1. Governance
November 24, 2016

The Northern Powerhouse Strategy: pigeon steps in the right direction

By Ed Cox

Slowly but surely, Treasury officials are beginning to understand that the relentless pursuit of net aggregate growth doesn’t necessarily make for a healthy national economy. Britain’s productivity problem is increasingly being recognised as a regional one, and yesterday’s Autumn Statement is clear recognition of this fact, with sobering projections of slower growth married with measures to boost productivity all around the country and a dedicated “Northern Powerhouse Strategy”.

The very fact that the government has published this document should finally silence those critics who suspected the new regime had wobbled on Osborne’s pet project. But unlike his predecessor, Philip Hammond has been careful to avoid accusations of empty rhetoric. Early in the strategy comes a long list of government investments in the Northern Powerhouse ranging from the frequently cited £13bn transport investment through to £5m for 2018’s “Great Exhibition of the North”.

Aside from the transport investment, the total comes to approximately £4.5bn. This is not to be sneered at – but a shopping list is not the same as a strategy, and critics are right to ask whether the measures outlined are likely to address our productivity challenges. To its credit, the Northern Powerhouse Strategy does recognise some key drivers of economic growth and addresses each in turn.

Connectivity – Northerners have long since given up expecting bold new announcements of transport spending at fiscal events of this kind. The hard labour involved in scheme development and appraisal carries on into next spring, by which time we hope key priorities will be included in Network Rail and Highways England’s new long-term plans.

Meanwhile we make do with local road improvements and some more money for scheme appraisal as we look on enviously as the Oxbridge super-highways get the green light.

Skills – In the March budget, Sir Nick Weller was commissioned to produce a report on Northern schools which is also published today. Along with generous references to IPPR North’s work in this field, its emphasis on the recruitment and retention of good teachers is key.

But ultimately this will come at a price – and there’s no sign of the “Powerhouse Premium” that we have recommended. Similarly, there are suitable nods towards careers advice and high quality apprenticeships but not the skills devolution that the cities are all demanding.

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Enterprise and innovation – Measures to support small business include a £400m Northern Powerhouse Investment Fund and a series of previously-announced one-off investments in university initiatives. But the big money is in the research budgets heralded earlier in the week by the Prime Ministers, over 80 per cent of which go to the so-called “golden triangle” (Oxford, Cambridge and the London universities).

As we have argued in our health innovation research, if government is serious about backing northern innovation, it should follow the market, double current commitments and invest in northern R&D at the same rate as businesses do.

Trade and investment – The formation of a Northern Powerhouse team and a new £5bn investment portfolio for the north are both important steps forward for the region. And it is not insignificant that the north has shot up the Ersnt & Young “attractiveness” rankings.

But how far these measures will stem the Brexit challenges remains to be seen. The north of England is more dependent on EU trade than any other part of the country and, unlike London, since the turn of the century that dependence has grown.

The great northern way

Many of these measures, though pigeon steps, are welcome, as is the very existence of a coherent framework to guide thinking. But there are some crucial oversights which must be addressed if it is to move beyond being a list of worthy gestures to become a “place-based industrial strategy” likely to transform the Northern economy.

First, the recent Northern Independent Economic Review identified four “prime” and three “enabling” economic capabilities in the north: the sectors that are most likely to lift productivity and enable the region to compete on a global stage. Although IPPR North is developing detailed analysis of each, it remains to be seen how these vital sectors will be supported to collaborate across LEP areas and ensure their collective strengths become more than the sum of their parts as they do, for example, across Greater London.

Second, there is very little mention of devolution. Commitments to give mayoral combined authorities more borrowing powers are promising, as is the prospect of the devolution of business rates, but the devil will be in the detail of such schemes and they will be tightly controlled by HMT. Overseas visitors looking at the plan would no doubt ask why such a document is being prepared by government anyway – surely this is the kind of thing that should be driven from the bottom up? In most other developed nations, the funding for the kinds of initiatives identified in the strategy would be raised and spent locally.

Which brings us to the third omission. In just four short lines, the government commits itself to continuing engagement with LEPs, businesses and combined authorities – but there’s no mention of any guiding hand, not even of the commitment with the core cities that was signed at the last budget. Surely a strategy of this nature needs and owner and a proper action plan?

There is a vitally important line in the introduction of the document where it is rightly stated that the strategy can’t be delivered by government alone. It is just as well. Government commitments to boosting productivity in the north of England are welcome first steps, but it is time that stakeholders across the north rallied together to develop a real strategy for growth and shared prosperity. We can do better than this.

Ed Cox is director of IPPR North and tweets as @edcox_ippr.

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