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Speech by economic secretary to the Treasury, Ed Balls, at the Manchester Chamber of Commerce last night:

'It is a pleasure to be back here in Manchester again - after just a few days away. I want to thank the Manchester Chamber of Commerce for inviting me here to today, as well as the Royal Bank of Scotland for their support.

Delegates at last week's conference commented regularly on the staggering transformation that Manchester has experienced over the last decade - and particularly since the tragic bombing on the 15th June 1996, which left Corporation Street all but destroyed.

To have rebuilt completely within 5 years of that date - not to mention the further investment and enrichment of the area, has really been an outstanding achievement and this city can feel great pride.

Manchester today is flourishing - economically and culturally. The success of our national economy has played its part in your success. Stability in our economy, rising employment and the Government's relentless focus on strengthening our underlying economy has provided a strong foundation upon which you have built.

But it is the strategic vision and leadership of the people of Manchester itself - and your partners in this great conurbation and the North-west region - that have driven this transformation.

Manchester today is a vibrant place to live and work, with people once again choosing to live and locate businesses here to take advantage of its huge potential.

But this transformation did not happen overnight. It depended on an ambitious city council working with the private sector and government partners.

I have seen first-hand in our joint work on the Northern Way steering group the dedication and strategic vision of Manchester City Council leader Richard Leese. I have worked closely with Bryan Gray and the North-West Regional Development Agency. And this Chamber of Commerce is itself one of the most successful, dynamic and influential chambers in the country

And I know your Council has worked hard to build up cooperation with surrounding boroughs, who saw that a strong Manchester was good for them too. This has been underpinned with the development of a series of key strategic frameworks - for example, the integrated transport strategy for Greater Manchester - that help drive the growth of this city-region.

I believe Manchester is a powerful example of how local authorities and regional agencies can work together with the private sector to drive economic development and social progress. I want today to look at the progress we've made to date - both in terms of economic stability and regional and local economic development - and chart the next steps we can take together.

Economic stability

Let me start with stability. Our national economic priority has been to establish robust frameworks for stability, for growth and for fairness. That is underpinned by the stability of low, long-term interest rates, low unemployment, and high and growing employment in every region.

The economy has now grown for 56 consecutive quarters, the longest unbroken expansion on record. It has shown greater stability and stronger GDP growth than most of its major competitors.

The UK is the only G8 economy to have avoided any quarters of contraction in output since 2001 - and it has continuously expanded inspite of slow growth in the G8 export markets and other global challenges over the recent past.

Despite continuing global economic uncertainty, economic growth in the UK is stronger and more balanced - business investment is growing more quickly than private consumption. Exports growth is also strengthening, up by 8.5% over the past year compared with 4.8% in 2005. Employment is at a record high, up 220,000 over the past 12 months. And as the latest data shows since 1997 we have been closing the productivity gap with our major competitors.

So as we prepare our Pre-Budget Report, our task now is to use this period of economic strength to lock in stability - and to take the decisions on skills, transport, planning, better regulation and the environment to ensure that British firms and individuals are well placed to meet the challenges of the 21st century. This Chamber's PBR submission makes a number of important and constructive proposals and we will study this with care.

Strategic regional and local leadership

We have repeatedly stressed at the Treasury that Britain cannot have full employment, improved competitiveness or long-term prosperity without balanced economic gains in all UK regions and localities.

Over the last six years I believe we have forged a new regional economic policy for Britain - a break from the old regional policy of the past: the ambulance work of the 1930s, the top-down capital grants of the 1960s, or the laissez-faire of the 1980s.

Our new approach has consciously shifted the emphasis of regional economic policy from a top-down dictated series of grants and loan assistance towards a bottom-up approach where the regions themselves are liberated to set priorities and to steer their own distinctive strategy and approach.

And Whitehall has had to let go, pushing responsibility closer to the frontline of delivery, strengthening the role of Local Authorities working in partnership with the Regional Development Agencies.

As Manchester shows, place and local leadership matter.

Globalisation offers tremendous opportunities to increase prosperity, but our economic analysis suggests the greatest benefits will go to people and to regions with higher level skills and new ideas and attractive business and living environments.

Places which are able to attract and retain high-skilled workers will do better compared with places with a low-skilled population. Agglomeration - where firms benefit from being located near to each other - will exaggerate these effects.

So it will be ever more important that we have effective strategic regional and local leadership to build on local strengths and tackle weaknesses. Leadership located at the spatial level where markets operate and comparative advantage bites. This demands further devolution so that you can respond effectively to opportunities and tackle market failures which hold back growth or perpetuate unfairness.

Devolved economic decision-making

By setting up the RDAs as business-led strategic leaders on economic development, with single pot funding since 2001, and stability in budgeting and certainty of funding - we have seen genuine devolution of power in economic decision-making to regions and localities.

The creation of the RDAs, and the transfer of responsibility and funding involved, from Whitehall departments to the regions, all pushed by the Treasury under Gordon Brown, has been one of the most significant acts of decentralisation of this government. That single pot is £2.2 billion this year and£2.3 billion next year - more than£11 billion since the RDA's inception.

The strategic leadership shown by RDAs has demonstrated how priorities set at a regional level can instil a culture of regional inclusion and decentralisation that have transformed the way decisions are made and resources are distributed - tailored towards local challenges.

I believe this approach is working here in the North West where your RDA is working with cities across this region to develop jointly agreed action plans through sub-regional partnerships.

Some feared that RDAs might weaken the role of local government in economic development. Yet Manchester shows that the opposite can be true.

Look at how Manchester has worked with the North West RDA, for example on science through the Science City initiative to increase business R&D, making companies more innovative and competitive.

The National Biomanufacturing Centre in Speke and Nowgen in Manchester offer specialist facilities. The NWDA is currently working with the Northwest Aerospace Alliance on plans for an Aerospace Innovation Centre for the Northwest - and a possible£30 million Media Enterprise Zone in Greater Manchester, which forms a key part of the BBC's proposals to relocate a significant part of its production to the Northwest.

The same pattern of regional strategic leadership unlocking local economic dynamism is happening in Leeds, Newcastle and Birmingham too - all cities enhanced by regional initiatives.

At the same time, the Northern Way initiative has brought regions and local government leaders together to work on issues that cross the northern regions.

In the North of England, the three northern RDAs along with local government leaders and other regional partners, have come together to develop and implement the Northern Way's Growth Strategy. This has proved an ambitious vision for the North of England - combining a world-class economy with a superb quality of life.

And since its inception in 2004, the Northern Way has championed new initiatives to promote growth across the North of England, including through:

bringing together the research-intensive northern universities as part of the N8 initiative to increase research excellence in the North

spearheading the Science Cities initiative in Manchester, York and Newcastle, and committing the 3 northern RDAs to invest over£100 million by 2010 in strengthening business-university collaboration

developing a robust, evidence-based Northern Transport Compact to identify pan-Northern investment priorities

initiating a joint campaign to market the North, with a single brand to overseas markets and increase the number of international tourists visits.

But the RDAs sub-regional planning process has also strengthened collaboration between local authorities on economic issues within regions, in areas such as local transport, planning, housing and skills which necessarily cross local authority borders. With real money - they have real reasons to work together.

Indeed it was the RDA-led Northern Way that recognised from the outset the particular importance of enhancing the economic performance of cities and city-regions - such as Manchester and Leeds - for delivering its economic ambitions. The Northern Way found that its eight city-regions, between them, house 90% of the North's population and more than 90% of its economic activity and current economic assets.

Here in Manchester you have always had a strong tradition of cross working across local authority boundaries. The Association of Greater Manchester Authorities has enabled the development of a series of key strategic frameworks to help drive and protect the growth of the city-region, for example, through an integrated transport strategy for Greater Manchester. This dynamic political leadership has placed the Manchester city-region ahead of most other city-regions in terms of capacity for action based on your ability to deliver, your scale, your creative partnership-based approach and your focus on inclusion and social benefit.

In the wider North-West the RDA has also helped towns as well as cities outside Greater Manchester to work to a shared regional agenda. In the Wakefield area, my home district, the local authority has responded to the Northern Way challenge by putting forward our own 'Wakefield Way' economic plan. Drawn up with our RDA Yorkshire Forward, and showing how we can contribute to the Leeds city-region, it stresses what we can do locally to boost enterprise and staying-on in further education, tackle joblessness and promote new investment.

In Wakefield, we are acutely aware of the need for coordination with next-door Leeds, just as Rotherham is determined to collaborate with Sheffield. Our RDA is helping to knit together new networks and bonds of cooperation. Indeed, in many parts of the country, it has been the RDAs that are the crucial ingredient to incentivising collaboration.

New challenges

But we cannot stop now - there is more that we need to do. There are still significant disparities both between regions and within regions. For example, Greater Manchester South grew by over 45% between 1995 and 2001, compared to less than 18% in Greater Manchester North, and less than 9% in East Cumbria.

Across the North, inactivity and worklessness remain high, skills levels too low. Historic under-investment in transport linkages and a lack of integration between transport investment and other strategic housing, planning and development decisions continue to be a constraint on success.

The answer to these challenges is not to dismantle our regional approach to regeneration and governance in England but to build on it.

In a recent pamphlet I wrote with my Treasury ministerial colleague John Healey and former local government Minister Chris Leslie for the New Local Government Network, we argue that it would be a mistake to suggest that we have to choose between new powers for cities or local government on the one hand, and the current structure of regional and local economic decision-making on the other.

Strong cities are the future. Around the world, successful economies have strong and vibrant urban centres with the powers they need to shape the future. The UK should be no exception - led by pioneering cities such as Manchester.

But as Ruth Kelly said recently at Sir Michael Lyons' conference on local government:

'we must resist the false choice of city or region. What is needed are strong cities in strategic regions'.

We must strengthen the powers for local government in economic development, and strengthen co-operation across local authority boundaries. But we should not forget that in many parts of the country it has been the RDAs that have been instrumental in making that co-operation start to happen. If we weaken the role of the RDAs, the losers would be the cities themselves - and also the smaller towns and cities who have benefited greatly from the new regional policy.

I believe it would be very damaging to Burnley, Blackburn or Preston to see Greater Manchester carved out of their North West Regional Development Agency. The same is true for Wakefield next to Leeds or Doncaster and Sheffield. I do not believe it would be in the interests of Manchester, Leeds or Sheffield either. That is why, as Ruth Kelly has made clear, our agenda to strengthen cities must not be about weakening RDAs.

We need greater encouragement for cities like Manchester or Birmingham both to take decisions locally and to understand their wider regional responsibilities. And we must make sure this does not happen at the expense of the rest of the North-West or exclude towns and cities across the West Midlands or Yorkshire.

Regions and city-regions

Our new regional policy requires regions to work together with towns and cities and demands collaboration across city regions.

Let us not get bogged down and lose sight of the real challenge which is to devolve more power from the centre. The question we need to answer is how best to enhance that devolution, not fragment it.

I believe we should build on successful devolution in urban regeneration and economic development by giving more power to the regional and local levels. That is a key challenge for both the forthcoming Local Government White Paper and the Comprehensive Spending Review.

The Government's review of sub-national economic development and regeneration will inform next year's Comprehensive Spending Review. Its task is to identify how best to improve governance, accountabilities and incentives for economic development, and ensuring that these responsibilities are held at the right spatial levels.

We must ask what more we can do to devolve power and flexibility down from Whitehall to regions and localities - in areas such as skills, transport, planning and regeneration.

For local authorities we have already introduced new trading and prudential borrowing powers, and powers for local authorities to improve the economic well-being of their area.

We have encouraged innovation through Business Improvement Districts, through Urban Regeneration Companies, local strategic partnerships and enterprise areas. We have also created the Local Authority Business Growth Incentive and launched the Local Enterprise Growth Initiative, supported by the creation of the economic development block within Local Area Agreements.

These all allow local councils to draw on local knowledge and local strengths to deliver more effectively, and give greater incentives and flexibility to deliver economic development and regeneration. I would like to see a much clearer recognition of the local authority role in economic development in the CPA.

So the challenge for the coming weeks and months is to do more to support an enhanced role for both regional strategic leadership and local government in economic development - and to make easier and more effective the kind of collaboration you have made work here in Greater Manchester.

Instead of a zero-sum argument about the governance structures of regions versus cities or city region, we must strengthen the regional agenda and help local authorities to work more closely together - without a return to the old local antagonisms.


With greater decentralisation must also come greater accountability locally, regionally and nationally both to scrutinise decisions and build a greater sense of common purpose.

Again some have said that the answer to the current accountability gap is to dismantle our regional approach, and to shift powers and accountability to cities at the expense of the regions: that city-region wide elected Mayors with powers that cross local authority boundaries should replace regional decision-making; that London - where the city-wide Mayor has powers over and above those of local authorities - is the template for the rest of England.

I do not believe that is the road that many in local government will want to take.

London is a strong and prosperous City. But it is exceptional because of its scale and history. I do believe we have found a model that works for London. But it is not one that is easily applied across all areas of England.

Take the link between identity and accountability. People from Lambeth, from Kensington, from Hammersmith and Tottenham see themselves foremost as Londoners before they identify with their London borough. The economic, administrative and social challenges the boroughs face are generally London-wide.

That is not so in other conurbations. People from Wakefield are from Wakefield - they do not identify themselves as citizens of the Leeds city-region. Those from Chester aren't a part of greater Liverpool. The same is true of Stockport or Sale too.

That is why I believe accountability has to start from the local. After all, the local council is generally the only organisation democratically accountable to all the people living in its area and we should continue to examine how locally-elected leaders could have enhanced powers. The Regional Assemblies of local authorities are doing a good job. But there is more to be done. If county and city region federations of local authority leaders can bring more clout to holding RDAs to account, then we should empower these elected representatives to undertake such scrutiny to greater effect.

But we also need to strengthen accountability to parliamentarians as well as locally elected representatives and involve regional media and MPs much more.

In particular, as we also argued in our pamphlet, there is a case for considering how regional issues can be built into the working practices of Parliament, in order to give more opportunity for the consideration of regional concerns. We need to encourage a debate in Parliament and beyond about how scrutiny of and accountability for the work of regional bodies at a regional and sub-regional level can be strengthened.

One option would be to set up select committee style bodies for each region which could call for direct responses and evidence from the principle figures within RDAs and government departments as well as local authorities. These need not be Westminster-centric and indeed could cement their role as a voice for public as well as parliamentary enquiry by meeting in the regions themselves.

So if a Parliamentary select committee wants to hold hearings on the performance of the North West RDA, why should they do so in a small room in Westminster with only the witnesses as an audience? Why not bring Parliament to the regions and hold those hearings here in Manchester in front of this audience?

Closing remarks

In conclusion, you have here in Manchester and across the North-West a strong sense of identity and a powerful co-operative impulse. Not surprisingly. Because it was in this region that the Rochdale Pioneers launched the co-operative movement whose pioneering work and leadership here the North West and Manchester have inspired the Co-operative movement over the last 150 years.

Here today, in this city, the cooperative movement retains its headquarters, a key contributor to the economy of the region and a significant ethical employer. The mutual sector here and across the UK has experienced considerable growth and innovation in recent years - and in the light of the 2002 and 2003 Cooperative Acts and the Companies Bill which will receive Royal Assent this autumn we will consider whether there are further steps we should take to modernise the legislation governing the cooperative and credit union sectors.

That spirit of common endeavour that underpins the cooperative movement - that drive to improve and build and to lead - is the decisive factor for me, in determining long term economic success. It is a driving motor for regeneration, for enterprise, for social justice and pride in your community.

Our challenge now is to back your efforts and leadership. As my Treasury colleague John Healey said recently:

'Whitehall centralism is the biggest obstacle to progress. Our joint challenge is to devolve more power, policy decisions and resources from Whitehall to the regions, and to the local level.'

We intend to make sure that this decentralizing drive will be at the heart of the local government white paper this Autumn and at the heart of the Comprehensive Spending Review next summer. That is the way to back Manchester's continuing economic renaissance in the months and years to come.'

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