1. Governance
October 9, 2014

“Buccaneering, wealth-creating families were replaced by councillors”: Lord Heseltine talks to CityMetric

By Jonn Elledge

You can read too much into a politician’s biography. Not everything can be explained by where someone comes from, or the path they took to leave there.

Nonetheless, it feels significant that Michael Heseltine was born in Swansea, Wales’ second city, and a long way from the affluent south-east of England. Partly this is because it goes some way to explain his long-standing interest in spreading growth more evenly around a divided country; but mostly it’s because, when we meet in his office at the Treasury, it’s one of the first things he brings up.

“I saw life from the wrong end of the economic telescope,” Lord Heseltine tells me. “I’m a one nation Conservative. I believe in individualism, entrepreneurship, competition – but I’m in no way afraid of words like paternalism.”

All this is holding him in good stead in the job that chancellor George Osborne asked him to do in 2012: come up with a strategy to boost Britain’s economic growth. The result was “No Stone Unturned”, a 233 page report filled with 89 separate recommendations: on how to improve links between public and private sectors, on how to sort out our infrastructure, on how to upgrade the workforce’s skills.

The beautifully literal cover illustration from “No Stone Unturned”.

But perhaps the most prominent of his recommendations, at least for the readers of CityMetric, was the suggestion that Westminster should “unleash” the energies of England’s cities by devolving a significant degree of money and control from central government. This, Heseltine admitted at the time of the report’s publication in the autumn of 2012, would go down like a “lead balloon” with the Whitehall officials whose power base it would inevitably erode. But, he added, “I do not work for the Treasury, I work for George Osborne. And George has been behind this initiative.”

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In the end, the government accepted 81 of his 89 recommendations – but there’s been some debate about whether “accepted” means quite the same thing as “implemented”. What’s more, while locally-controlled “local growth funds” are on their way, the true devolution of power that the report seemed to promise has yet to put in an appearance.

Tackling Britain’s ever-widening regional inequality is not just a matter of conscience: to Heseltine, it’s also one of plain, good business sense. “Deprived communities are extremely expensive to government. The amount of money poured into those areas is huge,” he argues.

Better, then, to find ways of increasing regional growth rates, and thereby make those areas better able to support themselves. That would have the added benefit of boosting the economy as a whole. At the moment, London is generating roughly twice as much wealth as Manchester or Birmingham. As a key passage in Heseltine’s report argues, the best way of improving “our aggregate economic performance” is to close the divide.

I don’t hear the Mancunians or Liverpudlians calling for a new regional grouping

When explaining the origins of Britain’s north-south divide, the left tend to blame the Thatcher government; the right prefer to blame the welfare state. For Heseltine, though, the problem set in far earlier, at the end of the 19th century. “The motivations of the people running cities dramatically changed,” he argues. “Buccaneering, wealth creating families were replaced by councillors. That’s not a criticism, but they’re doing different things.”

His thesis runs thus. As the state grew, local government gradually took over all the services that had previously been provided by a patchwork of churches and charities and other informal bodies. But universal provision implied minimum standards, which in turn required a certain amount of redistribution of funding from rich districts to poor ones. That gave Whitehall control, of both money and policy.

All this infantilised local government. Ambitious and hungry people were less likely to take municipal jobs (why bother, if you’d be nothing more than the servant of Whitehall?). And budgets were increasingly broken into silos, based on the institutional geography of national government (one pot of money for housing, another for transport, a third for schools and so on). It became harder to scrape together the money needed for major projects – or even, since no one was in a position to think holistically about what an area needed, to determine what those projects should be.

And so, as heavy industry began to recede in the face of globalisation, local government was mainly concerned with emptying bins and tending to parks, rather than arresting economic decline. So, things got worse.

A chart from “No Stone Unturned”, illustrating the degree of the UK’s economic centralisation. Exclude the Celtic nations from the equation, and the results would be even starker.

Heseltine has spent half a lifetime trying to address this. As environment secretary, responsible for municipal affairs during the first Thatcher environment, he encouraged links between councils and private developers, requiring officials to come up with embryonic growth plans if they wanted access to particular pots of funding. After the 1981 riots in the Toxteth district of Liverpool, he “asked Margaret Thatcher to let me walk the streets, taking meetings with everyone who wanted one”. They all agreed that things had gone wrong – “but it was always someone else’s fault. It was quite chilling.”

Heseltine continued to work in this sector on and off for the next 15 years. He was the driving force between the “development corporations”: public-private partnerships tasked with assembling land and otherwise clearing the way for major regeneration schemes. The most famous of these was the London Docklands Development Corporation, which was instrumental in turning some disused docks into London’s second business district.

In 1991, Heseltine also launched the “City Challenge” policy, under which councils had to compete to produce the best regeneration proposals if they wanted to win a share of government funding. This, he argues, didn’t just encourage councils to take an active role (rather than simply waiting meekly for central government hand outs); it also encouraged them to create links with local businesses to actually deliver on these proposals.

All these themes appear in the “No Stone” report, a document packed with ideas Heseltine has clearly been dying to put into action for 30 years or more. It envisions a world in which local bodies receive a single pot of funding from Westminster, no strings attached, to do whatever they think would most benefit the local economy. To encourage areas to come up with better plans than their neighbours, they’d be required to compete for funding. And, to give the private sector greater confidence about doing its part, budgets would be set out over a period five years or more.

I don’t believe people are queuing up to hand their budget over to someone else”

Perhaps the most surprising aspect of the report was which bodies Heseltine decided to empower. He didn’t choose councils, but the Local Enterprise Partnerships, in which groups of councils team up with businesses to do wondrous things to the local economy.

At first glance, this is a bit of an odd choice: LEPs, after all, are not democratically elected bodies. But, Heseltine argues, individual local authorities are too small, and talk of regional government “has not caught the public imagination. I don’t hear the Mancunians or Liverpudlians calling for a new regional grouping”. Anyway, he adds, “the way to start is not by going into structural change”.

As to the question of what should be devolved, Heseltine’s answer is, in effect, everything: “If you started on a baseline budget basis, you’d seek to restrict national government to quality control and delivering necessary infrastructure,” he says. “I want maximum power devolved to the people who live and work in these areas. And you should be open to experimentation. Let a thousand flowers bloom, to lift a piece of Marxist dogma.”

Officially, the government’s response to “No Stone Unturned” was warm. In practice, though, the “Single Local Growth Fund” now on offer to LEPs represents only a fraction of the money that Whitehall grants to local government: £2bn a year, rather than the £49bn over four years that Heseltine envisioned. The strings are still very much attached. Power, whether over money or policy, is still seen as something that national government gives to councils – not something that they deserve by right.

But the Scottish referendum, and the promises of greater powers that followed it, have increased pressure for reform elsewhere in the UK once again, and devolution is now higher up the political agenda than any time for 10 years or more. “The agenda I’m interested in could happen tomorrow,” Heseltine claims. “You just need an announcement about what is going to be devolved and when it’s going to happen.”

So why hasn’t it? One senses that lead balloon is still dragging things down. While Heseltine repeatedly stresses how supportive George Osborne has been, the Whitehall establishment seems to have been rather less keen. “People don’t give up what they hold,” he argues. “I don’t believe human nature has changed, and that people are queuing up to hand their budget over to someone else.”

The city most often cited as a shining example of what can be achieved when power is devolved is Manchester, with its trams, business district and economic vibrancy. But Heseltine remains most excited about a city he’s had connections to for 30 years. This summer, he notes proudly, Liverpool hosted the International Festival of Business – something which would have been unthinkable back in the 1980s.

“Above all else it’s about confidence,” he says. “Liverpool is unstoppable now. It’s full of people who are going to achieve.” Perhaps other cities could do the same – if only Westminster would allow it.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and also has a Facebook page now for some reason.

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