Greg Clark MP: How and why we’re devolving powers to cities

Greg Clark is Financial Secretary to the Treasury and MP for Tunbridge Wells. Follow Greg on Twitter.

Most Tuesdays he will be writing this 'Letter from a Treasury Minister' for ConservativeHome readers. Previous versions of this Letter appeared here.

Today twenty cities – from Plymouth to Sunderland, from Preston to Brighton – have been invited to negotiate City Deals with the Government. This second wave of City Deals follows an initial round of the eight biggest cities outside London.

The City Deals take powers and budgets that were previously vested in Whitehall and put them under local control if the city can show that by doing so they can get better results and better value for taxpayers’ money.

For years, the Treasury was the last government department you would go to if you wanted to devolve powers. It was renowned as the keeper of the orthodoxy that the man in Whitehall knows best. That is being transformed.

When I was appointed Financial Secretary to the Treasury five months ago, I asked the Prime Minister to continue my responsibility for working with cities, which I had begun a year before, because I was convinced that the cities programme is of direct relevance to the work of the Treasury.  The Prime Minister and George Osborne shared my conviction. Yes, we must have the right macroeconomic and microeconomic policies to create the conditions for growth – low interest rates, a determined programme of deficit reduction, a globally competitive tax system and flexible labour markets, to name just a few.  But economic policy must also recognise the importance of place. After all, growth happens not in the abstract, but in particular places where employers expand their production or set up for the first time. These places can be attractive and supportive to growth, or they can place impediments in its way: whether it is the state of local infrastructure, the skills available in the local workforce, the availability of land suitable for investment, the presence or absence of other relevant businesses, the responsiveness of local leaders to employers’ needs. It is essential that we do everything we can to make sure that Britain consists of places where growth can take root and flourish.

Any consideration of the importance of place quickly highlights the importance of our cities.  They are the where most people work, most businesses are based, and most of our higher education institutions are founded.  Over decades past, British cities have performed less well than those in other countries. Elsewhere, regional cities are the motors of growth of the national economy. Yet in Britain, most of our big cities outside the capital have lagged behind the rest of the economy.

For instance, in Germany all eight of the biggest cities outside Berlin outperform the country in terms of GDP per capita. The same goes for all but two of the largest eight Italian cities. In France, three of the eight outperform the national average and none fall significantly below it. But for England, seven of the eight biggest cities outside London underperform – with Bristol the only exception. Much the same pattern applies when it comes to the proportion of the workforce educated to tertiary level and to per capita rates of innovation. Despite the regeneration we have undoubtedly seen in many of our cities over the last 25 years, there is massive unrealised potential. It is a particular indictment of the previous Labour government that, over thirteen years in power, the economic gap between London and the north grew larger not smaller.

It’s a short step from recognising the importance of cities to growth to recognising that each of them is unique. Every city has its own history, its own industries, its own skills and attributes, its own geography, its own culture, its own politics. When I was growing up in Middlesbrough we used to resent – and were bewildered by – being bracketed with Newcastle-upon-Tyne by the London-based bureaucracies when the industries, skills and character of the areas were very different.

It’s as crazy to regard each city as the same – and to subject it to a one-size-fits-all policy designed in Whitehall – as it is to assume that every individual in the United Kingdom has skills, abilities, resources and responsibilities that are identical to everyone else. What policy makers must do is to make the very best of what each has to offer – to help them achieve their potential – not to make everyone behave the same way.

That’s what the City Deals do.  They are bespoke to each city – it’s not a valid objection to say it isn’t done like this elsewhere, or hasn’t been done like this before. City deals give the right of initiative to the city, not to Whitehall: for Greater Manchester to invest billions of local resources in transport improvements in return for a share of the increased tax take to the Treasury; for Newcastle to regenerate derelict sites financed through the uplift in business rates they generate; for Leeds to work with local businesses to give employment or training to each young person; for Liverpool to create Docklands-style Mayoral Development Zones to breathe new life into neglected areas of the city.

As with any deal, a City Deal can only be agreed if it offers value to both parties to the transaction: in this case, the city and the nation. It requires negotiation, tangible commitments on both sides, and due diligence to ensure that claims made are not fanciful but dependable.

The first wave of City Deals was concluded within a year and set a new direction for the relationship between central Government and cities. Now twenty more cities will have their chance to negotiate deals with the Government. Based on the local enterprise partnerships these are: the Black Country; Bournemouth; Brighton and Hove; Greater Cambridge; Coventry and Warwickshire; Hull and Humber; Ipswich; Leicester and Leicestershire; Milton Keynes; Greater Norwich; Oxford and Central Oxfordshire; Reading; Plymouth; Preston and Lancashire; Southampton and Portsmouth; Southend; Stoke and Staffordshire; Sunderland and the North East; Swindon and Wiltshire; and the Tees Valley.

This is the latest stage in a quiet revolution in British economic policy, in which the contribution of particular places to growth is recognised alongside countrywide macroeconomic and microeconomic polices – and in which the Treasury is a force for change.