Centre for Cities

Tory devolution plans - more details

I saw the rather jolly Bob Neill this week - MP for Bromley & Chislehurst, and one of the key players behind last week's Tory decentralisation green paper. 

Bob repeated the general thrust of the Tory paper - the UK is far too centralised, this is "fundamentally unhealthy", and local government needs far more discretion (especially over finance). More usefully, he then explained how the green paper would be implemented by a new Conservative government.

The Tories plan to take "lots of incremental steps". Despite Cameron's rhetoric last week about "radical decentralisation", Bob said there's "no big striking measure" and they won't do this in "one big leap". Here's what he said:

• They will get rid of RDAs "in their current form" - because regions are "wholly unnatural" and RDAs are undemocratic. But they've stopped short of abolishing RDAs altogether, because they want local councils in each region to decide the fate of their RDA themselves. In reality, they expect most RDAs to disappear - but "one or two" RDAs might survive in some cases, like the North East - where support for One North East is relatively strong. A Tory Business Secretary would play the role of "institutional liquidator", and oversee the transition from RDAs to these new sub-regional and local arrangements. This will probably need primary legislation, but they want to avoid a prolonged transition.

• They want to see the "organic growth" of more city-regions, through the "general competence" power - which will make it easier for councils to collaborate across boundaries. They're not interested in any more restructuring, and will not impose any more new unitaries. But they are very interested in encouraging councils to save money by sharing back-office services and chief executives.

• They will "scrap the whole of the regional spatial strategy" - so all RDAs will lose their planning and housing powers. Instead, the focus will be on Local Development Frameworks.

• They want local councils to be able to "harness the proceeds of growth" (when that starts again). So new housing will be incentivised, by allowing councils to keep the whole of the increase in council tax revenues from new housing developments (for six years). But it's "not practical" to return the whole of the business rate to local councils - instead, councils will keep the increase in business rate revenues from new commercial development. 

Bob promised a freeze on Council Tax, for the first two years of a Tory government. Tony Travers was talking about that this morning.

Council Tax bills will rise by an average of 3 percent in the coming year - the second lowest increase ever. There now seems to be a cross-party race to limit future increases still further - just as demand for local services goes up. The Tories want a freeze, and John Healey has made clear he will cap any excessive rises.

Lower Council Tax is obviously attractive politically, but it does mean that councils will be much more strapped for cash in this recession. Councils have already started to lay off staff, and are expected to shed 40k jobs over this year. On top of that, the next Spending Review will probably freeze central grants to local councils - which means they may need to start dipping into their £38 billion reserves. Tony reckons councils will have to start spending some of that.

Levelling the playing field

Just spotted this Cabinet Office press release, announcing that the "Government levels the playing field for open source". Here's John Mann MP, demanding a level playing field for UK workers - and the Scottish Sea Angling Conservation Network, calling for a level playing field in the fishing industry. (Is that possible?) And here's the Enterprise for All Coalition, calling for - wait for it - a level playing field for small businesses. There's even an organisation called the Level Playing Field Institute.

I do understand that a level playing field is all about fairness and giving everyone an equal chance to succeed. But couldn't we find another way of talking about this? If I was really playing on an actual unlevel playing field, I'd have given up by now. Time for another cliche, please.

And don't get me started on "one size does not fit all" - that's the worst of the lot.

The Government should set up a speedy but independent review into uneven playing fields, and publish a clear timetable for levelling them out by 2010. Ministers should also issue a clear and unequivocal statement that one size does not in fact fit all. Hopefully, that should put the matter to rest.

Gordon goes Back to Building Societies

Gordon Brown today called for "the reinvention of the traditional savings and mortgage bank" - a bit like good old  building societies, which (like Gordon) used to be very prudent.

Today's reaction to Gordon's Observer column has mainly been on the theme of stable doors and horses bolting. Which is fair enough. But so far, no-one has managed to make the link back to the conversion of our building societies into banks about 10-20 years ago.

I covered building societies in my first Treasury job (1996-97), so here's a quick potted history:

• Before 1986, mortgages in this country were provided mainly by building societies - not by banks. Building societies financed home loans in the traditional way through their savers and depositors, and were subject to strict rules on how much they could borrow from the wholesale money markets.
• The 1986 Building Societies Act changed all that - and injected new competition into the mortgage market, allowing high-street banks to issue regular mortgages.
• The 1986 Act also allowed building societies to convert into banks, so they could access those cheaper wholesale funds on the international money markets. Their members had to agree to the switch, but were enticed by big windfall payouts.
• Abbey National was the first UK building society to take the plunge into plc status. Lots more followed in the mid-90s, including Halifax, Alliance & Leicester, Bradford & Bingley, Northern Rock and Woolwich.
• The 1997 Building Societies Act deregulated the rules governing building societies, but did nothing to stop the process of demutualisation.
• The newly-demutualised banks then started dealing in mortgage-backed securities, i.e. packaging up their mortagage books and selling them on to institutional investors. Gordon got very interested in MBSs, and whether we should copy the US-style model of Fannie Mae and Freddie Mac. With house prices heading skyward, MBSs were a sure-fire bet....
• ...until the credit crunch, when mortgage-backed securities started back-firing.

I worked on the 1997 Act - it was rushed through just before the 1997 general election. I also spent days on end answering letters from aggrieved members of the public, who had failed to grab their windfall.

I've got a few comments on this:

• Both Tory and Labour governments presided over the demise of traditional building societies.
• The British public was only too happy to cash in at the time - loads of people opened accounts in the mid-90s, just to get their windfall. I don't remember many people worrying about the consequences.
• All of the building societies that converted into banks have since been swallowed up in subsequent mergers and takeovers.
• The mutuals sector - including credit unions as well as building societies - will be more popular from now on. And local authorities will start to do more mortgage lending.

Corrie and the Conservatives

Following this week's Tory green paper on local government, Conservativehome is now debating which soap characters vote Tory - especially Coronation Street characters.

I'm a diehard Corrie fan - have been watching since Ernest Bishop got shot in 1978, and was nearly one of their casting assistants - so I'm quite well qualified to comment on this.

Local government has popped up on the Street from time to time - Deidre Barlow was a councillor in the early 90s, and Alf Roberts was mayor of Weatherfield in 1973 and 1994. Bizarrely, Margaret Thatcher's dad was called Alf, and also ran a corner shop.

In real life, Ken Barlow (Bill Roache) is a big Tory - and infamously supported Neil Hamilton in 1997. And of course, Weatherfield is in Salford - which is Hazel's constitutency. She'd be a great character...

Here's what the Conservativehome bloggers think:

• Dev (who runs the corner shop) and Rita (who runs the Kabin) are definitely Tories
• Kevin Webster (who runs the garage) votes Labour
• Roy and Hayley (who run Roy's Rolls caff) are LibDems
• Gail Platt (who's a receptionist at the doctor's) is a swing voter

This got me thinking which Corrie characters should be in the Shadow Cabinet - you have to watch Corrie to understand this...

• Steve McDonald - Leader
• Becky Granger - Shadow Home Secretary
• Tony Gordon - Shadow Business Secretary
• Emily Bishop - Shadow Communities Secretary

Any other suggestions?

Tories plan "radical power shift"

It's official - the Conservatives now want to be the party of local government. Today's green paper Control Shift: returning power to local communities sets out how the Tories would shift power from the centre to local people and councils.

This repositions the Tory party as most definitely pro-local government. Quite a change from two decades ago, when most Thatcherite Tories saw local councils as the enemy. But given they now control three times as many councils as the other parties put together, it's no surprise that David Cameron is a "confirmed localist".

Which presents quite a challenge to the Government, and its incremental devolution agenda. John Healey today said there was "little new" in these proposals, and he's partly right. He also said that Labour is already devolving, which is also true - but progress has been painfully slow.

The problem is that Gordon Brown isn't talking about this, and David Cameron is. Given the opportunity to talk up cities and local government the other week, Gordon gave quite a disappointing speech to the NLGN. Presentationally, this leaves the Tories looking like the great devolvers - and Labour appearing to be top-down centralisers. Time to put that right, Gordon. 

Launching the paper in (Tory-controlled) Coventry, David Cameron today called for a programme of "radical decentralisation", including (crucially) more financial powers for local councils and (hurrah) more city mayors:

• All regional planning and housing powers will be shifted from regional government, to local councils
• "New enterprise partnerships" will take on the economic development functions of RDAs
• Councils that build new houses will get a slice of the increase in council tax revenues
• Councils will be able to cut business rates - and businesses would have a vote on the new Business Rate Supplements
• Capping council tax will be scrapped - instead, council tax increases above a certain limit could trigger a local referendum (and then vetoed)
• And 12 big cities will be able to vote on whether to have an elected mayor

We agree with much of this. The UK is far too centralised, and we need a step-change in power away from the centre. Cameron is right that "more decisions made and money spent at the local level" would result in better local services - which was Gus O'Donnell's test last week. Real financial incentives, to promote local economic growth, are the right way forward - as are local authority bonds, to help finance development projects. We need more focus on this, to reward those councils that go for a pro-growth agenda.

We like the clear pro-mayor position, with plans for referendums in 12 big cities on the same day - Birmingham, Bradford, Bristol, Coventry, Leeds, Leicester, Liverpool, Manchester, Newcastle, Nottingham, Sheffield and Wakefield. It also sounds like the referendums will be designed to encourage a "yes" answer. But there's still a lot of scepticism about mayors, so Cameron will need to push hard to persuade his own party and the wider public. Michael Heseltine will help define the powers of these new city mayors, by the way.

We'd rather have mayors that cover "whole cities", not just core city councils. There's not much point Richard Leese becoming mayor of Manchester, if the other nine Greater Manchester councils stay the same. Better to have a mayor for the whole of Greater Manchester, with powers over the whole area. But that was a step too far for this green paper.

The Tories have a real go at regional government: "Sprawling tiers of regional bureaucracy, distant and remote from local communities, have no place in our vision of local government." And they take several swipes at the "woeful performance" of the 8 Regional Development Agencies outside London. 

But RDAs would still continue - just about. Their powers over planning, housing and regional spatial strategies will be handed over to local councils. And councils that share the same real economy (i.e. sub-regions) will be able to form "new enterprise partnerships", and take over economic development from their RDA.

This isn't quite giving RDAs the chop, as Eric Pickles suggested last autumn. It's more like chopping them up into small pieces, and throwing them to local councils.

Gus O'Donnell

It's not every day that the Cabinet Secretary talks about local government. Gus O'Donnell did just that, earlier this week, at the launch of NLGN's latest report - on how Whitehall should work with local government and the regions.

Ministers say they're up for local devolution quite a lot. But Gus suggested that more devolved powers are unlikely in this recession. Here's why:

• The economy is the top priority
• The Government is focusing more on international and global issues
• With massive deficits for the foreseeable future, local government will have to be more efficient

Gus questioned whether devolution should be a goal in itself. For him, the real goal is improved service delivery for "customers" in education, health, transport, etc. If devolved powers for councils can deliver cost savings and better outcomes, fine. But if other outfits can deliver better, that's fine too. Devolved powers for councils, for its own sake, is not his goal. Indeed, he suggested that a bit more centralisation might be good - e.g. by combining councils' back-office functions (which the Tories called for a while ago).

Former local government Minister, Hilary Armstrong, also spoke at the NLGN do. She reminded us why it's so difficult for the Govt to devolve - because it's so risk-averse. Although they'd like to give councils more funding flexibility (said Hilary), Ministers always get the flak when things go wrong - so they'd rather control from the centre by ring-fencing lots of stuff to make sure it gets done.

I know what Hilary means, but I don't quite buy her argument. The Govt doesn't get the flak for phone bills or gas bills any more. Since the utilities were privatised, Ministers have done quite a good job of distancing themselves from BT and British Gas. When the political will is there, the Govt can let go - and avoid the flak.        

All this means that fans of devolution, including me, will need to make an even more compelling case to Whitehall. We'll need to show how devolution encourages innovation at the local level, and helps to drive down costs. And we'll need to convince Ministers to shift more power - and responsibility - to the local level. But for now, efficiency will be the main priority for Govt - not devolution.

Back to the New Local Government Network report...

It assesses how "spatially aware" individual Departments are. The Home Office, Department for Transport, and Department for Work & Pensions all appear to be spatially challenged. While the Department for Innovation, Universities & Skills and Treasury seem to interact better with cities and regions.

Unsurprisingly, Hazel's department (CLG) is most keen to be flexible with the new Multi Area Agreements - and DWP is the least keen. And when it comes to Local Area Agreements, Government Offices tend to side more with Whitehall departments, than local authorities.

One of NLGN's recommendations is to make the nine Regional Ministers full-time, and turn the Government Offices into "Offices of the Regional Ministers". We had our doubts about regional ministers, when they were first appointed in June 2007 - partly because they were too part-time. NLGN found that some were only able to devote about 20% of their time to their region. But apparently they're playing quite a useful role in the recession. 

Gus said some nice things about Regional Ministers - they were an "interesting innovation", and at their best they were "tremendous". But there's an overall limit to the number of Ministers, so more regional ones will mean fewer other ones. I reckon we could chop a few junior ministers from the payroll, to make room for nine regional ones - easier said than done, though.

Devolution update

It's hard to keep track of the devolution agenda during this recession - mainly because it's moving rather slowly, and the recession is catching all the headlines. But as Gordon said to the NLGN the other week, "the downturn is absolutely the wrong moment to turn our back on devolution". So here's a quick update...

You may remember the Sub-National Review - well, it's still moving forward at the same time as all those job losses and bank bailouts. Hazel's department, CLG, published a policy document last month setting out options for sub-regional cooperation - basically, a couple of different versions of Multi Area Agreements and Economic Prosperity Boards.

There are now 10 MAAs, for places like Greater Manchester, Leeds City Region, Liverpool City Region, Tyne & Wear, and South Yorkshire. More MAAs will follow - in e.g. Hull, Birmingham, and the Olympic boroughs. MAAs can either be very informal, or can be a bit more formal (with statutory duties).

Economic Prosperity Boards are the next big thing. In the Budget, the Government will announce at least two "forerunner" or "pioneer" city-regions for EPB status. These will be formal, statutory city-regions with more powers than MAAs over things like economic development, transport and skills. Greater Manchester is the most likely candidate for this. But EPBs will take a year or two to emerge. The Local Democracy, Economic Development & Construction Bill first needs to go through Parliament - that will take until at least the summer.

It's easy to knock this stuff - more acronyms, more guidance and so on. And it is hard to keep track of all the different models on offer. But here's the main point - CLG are trying to put forward a number of different models for different places, and don't want to force one single approach on everywhere. Which is fair enough. They are also saying that serious devolution of big money to city-regions will only happen if they go for the formal, statutory EPB approach. That's why 6 out of the 8 core cities are already interested.

My problem with the CLG guidance is that it's, well, so hard to find. Even a city geek like me didn't spot the CLG policy document the other week - it was buried on their website somewhere. It would be really helpful if the department did a few simple things, like put a devolution link on its homepage - which, bizarrely, has had a permanent feature on eco-towns for months.

The ultimate goal for us is a single city-region budget for Greater Manchester and other city-regions, so they can prioritise and target their own funding on things like transport, housing and job training. That would be a big move. It's still quite a way off right now - but if it happens, then all this CLG guidance will be worth it.

More tomorrow, on the NLGN's latest devolution proposals - including full-time regional ministers.  

It's not all doom and gloom

There's been a lot of bad news recently, so thought you'd like to hear a few cheery recession stories....

Quite a few businesses are doing well out of the recession, as we cut back on fancy holidays abroad and do more eating at home:

• Pontin's has reported a 30% increase in bookings this year - and is planning to hire 2,000 extra staff.
• Pukka Pies are much more popular, with 10% more sales and £2.5m increase in turnover
• Greggs recently posted 4% sales growth for the second half of 2008
• And of course those big supermarkets like Asda and Tesco are doing quite nicely  

Meanwhile, Hull came out quite badly in our recent Cities Outlook report, with the sharpest increase in JSA claimants over the last year. But apparently, Hull's men are the most romantic in the UK - last year, they sent the most (and most expensive) bouquets to their other halves on Valentine's Day. Bradford, Plymouth and Stoke are among the other most romantic cities. Edinburgh and Bristol came bottom.

...which kind of suggests that the best-performing cities are the least romantic, and the poorer performers are more loved up. Well done, Hull - and shame on you, Bristol.

Do let me know about any other recession-busting stories... 

How to be a distinctive city

Here's a dilemma for UK cities. Should they specialise in a distinctive niche industry or two, to gain a bit of an edge over other cities? Or should they go for diversity, and spread their exposure around?

Distinctiveness and diversity are both promoted as great economic development strategies:

• Liverpool is now building up its niche in creative industries, following the success of Capital of Culture. And Science Cities like York and Newcastle are promoting their cutting-edge science base.
• Meanwhile, Bristol (another Science City) prides itself as one of the most diverse urban economies in the UK - with strengths in financial services, retail, aerospace, plus a sizeable public sector.

The recession has probably tilted the scales in favour of diversity. Niches are all very well in a strong economy, but they can suddenly look very vulnerable in a recession. Just look at financial services in Leeds and Edinburgh. A nice combination of distinctiveness and diversity is obviously the best bet.

So how does a city become distinctively diverse? Ivan Turok, at Glasgow University, sheds new light on this, in his report The distinctive city: pitfalls in the pursuit of differential advantage.

Ivan says that distinctive niches are useful for cities. But here's the catch - cities tend to pursue distinctiveness in, well, the same kind of way. In their search for distinctiveness, they sort of end up looking the same.

There's a "similar recipe" for distinctiveness, which goes something like this - develop a new or nascent industry (like bio-tech or life sciences), get or expand a university (to attract highly-skilled workers), build a few signature buildings (Sage, Baltic, Beetham Tower, etc), and do a bit of fancy branding to attract the latte and laptop types. Sound familiar?

Here are the main messages I took from Ivan's report:

• Know your own city. Cities will do better if they really understand their own strengths and weaknesses. Importing ideas from other cities might not work.  
• Don't forget the basics. Instead of getting distracted by the latest fad (e.g. bio-tech cluster, creative quarter), cities should make sure their basic infrastructure is up to scratch.
• Build on what you've got. Diversity is good, but not easy to achieve. It's quite hard for cities - especially small, ex-industrial ones - to broaden out into brand new sectors. Better to support existing assets and capacity, instead of going after unrealistic aspirations.
• Don't just do flagship buildings. Cities have been far too obsessed with shiny new buildings, and not focused enough on the more mundane (and difficult) task of narrowing disparities and tackling long-run worklessness.
• More graduates need more jobs. Cities that expand their universities also need to trigger a corresponding increase in demand from employers, otherwise the graduate talent will leak out. 

There's loads more in there, so give it a read. It makes a refreshing change from a glossy economic development strategy, but is probably sobering reading for quite a few cities...

Iceland

I've been struck by the parallels between the current weather, and the recession:

• We've just had the heaviest snowfall in 18 years - when the UK was last in recession.
• Gordon Brown said he was doing "everything in our power" to deal with it - just like this recession.
• But not everywhere was "well-placed" to weather the storm - bit like this recession.

But there are some obvious differences, as well:

• This snowstorm started in Russia, then spread here - unlike the recession, which began in the US
• Lots of people enjoyed the snow yesterday - unlike the recession, which isn't much fun
• The snow will melt by the weekend - unlike the recession, which will be here for at least another year

The blame game kicked off today, with local councils getting the flak in London for not gritting the roads properly. Boris blamed the wrong quantity of snow - thank you, Boris. No-one's blamed Gordon yet, amazingly.

I'm not convinced by those who say that more could have been done to prevent the traffic chaos, lost business and school closures. We're not Russia or Canada, and we don't get this kind of snow very often. So it doesn't make much sense to invest loads of cash in a fancy resilience system. Indeed, if we did, the Taxpayers Alliance would end up screaming outrage at the misspent money and idle snowploughs.

The snow drama did give the Local Government Association's new chief executive a bit of primetime exposure. John Ransford has taken over from Paul Coen, who was asked to leave the LGA following a disagreement with LGA chair Margaret Eaton over restructuring plans, and the losses incurred by lots of councils exposed to the failure of those banks - in Iceland. Listen to Ransford's interview on the Today programme this morning (at 8.10am) - and Coen's infamous interview on Today last October - at 7.35am.

Oh, and is it just me, or are there more people carrying Iceland bags these days? Surely a sign that the recession is biting hard...