We need to think bolder if we are to rebalance the UK economy


Jack Hands

The recent report by the Centre for Cities was a startling yet perhaps unsurprising indictment of the UK economy in 2014. London dominates Britain more than at any other time in our history. Why, you may argue, is this even unhealthy; surely whilst London prospers the rest of the UK benefits too? Put simply, the rest of the UK does benefit but it also pays a price because as London has grown, it has become a black hole sucking in more and more talent from elsewhere to the detriment of local economies from Inverness to Plymouth.

All political parties have argued the need for a great rebalancing of the UK economy yet have offered little way in terms of substantial setups. The Government’s flagship regional Growth Fund is one such policy and has made a marked difference. In some regions such as the East Midlands, job creation is seeing a mini boom.  Relocation however is one aspect which sees far too little political air time.  The one move of real political courage was to relocate the BBC studios from London to Salford. It has been an overwhelming success which reaches far beyond the simple relocation of jobs from London to Manchester.

Of course, the focus on any regional growth programme should be first and foremost about sustainable, private sector growth. Public Sector institutions and private investment are however, at times inextricably linked. The BBC’s move has improved the image of Manchester, attracting young, creative talent and helping to expand the media industry in the region. These factors in turn have led to greater private sector investment and, in the long term, will make Manchester a place where businesses are more attracted to relocate.

Why then should we not look at further bold relocations to rebalance the UK? Perhaps the inconvenient truth is that this issue simply does not feature as prominently as perhaps it should do. Is moving Parliament to Birmingham such a nonsensical idea? Are moving our leading museums to Sheffield such a backwards step? If you believe in the need to transform our regions to help them attract more private sector investment and, put frankly, improve their image, then these are valid debates we should be having.

Bold moves such as this desperately need to be advocated by more politicians because the gap between London and the rest of the UK has grown so terrifyingly wide. Travelling from London to the rest of the UK often feels more alien than travelling to other major European cities. London’s identity is its own – its excellent success has allowed it to prosper in a way which means it is now unrecognisable from many parts of the UK. Long term, our national identity will be threatened because London has the potential to warp into its own state, distant and non-needing of any other UK city. 

When the UK economy was on its knees after the financial crisis in 2009, the Government stepped in to provide a stimulus effectively propping the UK economy up until it recovered. London is creating ten times as many private sector jobs than anywhere else in Britain. It is prospering. Why then should no one argue that some UK institutions currently based in London such as museums or Civil Service departments not be relocated to help cities outside of London prosper until they can create enough private investment to recover and prosper themselves.

We need to realise the economic potential of our other major cities

Andrew Thorpe-Apps

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.

Follow Andrew on Twitter.

A misguided cap on Bankers’ bonuses

Alexander Pannett 3.30pm

And so they are marching again. The restless European Parliament is finally getting its revenge against the unscrupulous “Anglo-Saxon” capitalists in London. It has voted to reign in bankers’ bonuses, reducing permitted amounts to the base salary of bankers.

The rules would apply to Europe-based employees of any bank, as well as to staff of European banks wherever they are located. That means a Barclays trader working in New York would be subject to the cap, as would a Goldman Sachs banker based in London.

I am sceptical of the bonus cap’s effectiveness. The reduction of bonuses will mean that remuneration will be granted in the form of higher salaries.  This adds inflexible costs to financial institutions which, in a crisis, will have to reduce head-count rather than being able to cancel bonuses in order to preserve capital levels. It will lead to the increased use of temporary contracts as banks seek to maintain flexibility.

Increased salaries, rather than bonuses, also moves the City away from performance related pay. Bankers will receive salaries despite the poor risks and mistakes they make. Failure will be rewarded. This is also unnecessary as recent claw-back regulations have been introduced which are designed to ensure remuneration is performance linked. Bankers whose trades made losses in the long-term would see their bonuses reclaimed, which incentivises bankers to consider long-term risks. Higher salaries do not ensure that bankers mitigate risks.

I also have an intrinsic revulsion at politicians who interfere with business for political or even emotive reasons. Do these politicians understand or even care about the effect that these changes will have on London’s financial services, which is a considerable European strategic asset? I suspect they do not.

Despite my above concerns, we must not ignore the considerable antipathy that the British public holds for the financial sector. It is almost satirical that RBS, which was saved with taxpayer’s money, has posted 2012 losses of more than £5 billion whilst paying out £600 million in bonuses last year. This European cap on bonuses may be mis-guided but that does not mean the City now smells of roses.

A reform of the bonus culture may indeed be needed, such as substituting locked-in equity for current bonus structures or changing the criteria for awarding bonuses so that they are more strongly linked to the overall performance of a financial institution. However, this European cap on bonuses is not helpful and will be counter-productive as it harms the international competitiveness of one of Europe’s few remaining engines of economic growth. The prime minister is right to resist.

Follow Alexander on Twitter @alpannett

Look to Stansted?: expanding Heathrow is a ‘ludicrous proposition’, says Steve Norris

Nik Darlington 10.48am

TRG patron Steve Norris has popped up on the Times comment pages (£) this morning endorsing an interesting idea: solve the south-east’s air capacity problem by expanding Stansted Airport.

Opting for Stansted is, says Mr Norris, the “least worst option”, as an extra runway (or two) at Heathrow would be “ludicrous”:

"[Enlarging Heathrow has] a powerful argument, attractive to business users but completely unacceptable. Heathrow is simply too close to London. The third (short) runway would not only mean an increase in flights low over the city with all the pollution and noise that implies, but would effectively obliterate a village. A fourth [runway] would raze thousands more homes to the ground. It is a ludicrous proposition and all parties have been right to oppose it."

Crossrail, due for completion in five years, offers the solution:

"From east of Stratford a 10-kilometre rail tunnel spur emerging at Fairlop Water and following the line of the M11 could link Stansted directly to Central London and take passengers to Heathrow without changing trains. There is the capacity for six trains an hour, more than the Heathrow or Gatwick expresses. Journey time to Tottenham Court Road or Bond Street would be around 40 minutes. And all for around £5 billion."

Mr Norris, a Transport Minister during the 1990s, gives short shrift to the Mayor of London’s island airport idea:

"Not only does [an estuary hub airport] require the closure of Heathrow…but it is predicted to cost £50-100 billion. In truth the scheme is a brilliant CGI but unworkable in practice. Its flight paths would conflict with existing Schiphol holding patterns and the proposal is very light on transport details beyond a broad statement that there would have to be new rail and road connections. It is not going to happen."

Stansted Airport expansion is not a new idea. Indeed, Boris Johnson offered his support for it, albeit as a stop-gap, as recently as this summer. And as with Heathrow, it has its own vociferous 'anti' campaign group.

But if indeed we do desperately need to expand airport capacity in the south-east of England (as opposed to elsewhere, such as increasing the capabilities of Birmingham Airport), then Steve Norris is absolutely right that Heathrow would be unacceptable and he is probably right that ‘Boris Island’ would be overly expensive and logistically impossible (as much as I like the idea).

On this basis Stansted Airport, allied with Crossrail, does seem like the least worst option.

Follow Nik on Twitter @NikDarlington

'Without the new, there would never be any old'

Craig Barrett 6.01am

Sitting watching the Queen’s Speech last week, I was reminded of how much better Britain does pomp and ceremony than other countries. European militia look faintly ridiculous in comparison.

And on 4th May, I felt hugely privileged to attend the Trial of the Pyx, a ceremony that goes back some nine hundred years. Every year, the Worshipful Company of Goldsmiths is responsible for assessing newly minted coins, to ensure they conform to required standards in terms of size and quality of metal. Present is an expert panel of assayers and the Queen’s Remembrancer (the senior Master of the Queen’s Bench), certifying above all that the Master of the Mint has not been shaving gold or silver from the nation’s coinage.

The Master of the Mint, George Osborne, was indeed there this year, so restoring a relationship broken between 1997 and 2010 by Gordon Brown and Alistair Darling. We are, of course, more than aware of Mr Brown’s attitude towards our nation’s gold reserves.

After assessing the coinage, the Verdict of the Pyx is delivered. Safe to say, it passed the test. We then repaired to luncheon to hear an address from the Chancellor of the Exchequer. Among non-disclosable political comments, Mr Osborne chose to highlight the fact that the Royal Mint provides currency to more than sixty countries around the world - a true export success to boot.

I was accompanying the inimitable Catherine Bott, herself the guest of the Prime Warden of the Worshipful Company of Goldsmiths, Hector Miller. Unlike many Livery Companies, the majority of the Goldsmiths actually practise in their field, so we were in the presence of true craftsmen. At the new Goldsmiths Centre in Clerkenwell, you can see for yourself.

Funded partly by a bequest in 1514 when Agas Harding, a widow of a Goldsmith, left the Company a small amount of land in Holborn, the Company decided some years ago to put it to good use and create something to assist nascent craftsmen. Workshops are available at competitive rents, as well as extensive facilities for teaching. What impressed me most was that the focus is not simply on passing on techniques but also what we might call “life lessons”. There are classes on managing accounts and business planning - vital skills for the self-employed that might otherwise be overlooked.

The Goldsmiths have a long history of involvement in education. Goldsmiths College is the most obvious example, but the Company was also closely involved in the founding of Imperial College. This could be a kernel of the ‘big society’ - independent of the state, they have created a unique learning space for craftsmen and the public.

Catherine commented that she rather likes antique jewellery, to which I responded, “without the new, there would never be any old”.

What is marvellous about the new Goldsmiths Centre is the way in which the old has been able, hopefully, to continue to create the new. I urge you to pay it a visit.

Follow Craig on Twitter @mrsteeduk

It is simple: we cannot allow the offensive and malicious Ken Livingstone back into City Hall

Craig Barrett 11.39am

Polls polls polls! "Boris lead narrows!" "Ken less popular than his party!" "Boris more popular than Tories!" "Only 12% of people believe that Ken is honest!"

While opinion polling has become much more sophisticated, anyone who watched the 1992 general election coverage on Easter Monday would know that only one poll matters: when you enter your booth and wield your pencil (unless you live in Tower Hamlets, of course).

With just one week to go until the election for London’s mayor, the current polling serves only to allow campaigners to twist and spin to whatever advantage possible and to remind people (like me) that we should be doing more to help.

I feel a bit sorry in some ways for the London Labour party. They have had a candidate forced on them who seems to owe no loyalty to them barring the right to campaign under their banner and deploy their activists for his own ends.

Had Labour picked someone else, Mr Livingstone, who believes the mayoralty his divine right, would have run as an independent candidate as he did in 2000.

Mr Livingstone’s campaign is a goulash of undeliverable policies, bold but inaccurate pronouncements about his Tory opponent, and craft attempts to shift the media’s focus away from his own activities. It is not so much that Mr Livingstone is a stranger to the truth, it is more that lying and smoke-screens come easier to him.

To Mr Livingstone, it matters not that he has no power to restore the EMA, or that the TfL ‘cash mountain’ is intended for investment rather than fare giveaways. To Mr Livingstone, it matters not that the only experience he has to validate his comments on Boris Johnson’s tax affairs comes from his own hypocritical tax avoidance. To Mr Livingstone, it matters not that what spews from his mouth is offensive to one group of Londoners or another.

Mr Livingstone has given us no compelling reasons to vote for him; no policies on which any Londoner can be certain of his delivering. His crony-aplenty, wasteful record in City Hall speaks for itself.

Contrast that figure with Boris Johnson, who has actually delivered on his promises - whether policing, sustainable housing, tax freezes and others - and whose plans are both costed and practical.

But above all else, consider two vital points. First, I am not old enough to remember Mr Livingstone’s reign as leader of the Greater London Council but I know enough to understand it for what it was: a publicly funded one man crusade of self-justification, with money poured down the drain to embarrass Mrs Thatcher’s government or to challenge its actions in the courts.

The Mayor of London must speak for the city with an independent voice, but they must also be able to co-operate with central government to ensure the best for the city. For at least the first three years of the next mayor’s tenure there will be a Conservative politician in 10 Downing Street and while Mr Johnson and Mr Cameron may not be close personally, they do at least have a mutual understanding and interest.

Boris Johnson is a doughty fighter who has regularly exercised his inherent independence to seek the best for London. Mr Livingstone’s egomania and pathological hatred of the Tories will mean that were he to be elected next week, it would be the start of at least three years of pitched battles on meaningless fronts, all paid for by London’s rate payers.

Second, and perhaps most important, Mr Livingstone’s public utterances over the past few months demonstrate the type of man he is.

Whether suggesting that a councillor in Hammersmith & Fulham ought to “burn in hell…and…flesh be flayed for demons for all eternity”; whether suggesting that gay bankers in the Middle East could be mutilated; whether suggesting that London’s Jewish population is too rich to vote Labour; or whether simply another cheap insult at a critic, Mr Livingstone appears oblivious to the effect of his own words.

It is not good enough for the Labour party to say “Ken is just being Ken”, or words to that effect. Mr Livingstone is no Jed Bartlet, and the fact that many in the Labour party are doing their best to distance themselves from their own candidate shows the whole strategy is a farce.

In a few months, the eyes of the world will be on London and other cities around the country as Britain hosts the Olympic & Paralympic Games. Boris Johnson may be gaffe-prone but unlike Mr Livingstone his gaffes are rarely offensive and certainly not malicious. We in this great and historic capital city cannot afford to have as our mayor a man who appears to set his stall deliberately to offend others.

For this reason, above all others, I urge you to back Boris Johnson as Mayor of London.

Follow Craig on Twitter @mrsteeduk

Lib Dem wins London Marathon!

Nik Darlington 10.32am

The Liberal Democrats don’t win many things these days but one of the party’s backbenchers led the field of MPs in yesterday’s Virgin London Marathon.

Greg Mulholland romped home in 3 hours 42 minutes, thirteen ahead of his closest challenger and fellow marathon veteran, Ed Timpson.

It is probably not a portent for the next general election, but here is the full list of MPs with their times from the official results page:

  • Greg Mulholland (LD, Leeds NW) - 3h 42
  • Ed Timpson (C, Crew & Nantwich) - 3h 55
  • Alun Cairns (C, Vale of Glamorgan) - 4h 03
  • Chris Kelly (C, Dudley S) - 4h 17
  • Jack Lopresti (C, Filton & Bradley Stoke) - 4h 22
  • Graham Evans (C, Weaver Vale) - 4h 46
  • Ed Balls (L, Morley & Outwood) - 5h 31

Making Mr Mulholland’s feat all the more impressive is that he had already run the Paris Marathon last weekend, before setting out on a 600-mile bicycle ride from Yorkshire to London, in aid of the Jane Tomlinson Appeal 10th Anniversary Challenge.

Alun Cairns finished impressively in just over 4 hours having aimed to complete the 26 miles and 325 yards course in something closer to four-and-a-half hours.

And shadow chancellor Ed Balls thanked the crowds for getting him home in his target time of five-and-a-half hours.

As someone who ran their third (and final!) marathon yesterday, I know that it is the slow plodders like Mr Balls who deserve our most respect. I will always maintain that anyone can do a marathon, and while few can do it quickly, it takes a different strength entirely to drag yourself across the finish line after so many hours of running.

Well done to everyone who took part, on what was a perfect morning for running. And thank you to the crowds, who truly did get us all home.

Follow Nik on Twitter @NikDarlington

I’m wishing all MPs the very best for the London Marathon (as long as I’m not overtaken by Ed Balls)

Nik Darlington 8.31am

The weather forecast might be frightful (I prefer my going hard, hot and dry) but I am actually looking forward to lining up alongside more than 30,000 fellow runners this Sunday in the 2012 Virgin London Marathon.

It is, however gruelling, the most wonderful event. Life changing, even. And indescribably so.

Yet this is a political blog, so here’s the politics. On Sunday, I will be sharing the starting line with eight MPs - some, like Alun Cairns, completing their first marathon and others, like Ed Timpson, their umpteenth (for the record, seven in London and nine overall).

The field comprises six Tories (Cairns and Timpson are joined by Graham Evans, Chris Kelly, Philip Lee and Jack Lopresti), one Liberal Democrat (marathon veteran Greg Mulholland) and one Labour MP, none less than the shadow chancellor, Ed Balls.

One shouldn’t really be partisan about these things and comment on the paucity of Lib Dem and Labour MPs taking up the challenge. The Lib Dems, after all, have very few MPs, and some of them are Charles Kennedy and John Hemming.

But are there really no other Labour MPs than Ed Balls able to run a marathon, or even to contemplate running a marathon? (There’s a joke in there about political parties lasting the course: answers on a postcard please.)

I’m actually rather pleased that the pugnacious Mr Balls is the man to put his hand up. As keener readers know, the shadow chancellor and I have form when it comes to on-field rivalry, both turning out occasionally as wicket-keepers for the Lords & Commons cricket team. I desperately hope I don’t see him approaching over my shoulder, but I wish him all the best - the very best, in fact.

They are all running on behalf of worthy causes, including a variety of local hospices (I am raising money this year for St Richard’s Hospice, Worcester).

And I hope as many readers as possible will turn out and cheer on them - and all the other runners - whatever the weather, as people of all shapes and sizes achieve the most Olympian of feats, in this, the most Olympian of years.

Follow Nik on Twitter @NikDarlington