Centre for Cities

Social mobility – the city facts

The Deputy Prime Minister launched the Coalition’s annual progress check on social mobility this week.

The document tracks the UK’s progress against a set of indicators mapping social mobility from birth into adulthood. The findings reveal stark gaps at all life stages between the poorest and richest in society.

Centre for Cities research reveals how these inequalities play out across the country:   

Foundation Years  

• 54% of children in Rochdale achieve a ‘good level of development’ in Early Years Foundation Stage compared to 69% in Richmond-upon-Thames in London (Source: Neighbourhood Statistics)

School Years

• 74% of children in Middlesbrough achieve a level 4 in Maths at the end of Key Stage 2 compared to 89% in Trafford in Manchester
• A 7% point gap remains between buoyant and struggling cities in GCSE Maths and English attainment (Source: Learning Curve, Centre for Cities)
• 44% of children in Barnsley achieve five good GCSEs including Maths and English compared to 66% in Gloucester
• Pupils eligible for free school meals are 3 times more likely to get five good GCSEs in Tower Hamlets in London compared to Milton Keynes

 Transition Years

• There is a 16% point gap between buoyant and struggling cities in the number of pupils going on to study A-levels (Source: Learning Curve, Centre for Cities)
• A young person living in Warrington is twice as likely to go to university compared to Grimsby and nearly four times more likely to go to a Russell Group university or Oxbridge (Source: HESA)

Adulthood

• Job-related training improves individuals’ chances of progressing in work. People in Derby are three times more likely to access job-related training than people in Bradford (Source: Learning Curve, Centre for Cities) 

*Unless otherwise stated data is sourced from the Department for Education

The emphasis in the government’s strategy for social mobility is on ‘joined-up’ government with departments working together across policy areas. This makes a lot of sense given that individuals’ social mobility is influenced by multiple factors. Yet departmental silos have historically been difficult to break down. Cities can lead the way here, bringing together partners at the local level to tailor interventions around individuals, to maximise the impact of national initiatives and to minimise duplication.

The Centre for Cities will be exploring some of these issues at a roundtable with key Whitehall officials with leading voices from cities and business next month. If you are interested in attending or want to find out more, please contact Niamh Sands.

More money, more power: Now Government means business with business rates

Over a year in the making, the Local Government Finance Bill is finally taking some shape. Before everyone starts partying like it is Jubilee weekend, there are some really important details to consider.

First, I have some kudos to give for the Bill. There are some positive changes from earlier versions:

• Overall, there is more recognition that this Bill can be used to incentivise growth (among Government’s other goals).
• The Government has come forward with a rather large incentive of 50 percent retention of additional business rates, well in line with what the Centre for Cities has been suggesting.
• Local authorities will be able to pool their business rates, reducing volatility and giving more opportunities to fund cross-border infrastructure and skills programmes. There is also a greater emphasis on pooling across a functional economic area.

However, there are some issues we think still need some work.

• Clarity: The design of the system is complicated and unclear. It will be difficult for authorities (and voters) to understand just how much additional development will benefit them, which reduces the effect of the incentive.
• Certainty: The system is designed with an initial 7 year reset period, which can be changed at a later date. This means the most certainty of income an authority will receive for a new development is seven years, and this may lead to a delay incentive. I have previously argued that at least 10 years between resets—preferably 20—would provide the certainty needed for authorities to act on the incentive.
• Rewards: The system only rewards authorities for building new commercial property; it doesn't incentivise converting old properties to suitable uses or investing in the public realm. To ensure the policy encourages business growth everywhere, a more compreshensive system would reward different development improvements that increase property values.

Now, the onus is on cities. Given the complexity of the Bill, local government will need to understand how the system works and how their city can benefit from bringing forward new development (not an easy task).

Also, cities may have to work harder in the current economic climate to realise the benefits of rates retention, as building rates are lower outside London and the South East. But, those authorities which really take this on will see benefits to their cities, and that’s the point - rewarding places for taking difficult decisions and going for growth.

Note: Evidence demonstrating the potential effects of the business rates retention incentive have been published using supporting evidence from previous Centre for Cities research.

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The double dip may be nothing new for some cities

Today’s GDP data release shows that the UK has officially re-entered recession. While this comes as somewhat of a surprise at the national level (consensus appeared to be predicting a small expansion of the economy), it is likely that some of our city economies re-entered recession before the first quarter of 2012.

Our most recent Labour Market Update showed that the claimant count has risen steadily over the last year in Derby. But it is not alone – its neighbours Nottingham and Mansfield have seen similar patterns, while Cardiff and Belfast have also seen steady increases. While the link between output and unemployment is not a straightforward one, it does suggest that these cities may have already been experiencing a double dip recession in the second half of 2011.

If the national economy is going to recover from a downturn that has persisted for four years now then it will require its cities to lead the way – they contain 58 percent of jobs and are responsible for 61 percent of output. The problem currently from a policy point of view is that very little is understood about where growth is going to come from, or how this will vary from city to city. This makes policy aimed at supporting economic growth more difficult to formulate. The Centre for Cities hopes to shed some light on this through research that we will release very soon looking at the make-up of the business bases of our cities, and setting out what this means for the policies that government and cities should be adopting to support stronger economic growth.

Watch this space.

Enterprise Zones One Year On: Where are we now?

Since they were announced in last year’s Budget, Enterprise Zones have been tipped by some as the magic pill for economic growth. Local Enterprise Partnerships (LEPs), as the ultimately responsible body, have bid in droves for one of the coveted EZs. As the zones ramp up to start offering business rates discounts in the coming months, it's worth reflecting on progress to date.

The idea is not a new one:  Enterprise Zones were first implemented in the UK in the 1980s, and the Centre’s previous study on their success can be found in What Would Maggie Do? The 21st century Enterprise Zones are managed by the LEP, and they benefit from business rates discounts and retention (when the Local Government Finance Bill is passed), simplified planning, superfast broadband, and enhanced capital allowances in some cases.

In England, 11 EZs were initially selected by Government and announced in the 2011 March Budget Statement. A further 11 were chosen via a formal bidding process, and one more EZ and another potential EZ were announced in the 2011 Autumn Statement, bringing the potential total to 24.

Some EZs have already brought forward Local Development Orders to simplify planning procedures and allow for change of use. Tees Valley finalised their LDO, while Bristol, Hereford and Aire Valley are in the process. 

But England isn’t the only country to get in on the EZs idea; Wales and Scotland have followed suit. Currently, there are 5 Enterprise Zones designated in Wales, with two more being proposed. The Welsh Government aims to be targeted and bespoke for each Zone, and they are hoping to draw down £100m in capital allowances from Westminster to support businesses in Enterprise Zones.

In Scotland, 14 sites have been selected and grouped into four sectoral Enterprise Areas (EA) so far, each focused on one of the four EA groups: life science, low carbon and renewables, general manufacturing and growth sectors (aerospace and creative industries). A combination of Scottish Government funding and Barnett consequentials brings total funding to around £20m. However, the Scottish Government is still determining how additional funding needed will be provided.

Despite their growing popularity in the policy agenda, Enterprise Zones are only one part of the solution needed for boosting job creation. There are still significant concerns that the Zones will simply move jobs around the country as firms are attracted to the business rates package offered in the Zones.

What is in store next year for EZs? Given that many Zones are still ramping up, it is very unlikely that we’ll see significant jobs or business growth yet. Developers are likely to apply for planning permission, but new developments will take time to come forward. Also, while Zones can offer business rates discounts from this April, it is unclear from the Enterprise Zones Prospectus when they will be able to retain business rates. In effect, this incentivizes Zones to delay development until the rates retention has been confirmed.

All-in-all, 2012/13 should be the year we start to see movement, but EZs are unlikely to have any substantial impact on the economy’s health just yet.

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What does Scotland want from its Enterprise Areas?

We were hoping that last week’s official briefing on Scotland’s "Enterprise Areas" would shed some light on how they will compare to their English (and soon to be Welsh) Enterprise Zone counterparts.  However, despite providing more detail on what the four Areas will focus on, the briefing falls short of addressing the fundamental question – what are they trying to achieve?

Our research on previous Enterprise Zones suggests that clarity on what the Areas are trying to achieve is crucial to designing the right range and mix of incentives.  If the objective is job creation, capital allowances that support investment in capital rather than labour will not be the best tool.  If the goal is to support greater levels of innovation, then providing R&D allowances and increased access to broadband might work better. If the goal is to support broader regeneration then skills and transportation links should be among the issues targeted. 

Whilst further analysis of the policy will have to wait until the Scottish clarifies its objectives for Enterprise Areas, there are a few reflections we can make based on the details released so far:

First, like their English counterparts, it appears that there will be a range of incentives available to businesses in each Area, potentially including business rate discounts, streamlined planning and capital allowances.  This is a good thing and should allow each Area to tailor the mix of incentives to its own particular needs.    

Second, it appears that the Enterprise Areas will be more focused on supporting selected industries.  So far 14 sites have been selected and grouped into four sectoral Enterprise Areas, each focused on one of the targeted industry groups: life science, low carbon and renewables, general manufacturing and growth sectors (aerospace and creative industries).  Whilst targeting industries is not in itself bad, explicitly limiting the variety of businesses in any one Area may reduce innovation and spillover effects.

Thirdly, the sites selected at the moment are spread all over Scotland with only 3 out of 14 located within cities. Yet our research has shown that Enterprise Zones located in urban areas or on their fringes are the most successful.

The crucial next step for the Scottish Government is to set out what the goal of their Enterprise Areas policy is.  Only then can the important work of designing the right incentives to achieve that goal get underway.

 

Great Expectations: where next for London?

London is a growing city with a population likely to reach 8.57 million by 2026, a level not seen since the eve of the Second World War.  Everyone agrees that to maintain its status as the motor of the UK economy and a global centre, the capital needs to accommodate ever-increasing demands on housing, transport and services.  To do so, it must deliver more housing, offices and shops.

And that’s where the consensus ends.  Everyone expects major development to happen between now and 2022, but while developers prefer the established markets of the centre and the west, the GLA expects the greatest change to happen where the most land is available, in the east.  With policy and the market pulling in opposite directions, which parts of London will really see significant change over the next ten years?  What should and could local government do to attract development, and where should the private sector take risks? 

Centre for Cities, working with GVA, has researched development potential in London between now and 2022.  Evolving London: The Future Shape of the Capital looks at prospects for office, retail and residential, and creates a new index to compare boroughs.  The report aims to reconcile the complex influences of past, present and future market trends, long-term policy ambitions, short-term policy direction and major public investments like Crossrail.

The report also looks at six places that could see change if barriers to growth can be overcome:

- Deptford Creek, the Royal Docks and White City: places that have already seen some change, and have the potential to attract development on a larger scale

- Park Royal and Old Oak Common: where HS2 could act as a catalyst for significant change

- Croydon town centre and Tottenham Hale/White Hart Lane: places with major post-riot barriers to overcome, but also potential to attract investment.

Evolving London fills the gap between the 20-year view of the Mayor’s London Plan and the short-term horizons of everyday debate.  It highlights the need for the public and private sectors to develop shared objectives to deliver on the scale needed if London is to continue to be an economic powerhouse.   

Predicting the future is never an exact science, but fulfilling London’s economic potential requires perspective.  Evolving London combines policy and market insight to show which boroughs could see major change, and what they need to do to make it happen.  Our research aims to help the public sector think about what’s needed to create the conditions for development. 

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A place for industrial policy

Last week I attended the event "Developing an Industrial Strategy for the UK" hosted by the IPPR, the Resolution Foundation and New Economics Foundation.

The key point to come out of the event is that politicians are looking for potentially new ways to respond to the economic challenges the UK is facing and industrial policy could be an area for development.

After the shortcomings and problems industrial policy faced in the 60s and 70s and its abandonment over the coming decades, politicians and academics were invited to the event to discuss both the broader remit of industrial policy as well as the specific recommendations for its implementation.

The debate was far less polarised than in previous decades. Most of the speakers recognised that key innovation and research are not going to be undertaken purely by the private sector especially in such a de-risking financial climate. But there was also a recognition by the panellists that the state, and indeed the rhetoric, should move away from the notion of "picking winners" and understand how other factors, such as competition, the regulatory framework and skills, can improve productivity.

Therefore, the speakers suggested that whilst “horizontal” policies (i.e. those policies which are not sector specific such as education, tax, regulation etc) should be used, the Government should also support the strongest sectors and have a strategy for “vertical” policies. Support, presumably in the form of procurement or investment, could be a reward for firms who are delivering on key long-term objectives such as research and development, employee training and up-skilling or long-term investment growth plans.

A key rhetoric change to come from the event was the recognition that 21st century industrial policy needs to be more spatially aware if it is to be successful – there is no industrial policy without regional policy.

Any future development of industrial policy needs to combine both vertical and horizontal policies with a spatial awareness that understands and recognises the strengths of different places. With a lot of activity across the cities agenda - LEPs, City Deals, mayors to name a few – it is imperative that industrial policy development does not ignore the role that cities can play.

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Watershed moment or complex upgrade? Navigating the pools, levys, tariffs and top ups of local government finance

Over the last week I’ve participated in several rich and insightful sessions discussing the Local Government Resource Review – and I’ve enjoyed them! They’ve involved brilliant individuals from central and local government, academia and business, all trying to grapple with the many issues that reform of an already incredibly complex, and in some cases contradictory, system throws up.

My overriding reflection from these discussions is that as we get into the detail we’re in danger of forgetting the purpose of reforming the local government finance system.  What’s it all for?  Is it about deficit reduction?  Is it about localism? Is it about growth?  Is it about public services? Is it about local authority autonomy and self-sufficiency?  The answer seems to be yes to all of them!  That’s a heavy load for any reform to carry and one that risks sinking the whole reform programme.     

More specifically, I’ve come away from these discussions with five reflections and concerns:

Firstly, the system lacks transparency and clarity.  If the growth incentive is to work in the way the Government intends - which is to help expand the business rate base and therefore to create more growth in the economy - then authorities and in particular councillors have to be able to understand how the incentive system will work.  When Tony Travers declares he’s having trouble working it out then we should all worry!    

Secondly, surely it is only in England that we could introduce a growth-based incentive that will be of most benefit to places that are least well placed to grow – i.e. those that are classed as ‘top up’ authorities will receive money from Government to make up the shortfall in their budgets caused by having either a small or weakly performing business base. 

Thirdly, the advice given by Government to ‘tariff’ places (those that pay more into the system than they get back) to ‘pool’ with a top-up authority so that combined they become a top-up pool and therefore qualify for extra money via the redistribution element of the system has not been fully worked through.  Taken to its extreme this could mean that Westminster pools with Birmingham purely for financial reasons.

Fourthly, we need to be clear about the nature of development that any incentive is likely to encourage.  Most developments that take place don’t require massive amounts of ‘enabling’ investment (new rail-lines or large-scale improvements to roads or land remediation, etc).  They do require a planning committee that’s deciding whether to permit a development to say yes rather than no and to do it slightly more quickly that they currently do.  This is where a growth incentive will have most impact– affecting the decisions and behaviours at the margins.  The developments which require huge amounts of enabling investment, whilst very exciting and great to talk about, are a relatively small proportion of the overall development decisions that planning authorities face up and down the country.

Finally, there seems to be an assumption that income from business rates will be (or should be) used to fund economic related activity - this is unlikely to happen in practice.  In an environment where local government funding is declining and will continue to do so at least until 2017, it’s more likely that income generated from business rates will be used to fund services of one type or another.

The Centre’s just published our latest research on issues relating to the LGRR. Our report looks at two elements of the proposed system that could be amended to make the whole system work better – the reset period and the exclusion of increases in rateable value.  It’s a short report and worth a read, as are the responses on Conservative Home and Public Finance

We’ll be trying to get to grips with pooling, the impact of central/local allocation and other elements of the reorganisation in our work later in the year and, as always, are interested in hearing views and experiences from cities across the country as they start to make their plans for operating under a new system. 

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Urban policy is back in town

Urban policy is back again. This is the message I took from the seminar on cities I attended at  No 10 Downing Street this week, with about 40 of the great and the good from the cities world.

The event itself was fascinating, especially for a cities geek like me. It brought together experts in architecture, design, technology and city leaders to talk about how cities might change in the future.

But what was really striking was not only that the seminar was organised in the first place, and seen as a priority by Cities Minister Greg Clark and Rohan Silva (No 10 adviser). It was also the presence of both the Prime Minister and the Deputy Prime Minister to talk about how important cities are to the economy.

Both the PM and the DPM talked about the importance of rebalancing the UK economy, benefiting from London but doing more to make the most of English cities outside London. They talked about the role that successful cities play as engines of growth, innovation and cultural enrichment. And they mentioned the opportunities that cities create for the UK economy, not just domestically but in relation to exports.

Arguably urban policy never entirely went away. But it’s very encouraging to hear such strong messages from the top of Government. The Centre has always called for recognition of the importance of cities to economic growth, and it’s great to hear that the Coalition is committed to giving cities greater autonomy to respond to local economic circumstances. When I talk to cities, too, there’s a sense that greater devolution might happen this time because of the focus on specifics such as City Deals.

But we have been here before and, for the Government, the challenge will be to ensure that this drive towards devolution continues during a very difficult year for the UK economy, when pressure on Ministers to take charge will be immense. Getting initiatives like City Deals right will be critical to demonstrating to sceptics that cities are ready to take on some of the responsibilities and risks that go with taking greater charge of their economic destinies. And that means cities need to rise to the challenge too; if they don’t prove this works, it will be hard to gain greater freedom in the future.

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A golden ticket for 12 lucky High Streets?

It’s not quite City Challenge. And it’s not Willy Wonka and the Chocolate Factory, despite the offer of a "golden ticket". But on Saturday the Government unveiled that a £1 million fund aimed to revitalising the High Streets of twelve towns or cities. Housing Minister Grant Shapps has even made a YouTube video about it.

We’ve stated our position on the Portas Review in previous posts. In essence, the High Street is only one part of a strong city centre. So any efforts to boost the High Street are likely to be hamstrung if retail is the only reason for people to go to the city centre.

Even setting aside the scepticism about the approach, the money set aside for the "Portas Pilots" is fairly small beer - £1 million spread amongst twelve places isn’t going to go very far. The fundamental issue that these places face is that they do not have consistent footfall to support retail. And they are unlikely to be fixed with £80,000 to improve the appearance of some shop fronts or setting up a weekly market. We’ll be addressing these issues in forthcoming work which looks to build on last year’s partner city report on Preston.

In the meantime, interested applicants have until 30 March to submit their application (which also requires the submission of a YouTube video) to be in with a chance of winning a "golden ticket".