Tag Archives: Coalition Government

Multi-Speed Britain: The Widening of Urban Inequalities

by Dr. Stephen Hincks, Lecturer in Spatial Planning, Centre for Urban Policy Studies, Planning &  Landscape.

‘Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse’ (Taleb, 2007: 225).

The interlocking nature of the local and the global serves to create a sense of ‘scalar nesting’ that is comfortable and familiar.  Yet, during crisis events, the outcome of this intertwined relationship is largely predictable: ‘winners continue to win’ and ‘losers lose harder’.  It is inevitably at the local level – the city, the town, the neighborhood, the street – where this Molotov cocktail reaps its havoc.

The depth and severity of the global financial crisis became fully apparent in mid 2007. Based on quarterly GDP figures, the UK experienced the longest recession between the second quarter of 2008 and the third quarter of 2009 since the publication of quarterly GDP data began in 1955. It was also the first time that the UK economy had the largest quarter-on-quarter decline since 1980.  So I was intrigued earlier this week to read Cities Outlook 2012, a report published by the non-partisan think-tank, Centre for Cities (Centre for Cities, 2012).  The report makes the case – through an analysis of recent social and economic data – that the gap between Britain’s most prosperous and poorest cities is widening as a result of the economic crisis. The report found a case for a ‘two-speed Britain’ as more resilient urban economies – including the likes of London, Edinburgh and York – adapt to changing economic circumstances as less resilient urban economies – including Swansea, Hull, Liverpool and Sunderland – struggle to respond to changing economic imperatives.  Research undertaken by the Centre for Urban Policy Studies at the University of Manchester – prior to the publication of the most recent Cities Outlook report – goes further in arguing that rather than there being a ‘two-speed Britain’ there is in fact a ‘multi-speed Britain’ as different types of urban areas respond differently to the impacts of the most recent downturn (Wong et al, 2011).

This, you might argue, is all fairly standard so far.  However, what both reports are clear on is that current government policies seem to be widening, rather than narrowing, the gap between our urban areas.  Without wanting to get too caught up here in the respective analyses, both reports contend that the scale and depth of public sector spending cuts – introduced as part of the Coalition’s austerity strategy to combat the ‘spiralling national deficit’ – are adversely affecting towns and cities up and down the country with the greatest shocks being felt in metropolitan areas that are reliant on public sector employment.  Unemployment in our metropolitan cities has risen sharply and the welfare system has become a safety net across a widening spectrum of society as individuals and households look to ride-out the economic storm.

We are all aware that the current economic climate is intimately entangled with the sovereign debt crisis.  Experiences in the Euro Zone, North America and Britain poignantly illustrate this.  And so, the arguments made for reducing the UK’s national deficit are well rehearsed: the nation’s debt needs to be brought under control for the sustainability of the national economy.  Whether this is something that you accept or not (this rationale for introducing the deficit reduction plan has been contested on the basis that net public debt was about 60% of national GDP in 2010 compared to over 200% in the 1950s following the end of the Second World War) there is political appetite for reducing the deficit.  The Prime Minister’s suggestion, however, that ‘we are all in this together’ seems to be collapsing under the weight of its own hypocrisy.  As the Welfare Reform Bill – of which there are some welcomed aspects including attempts to incentivise work in response to rising levels of worklessness – moves through the parliamentary process debates over the introduction of a benefits cap and the implications of proposed reforms to the NHS have intensified.  In a recent piece written for The Guardian (23 January, 2012), Randeep Ramesh points out that the proposals contained within the Welfare Bill – irrespective of the nature of the transition period adopted as one welfare regime replaces the other – have the potential to increase child poverty and to adversely affect certain disabled groups in society which is something that has been acknowledged by the Coalition itself.  Position these proposals in the context of wider reforms in housing benefit and cuts in regeneration funding – the adverse effects of which are likely to be disproportionately concentrated in our metropolitan areas according to recent research by the Centre for Urban Policy Studies (Wong et al, 2012) – and you catch my drift.

For most people, the arguments made for reducing the deficit, including the need to improve the sustainability of national finances, are, however, broadly palatable.  But, it is the nature and intensity of the cuts that has proven most contentious.  Cut fast, cut hard to reduce the deficit quickly or cut in a slower and arguably more ‘managed’ way: broadly speaking, this has been the crux of the debate.  Clearly, it is too early to judge the success of the government’s strategy but recent OECD figures suggests that the markets have been slow to respond to the deficit reduction strategy adopted so far.

However, in my view, the deficit reduction debate has served to mask a more fundamental and altogether more toxic set of policy assumptions; namely that the claiming of welfare support (and state aid in general) is indicative of a mentality that ‘living off the state pays’.  Do not get me wrong, I am not suggesting for one moment that the much maligned ‘Gallagher-esque’ situation – a reference to the dysfunctional family through which ‘contemporary council estate culture’ is portrayed in the British television drama Shameless – does not exist.  Clearly it does.  But what I am clear on in my own mind is that it is extremely unwise, dangerous even, for politicians and society in general to adopt extreme denominators as benchmarks against which to measure the characteristics and cultures of a place, a situation, a scenario, an individual or a family let along to use these benchmarks as springboards for the development of policy.  Since assuming office in the spring of 2010, under the guise of ‘Localism’, the Coalition has introduced a raft of reforms and proposals including neighbourhood forums, mayoral systems, and the further ‘decentralisation’ of powers to local authorities all of which form part of a plan to reduce the democratic deficit that emerged (perceived or otherwise) under previous administrations.  In many quarters these ‘innovations’ have been welcomed with open-arms.  Yet, as the raft of Coalition reforms, Bills, Acts and amendments meander their way through the parliamentary process, I cannot help but feel that there is a politics of survival being actively played out here through which inequality could bloom further; a politics that the most vulnerable in society – who are disproportionately concentrated in our metropolitan areas – are least equipped to play.

References

Centre for Cities (2012) Cities Outlook, 2012. Centre for Cities, London.

Ramesh, R. (2012) ‘Iain Duncan Smith holds the line on welfare cap’ The Guardian, 23rd January.

Taleb, N.N. (2007) The Black Swan: The Impact of the Highly Improbable. Random House, New York.

Wong, C., Gibb, K., McGreal, S., Webb, B., Leishman, C., Blair, N., Hincks, S. and McIntyre, S. (2011) Housing and Neighbourhoods Monitor 2011 – Fragility and Recovery. York, JRF.

Wong, C., Baker, M., Hincks, S., Schultz-Baing, A. and Webb, B.  (2012) A Map for England: Spatial Expression of Government Policies and Programmes. London, RTPI.

 

 

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Globalisation, Agglomerations and Regaining Balance

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Image: Manchester Agglomeration.

Dr Marianne Sensier is a Research Fellow at the Institute for Political and Economic Governance (ipeg), University of Manchester. Here she talks about her recent study on agglomeration economies and how balance can be achieved in the economy.

Global imbalances are widely seen to have caused the financial crisis and subsequent recession. The downturn saw a sharp fall in trade and a synchronised decline of economic activity across nations. The recovery from this recession has been uneven across the world which has prompted increased discussion about economic rebalancing at regional, national and global scales.

Agglomeration economies occur when the concentration of economic activities leads to the emergence of positive externalities, which are transmitted both within and between firms through channels such as technological spillovers, an increasingly skilled labour market and enhanced firm-supplier networks. A recent ipeg study of mine (with co-authors Artis and Curran) has found that over recent years, both industry and service sectors have increased productivity in city regions (although for industry this has been accompanied by the cost of falling employment in this sector), where they benefit from the growing demand that a relatively affluent daytime population brings. The long term decline in traditional manufacturing, caused by increased competition in the global market place, also means industries are less likely to cluster together. However, we find that the financial services sector does benefit from locating near companies in the same sector.

“Made In Britain” (a book by Evan Davis to accompany his BBC 2 series to be shown in June 2011) supports the findings of this ipeg study. Evan Davis explains that traditional manufacturing was dispersed geographically mainly due to natural resources – i.e. the concentration of steel works in Wales due to the availability of pig iron and coal – but now with the rise of the knowledge industries, and the greater need for face-to-face contact, people cluster in particular regions which has lead to the regional imbalances we see today.

Globalisation has increased the size of agglomerations in that firms and workers are attracted to places with lower production costs and larger local markets which reinforce regional imbalances. In my view it seems that the only way countries can compete in the global market place is to make certain locations more desirable so that efficient firms looking to lower costs of production will move into regions. The free market does not allow this solution, agglomerations left to grow to unsustainable levels will lead to negative externalities of pollution, congestion and other social ills (as in the case of London, see the article in Saturday’s Guardian).

So what is left for policy makers to work with post Regional Spatial Strategies? Well the Coalition Government has created Enterprise Zones (announced in the March 2011 Budget and offering discounts in business rates, simplification of the planning system, superfast broadband, enhanced capital allowances for firms that focus on high value manufacturing, use of Tax Incremental Finance and support from UK Trade and Investment for inward investment and trade opportunities). In this global market place we need to compete internationally and other countries offer similar incentives for firms to locate. National and local support for business is vital to help them set-up, grow, access finance, innovate, network, train workers, export and compete in the global market place. Enhancing the regional skills base is critical and further support for education was mentioned in the Budget in the form of funding for work experience places, apprenticeships and the expansion of University Technical Colleges. Incentives to business and investment in education are essential to sustain growth of an economy, help the environment and rebalance wealth from the overcrowded regions within our nation.

Rebalancing Acts: Social Sciences and the North/South Divide

Post by Alan Harding, Director of IPEG

PM meets Richard Leese

One of the last Labour Government’s many targets, enshrined in the Regional Economic Performance Public Service Agreement (REP PSA) in 2002, was to ‘make sustainable improvements in the economic performance of all English regions and over the long term reduce the persistent gap in growth rates between the regions’. It was never altogether clear which part of that aspiration was accorded priority, nor what mechanisms were being employed to bring the second element about. Indeed, for policy analysts who were prepared to dig below the surface, there were reasons to suspect that the implicit driving force behind spatial development policy in England was the perceived imperative of managing growth in the London super-region more effectively.

Thus, for example, Treasury-inspired policy reviews in the fields of transport (Eddington), land-use and planning (Barker) and skills (Leitch) all came out in favour of refocusing public investment and recasting regulatory instruments to tackle pinch points and serve the ostensible needs of ‘hot’ labour market areas. The Sustainable Communities Plan of 2003, uniquely, drew a distinction between the growth management needs of the Greater South East and the ‘regeneration’ and ‘low demand’ challenges elsewhere. And official figures showed that in the years either side of the adoption of the REP PSA, regional spending per capita was growing faster in the London, South East and Eastern regions than elsewhere, even before mega-capital projects like Crossrail and the London Olympics came on stream.

As it turned out, Labour didn’t make it to 2014, when the first empirical test of its long term aspiration for regional rebalancing was due to take place. As the Coalition Government has since taken pains to point out, though, its predecessor, in common with every Government since the mid-1970s, presided over a widening of regional disparities that has accelerated more quickly in the UK than in other large, mature economies, including the USA. As Karel Williams and colleagues here at the university have established, the picture would have been starker still had the post-2000 expansion of public investment not helped create large numbers of additional jobs in the public sector and the ‘parastate’ in non-metropolitan England during Labour’s later years.
The Coalition Government has learned some valuable lessons from its predecessor about the political risk involved in setting measurable targets. It has also charted a course for rebalancing – of public finances, and between public and private sector employment – that clearly works against the short term prospects for more balanced spatial development. A cursory glance at the outcomes of the latest local spending settlement, for example, confirms that front-loaded cuts are falling most heavily upon England’s poorest places – disproportionately concentrated in the North – whilst the areas that escape most lightly are concentrated in southern shire counties.

And yet a commitment to rebalancing – towards manufacturing from services, exports from domestic consumption, and clean from polluting economic activities and energy supplies, as well as spatially – remains strongly represented in Coalition rhetoric. Consider, for example, Nick Clegg’s introduction to last year’s Local Growth White Paper in which he noted that ‘Governments of the past have contented themselves with growth concentrated heavily in some areas of the country… and within a limited number of sectors – notably, financial services. Yet the banking crisis and ensuing recession have proved that model is unsustainable. Crucially, it is also deeply unfair’. Or George Osborne’s comments on budget day this year; ‘Yes, we want the City of London to remain the world’s leading centre for financial services, but we should resolve that the rest of the country becomes a world leader in advanced manufacturing, life sciences, creative industries, business services, green energy and so much more.’

A year into its term of office, the Coalition can now point to a modest number of new, relatively low-cost initiatives that may make some contribution to various forms of rebalancing that could benefit non-metropolitan England in the longer term. What remains disappointing is the extent to which the academic community, particularly in the North, remains unrepresented in, and seemingly disengaged from, the ‘rebalancing debate’ either for the purposes of holding Governments of any political hue to account or, more positively, playing an active role in underpinning the economic, social, environmental or moral cases for limiting spatial disparities. At one level, our relative silence relates to a larger lacuna within the social sciences and humanities. I recall canvassing colleagues a few years ago, for example, for recommendations about work within economics or economic history which spoke to the long-run benefits of a spatially decentralised economy and was able to turn up but a single article that claimed to demonstrate, theoretically, how ‘peripheral’ growth generates greater returns than growth in the ‘core’ (of Europe, in this particular case). Equally, though, it raises some uncomfortable questions about the extent to which we, as social scientists, engage with issues that shape the places in which we live and work rather than, or at least in addition to, responding to the pressures that require us to demonstrate our global scholarly credentials.

The reason I set off on my largely unsuccessful trawl of literature on the advantages of spatial economic balance was because I was, at that time, part of an unsuccessful bid to bring the ESRC’s Spatial Economics Centre to Manchester. Since that time, I have watched as the LSE-dominated group that won that particular competition has advanced an increasingly influential but, in many respects, deeply problematic people-based ‘solution’ to spatial disparities. This essentially advocates dealing with the challenges that market-driven development throws up and limiting other interventions to enabling the movement of people to jobs. Next week in Liverpool, representatives of the N8 group of universities are meeting to discuss the prospects of developing a social science programme in and for the North. It will be interesting to observe whether, as well as congratulating ourselves for the contributions our institutions make to northern prosperity by the very fact of their existence, we can mobilise around an agenda that recognises we are of, as well as in, the North.