At a meeting with the Northern Metro Mayors last year, chancellor Philip Hammond said that increasing productivity in the north of England is vital to the government’s plans to boost economic growth.
The scale of that productivity challenge is vast. According to an excellent report from the Centre for Cities, cities in the South East of England are a whopping 44 per cent more productive than cities in other parts of the country. The think tank estimates that, if all British cities were as productive as those in the South East, the national economy would be over £200bn larger.
To boost productivity levels across Britain, regions need to be able to attract and maintain the kind of highly skilled talent which companies seek when choosing where to set up their operating base. A recent Homes for the North report found that over the past decade 300,000 highly skilled workers had left the north. Retaining this talent will require both better transport links and more quality and affordable homes. The challenge is enormous.
To be fair to the government, the aim of its modern industrial strategy is to tackle the productivity problem over the next 30 years, ensuring that all parts of Britain can participate in and prosper in what policy wonks have termed “the fourth industrial revolution” – the labour market of the future.
While the fruits of this industrial strategy will not be felt immediately, the government has made some other encouraging moves which could help attract investment and talent to the north.
The decision to establish combined authorities and regional mayors to allow local councils to pool responsibilities and receive specific functions from central government means locally elected and accountable leaders, not Whitehall, will be responsible for more decisions over housing and transport investment.
It is also good news that Transport for the North (TfN) will become a statutory body. TfN is a true pan northern organisation which can help identify the infrastructure priorities that the region wants and needs. The government’s decision to create a sub-national transport body is welcome – although it does need budget responsibilities to be truly transformational.
Research from the Mace demonstrates the opportunities that TfN could grasp to deliver real economic growth across the north. The construction consultancy found that reducing average journey times by 60 seconds across the north of England could lead to £1bn a year extra in productivity gains.
However, when it comes to housing in the north the picture is less rosy. While the Prime Minister has clearly made housing a political and economic priority, recent moves by the Government risk undermining the housebuilding efforts across the north.
The reason for this can be traced to a set of proposed changes the government put forward before Christmas on how local councils assess future housing need. The aim was to exert pressure on local authorities to increase the number of new homes they plan to build. Unfortunately the draft methodology is flawed. It focuses on councils using a new, backwards-looking methodology based on growth assumptions which reflect today’s problems rather than tomorrow’s aspirations.
Councils are not required to plan housing to match their plans for economic growth. Instead the new numbers will only require them to plan in accordance with what is in effect historic trends. If this seems counter-intuitive, hostile to aspiration and growth, it is because it is. As a result, thousands of homes have been shaved off local benchmarks in the north. The proposed changes effectively amount to an anti-northern bias and a potential cap on economic growth across the north. Common sense must prevail.
New quality housing for rent and for purchase – hand in hand with an upgraded transport system – could act as an economic boon to the northern economy. However, infrastructure investment is currently viewed in silos. Decisions over new or upgraded road and rail routes have to be made in conjunction with an assessment of how many new homes should be built as demand increases. Quite simply, if the necessary homes do not follow, there is a danger that infrastructure investment will be squandered.
Improving infrastructure across the north could truly unleash the Northern Powerhouse. The further devolution of powers is vital. So too is unlocking the purse strings and giving local leaders the funding they require. Finally, the north needs a sub-national coordinating body – whether under the auspices of TfN or something else – which can deliver a coherent plan to deliver the investment we need in our railways and roads, energy infrastructure, as well the hundreds of thousands of new homes the region requires over the coming decades.
If the chancellor seizes this agenda then the government’s industrial strategy really could work in the interests of the north.
Mark Henderson is chair of Homes for the North.