The creation of four new super regional economic development agencies is needed to scale up transport infrastructure and big investment decisions, according to the former head of the civil service Lord Bob Kerslake.
He is the chair of an independent inquiry into regional inequalities, the UK2070 Commission, which has just produced a preliminary report - Fairer and Stronger: Rebalancing the UK Economy – arguing that London is “de-coupling” economically from the rest of the UK.
To combat this problem, much greater devolution of powers and funding is needed through the creation of four new super agencies covering the North, the Midlands, the South West and the South East, with London either incorporated into the South East or as a separate body, the report said.
“We have the potential beginnings of this in the Northern Powerhouse and the Midlands Engine, which are at the moment still informal partnerships,” Lord Kerslake told LGC. “These agencies would draw down decision making powers from central government.”
He claims decisions such as the one currently in the media spotlight over whether the Northern train franchise should stay with its current provider or be brought in-house could be taken by an agency created for the north.
He envisions these trans-regional agencies as drawing from business and crucially local government political leadership. But rather than replacing combined authorities or LEPs, they would complement them by scaling up transport infrastructure and big investment decisions.
Lord Kerslake claims there is also a case for devolving more powers to a county level. But he added that “it doesn’t follow that you would abolish the two tier system”.
The proposition for trans-regional agencies was first set out last year in an IPPR Commission on Economic Justice report. But Lord Kerslake admits that the local devolution movement now “feels like its ground to a halt”, and that the deal-based model has “run out of road”.
He claims the mayoral model works in urban areas – but not everywhere.
“We have been lucky to get good mayors,” he said. “I didn’t agree with plans [previously mooted] for mayoral authorities in Norfolk and Suffolk. We should have mayors in appropriate places, it shouldn’t be ‘one size fits all’.”
While acknowledging that the government at the moment “doesn’t have much enthusiasm for devolution because it’s consumed by Brexit”, Lord Kerslake said devolution should be a big part of the political agenda after Brexit. “Through this report, we are trying to open up the devolution debate for all political parties,” he said.
The commission, which is supported by researchers from UK universities and the US think-tank the Lincoln Institute of Land Policy, is also calling for a national renewal fund to combat under-performing regions, and a spatial plan to guide the future development of the whole of the UK.
Although Lord Kerslake admits that big cities such as Manchester, Birmingham and Leeds are growing their economies, he says compared to London, they are “really only holding their own”.
“Cities going ahead of national economy are in the south,” he said. “What we haven’t been able to create is sufficiently powerful city economies that can have an impact on the wider area, like London and the South East.
“Often the towns in the north have felt disenfranchised – they don’t feel part of successful story in the UK. Historically, policy was if London and the South East grow, it benefits the whole country. But increasingly this is not the case – wealth is staying in London and there is a sense of people feeling cut off from opportunities to grow.”
Predictive modelling carried out by Cambridge University suggests that without the commission’s proposed interventions, average housing costs in London will rise well ahead of earnings and jobs growth will be concentrated in affluent areas.
However, if changes enable higher growth in less affluent regions – with an additional four million jobs outside London and the south east – the rise in long-distance commuting would slow, housing would become more affordable and pressures on environmental resources would be reduced.
As well as London’s economic de-coupling from the rest of the UK, Lord Kerslake believes there is also evidence of cultural de-coupling too in the “strikingly different views on Brexit” of people in London compared to elsewhere.
“We are trying to bring the country together again at a very divisive period of the country’s history,” he said.
“There are inequalities in every country. But the research cited in our review, measuring 30 OECD countries against 28 different indicators, found only two countries more unequal than us – Slovakia and Ireland. By some measure, we are among the most unequal countries in the developed world.”