to do everything on economic growth and industrial policy themselves. Partnerships already exist to support policy development and delivery, whether at neighbourhood level (in the form of combined authorities) or across city regions.
Whatever happens to the ‘Northern Powerhouse’, the city regions across the north will keep working together; the same is true of places dubbed the ‘Midlands Engine’ and ‘Great Western Cities’. Local areas should be empowered to devise or deliver policies to support growth and improve public services, where they will often know far more about what will work efficiently than Whitehall civil servants.
- Make skills and innovation a national priority and work closely with city regions to deliver these aspirations.
Two of the biggest differences between successful places, and those that struggle, are skills and innovation. It’s vital that the May government does not fall into the historic trap of neglecting investment in human capital because its benefits take so long to come through.
The government’s national industrial strategy must prioritise skills, and work closely with local areas and key institutions across the UK to ensure everyone – from early years to those already in the workforce – can get the education and training they need to prosper in the modern economy. Government should also work closely with business to understand and raise demand for skills. This will be vital for future economic growth and productivity in cities across the county.
- Borrow to invest, working closely with city regions.
With the relaxation of Osborne’s fiscal rules, there is an opportunity for the government to invest in infrastructure projects that generate jobs in the short term, and could help city regions attract businesses, employment and investment in the long term. An industrial strategy that makes the most of devolution should also allow areas to borrow against local revenue and invest prudentially in infrastructure that unlocks development.
The weeks and months ahead will see frantic work on industrial strategy, productivity, economic growth and devolution. But for the government to realise May’s vision for growth up and down the county, it is vital that this work is joined up, as all these areas are integrally linked. The Government must also continue to recognise the diverse roles that different places, and cities and their surrounding areas in particular, can play in generating growth and contributing to the national economy, if it is to succeed in raising prosperity across the country.
