The announcement that Hull will be the City of Culture 2017 was met with a few chides and sniggers in the media. Whatever its cultural pedigree, Hull is a city tarnished by high unemployment and youth crime. It has seen the highest rate of Jobseeker claimants in the country.
Hull is not alone. A number of other cities and towns, particularly in the north of England, have been facing these challenges since the 1970s. While some people are able to travel in search of work, for others this is not an option. The result is that generation after generation are locked in a cycle of desperation and poverty.
During the boom years prior to 2008, London’s financial sector was able to pull the whole national economy along. The Government did not need to concern itself with maximising the economic potential of other cities. This inertia allowed for the national economic imbalance to be further entrenched, and Britain fell behind its competitors in promoting regional growth.
Yet this situation can no longer be accepted. The UK economy is growing again, but unemployment remains stubbornly high, particularly youth unemployment. With the rise of the BRIC nations, and with other developing countries hot on their heels, it is vital that Britain maximises all of its resources. This means encouraging innovation and creating jobs in our cities.
Decentralised fiscal reform will boost the economic prospects of Britain’s cities. Greater financial freedom will allow local politicians to better direct growth to drive their local economies. The current formula of majority Government grant has long restricted the growth of cities outside London. Centralised funding, managed as it is by Whitehall bureaucrats lacking sufficient local knowledge, is ineffective in supplying the investment cities need to maximise growth.
Speaking at a recent TRG event, Lord Heseltine argued that more must be done to encourage city economic growth. The vast majority of the recommendations from Heseltine’s report No Stone Left Unturned, published last year, have now been adopted. Yet the UK economy remains staggeringly unbalanced, particularly in geographical terms.
Cities need devolution of property tax revenue streams. This includes council tax, stamp duty, land tax and business rates. Cities also need to have the power to reform these taxes to suit local conditions. These powers would provide stable funding to stimulate economic growth and allow cities to raise sustained investment for infrastructure such as transport, schools, housing, energy supply and technology. City governments are best placed to create jobs and free up spending.
In most developed countries, top cities outperform the national economic average. Yet in the UK, only London is able to do so consistently. This suggests that many of Britain’s ‘Core Cities’ – such as Birmingham, Manchester, Nottingham and Leeds – have a great deal of economic potential. More financial freedom would allow this potential to be realised and could contribute a further £1.5bn per year to the UK economy.
Not only will city devolution benefit our national economy through jobs and growth, it will also help end welfare dependency for thousands of families across the country. The vast majority of those on benefits do not want to be clients of the state. City devolution, therefore, will give independence to the cities, but more importantly, it will give back power and self-respect to the individual.
In a recent cross-party initiative, London and some of England’s other largest cities have called on the Government for more substantial devolution. This follows on from the London Finance Commission’s report Raising the Capital, published in May 2013, which suggested measures that would give Londoners more say over a greater proportion of taxes raised in their city.
In London, only 7 per cent of tax paid by its residents and businesses is redistributed directly by the Mayor and borough councils. In New York City this figure is 70 per cent, in Paris it is 83 per cent, and in Tokyo it is 92 per cent.
Despite devolution to Scotland, Wales and Northern Ireland, the UK remains far too centralised. City devolution is the most effective way to make Britain grow. It will be a positive step in answering England’s devolution question. It will also help deliver the Conservative Party’s localism agenda.
Cities are the engine of growth in any national economy, and if Britain is to compete in the future, that engine needs to be firing on all cylinders.
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