Investment, investment, investment was the clear theme emerging from Centre for Cities’ Liberal Democrat Conference fringe event. Three influential Lib Dem thinkers – Vicky Pryce, Lord Shipley and Gerald Vernon-Jackson – joined Sean O’Grady, journalist with the Independent, to discuss whether the widening gap between city economies matters, and how it should be tackled.
Vicky Pryce, former Head of the Government’s Economic Service, gave a stark warning about the state of the UK economy. She argued that short-term measures to get the economy moving are essential before the next election - not just for political reasons: without growth by then the country will be in serious trouble. Government can tackle the lack of private sector confidence holding down investment and holding back the economy through cheap borrowing, as endorsed by the Governor of the Bank of England. This could create significant spending multipliers if used to build housing and infrastructure.
Sean O’Grady also pointed to infrastructure as the key to rebalancing the UK economy. He drew analogies with Japan during its 1990s recession which, when confidence drained from its economy, was so determined to build infrastructure that it embarked on a ‘Bridges to Nowhere’ programme. As the UK has a serious infrastructure deficit, it can emulate Japan in a more productive way by investing to fill the gap, which will benefit cities as well as the economy as a whole.
Lord Shipley, former leader of Newcastle City Council and advisor to the Minister for Cities, defended the Government’s record on rebalancing, highlighting City Deals in particular. However, he also acknowledged that people are still being left behind, not least unemployed young people, and he argued for more investment in universities in some of our struggling cities. He was supportive of greater investment in infrastructure too, arguing that the UK needs a national transport and infrastructure policy to ensure that big projects, such as airport expansion, happen, and that there is a balance of projects across the UK. He also attacked the Treasury investment test as too focused on short term returns rather than a longer term strategy, meaning that investments always look best in the Greater South East.
Gerald Vernon-Jackson, Leader of Portsmouth City Council, agreed that transport links were all important, highlighting the challenges of the slow train route from London to Portsmouth as well as the importance of links between Portsmouth and neighbouring areas in Hampshire and the Solent. He argued for a more local assessment of opportunity and need, arguing that Portsmouth’s deprivation is often overlooked because it is within a more affluent area, preventing the city from bidding for several government pots of money. Cllr Vernon-Jackson’s other priorities included stopping quangos such as the Highways Agency and the Environment Agency holding up growth and development; allowing planning permissions to expire if not built out; introducing Tax Increment Financing on the TIF2 model; and removing council borrowing to build housing from the Public Sector Borrowing Requirement, as in the rest of Europe. He also recommended that more people eat bananas, as Portsmouth has recently bought a banana importing company!
The consensus was that the availability of cheap borrowing should be used to boost infrastructure investment, and that infrastructure creates jobs. There was also a call for City Deals to be expanded beyond the Core Cities as soon as possible: as Cllr Vernon-Jackson pointed out, a new job has the same value wherever it is created.
However, there was some disagreement over whether rebalancing between city economies, and between manufacturing and services, is possible. Lord Shipley felt decisions taken over the autumn will prove critical to private sector confidence; Vicky Pryce said she did not think rebalancing would happen, and that manufacturing would not increase as a percentage of GDP.
We'll be talking more about these issues at Labour with speakers including Lord Adonis, Sir Richard Leese, Sir Robin Wales and Mayor Joe Anderson - do come along if you're there.