UNLEASHING METRO GROWTH FINAL RECOMMENDATIONS OF THE CITY GROWTH COMMISSION

OCTOBER 2014

ABOUT THE CITY GROWTH COMMISSION

The RSA City Growth Commission is Fellow, Metropolitan Programme a 12 month independent inquiry into at The Brookings Institution. how best to enable the UK’s major cities • John Van Reenen, Professor of to drive growth and respond to the fiscal Economics at the London School and economic challenges of the future. of Economics and Director of the Launched in October 2013, Centre of Economic Performance. Commissioners met three times to deliberate • Peter Vernon MRICS, Chief Executive a wide-range of evidence, including: of Grosvenor Britain & Ireland • A call for written evidence and four and previously Partner at IBM evidence hearing sessions across Business Consulting Services and the country (Manchester, Bristol, PricewaterhouseCoopers. Newcastle and London). • Tony Travers, Director of British • A dedicated quantitative and Government at LSE London, Professor qualitative research programme in the LSE’s Government Department and (including events in Southampton, Chair of the London Finance Commission. Cardiff, Newcastle and Edinburgh). • Ben Lucas, Chair of Public Services • ‘Deep-dive’ engagement with senior at the RSA and Principal Partner, leaders (Birmingham, Manchester, RSA 2020 Public Services. Leeds, London – including the Mayor • Rachel Lomax, Independent Non- of London’s office and London Councils Executive Director at HSBC and – and Nottingham) as well as the former Deputy Governor, Monetary Local Government Association, Key Stability at the Bank of England and Cities and Core Cities organisations. a member of the Bank of England’s • Consultation with senior Monetary Policy Committee. figures in Whitehall, Government • Rohan Silva, Entrepreneur in Residence and the political parties. at Index Ventures and previously Senior • A series of high-level public seminars, Policy Adviser to the Prime Minister private roundtables and party conference events with academics, business, civil Mike Emmerich, Chief Executive of society and political leaders. New Economy, and Alexandra Jones, Chief Executive of Centre for Cities, Chaired by Jim O’Neill, renowned are advisors to the Commission. economist, it is hosted and run by RSA 2020 Public Services. The Commission’s The Commission has been set up with membership consists of: the support of the Core Cities Group, • Jim O’Neill, Visiting Research Fellow at London Councils, the Greater London think tank Bruegel and retiring Chairman Authority and the Local Government of Goldman Sachs Asset (Chair). Association. Other project sponsors • Bridget Rosewell OBE, Chair of Volterra include the Joseph Rowntree Foundation, Economics and former Chief Economist Universities UK and British Private to the Greater London Authority. Equity and Venture Capital Association. • Bruce Katz, Vice President at the Brookings Institution and Founding Director of the For more information, including Brookings Metropolitan Policy Program. written submissions to the Commission, • Greg Clark, Chairman, OECD Forum minutes of our formal hearings and all on Local Development Agencies interim publications, please see and Investment Strategies and Global www.citygrowthcommission.com.

1 ABOUT THIS REPORT

A new global picture of growth is taking a new devo max settlement, following the shape. This is not about a transfer of ‘no’ vote on 18 September 2014. Relatively economic power from North to South, under the radar, but no less persistent, or West to East. It is about the rise of were growing calls for a significant shift cities, the concentration of productivity, in power away from Ministers and officials innovation and creativity that will in central government to cities. City Deals, drive our economic future. This, the Growth Deals and Lord Heseltine’s No final report of the RSA City Growth Stone Unturned, report have set the course, Commission, is the culmination of a but the challenge is to now a achieve a step 12-month inquiry on what the rise of change in devolution. cities means for the UK political economy. Over recent months, the importance Internationally, growth is increasingly of cities in driving growth and prosperity driven by cities. But very few in the UK has been increasingly recognised, rising up are at the forefront of the nation’s economy the political agenda to the highest levels. and all are overly dependent on top-down Two speeches from the Chancellor of the funding. It is clear that our centralised Exchequer, a commitment from the Leader political economy is not fit for purpose. of the Opposition that he would “champion UK cities compete within a global devolution” in government and the Northern economy, in which the drivers of urbanisation Futures campaign from the Deputy Prime and connectivity are evolving together, Minister have set a new political tone. and fast. Rapid changes in transportation In the wake of the Scottish referendum and communication networks expose UK debate and with the political parties cities to both economic opportunities and looking ahead to May 2015, several of risks. Concentrated demand for, and supply the Commission’s initial recommendations of, skilled labour means that many of the have already been taken up in Government challenges of an increasingly integrated and Opposition thinking, particularly global economy will play out in our cities. the importance of connectivity between Chaired by economist Jim O’Neill, with and agglomeration of northern cities; nine other individuals drawn from academia, strengthening the links between higher business and government, the Commission education and metro growth; and, the has considered how we can drive up the UK’s need for fiscal devolution to those cities long-term trend rate of economic growth. able to shoulder a genuine transfer of The Commission has focused largely on risk. This has both encouraged the supply-side measures, including transport Commission and heightened our ambition connectivity, skills and enterprise. for city growth in the UK. For the sake of Throughout the course of the longer-term economic growth and national Commission’s inquiry, the drumbeat of prosperity, we need to capitalise on this devolution has grown ever louder. Leading opportunity for change. the charge was the possibility of Scottish Focusing on the potential of the largest independence and now the transition to 15 ‘metros’ (with city centres, suburbs

1. See Annex for a definition and population sizes of the City Growth Commission’s 15 metros

2 CITIES DRIVE GROWTH BUT ARE HELD BACK

61% of uk growth is generated by city regions2

cities already account for up to 80 percent of global growth3

2. Calculated by Centre for Cities, 2014; refers to the 56 largest Primary Urban Areas in the UK 3. The Economist Intelligence Unit (2013)

3 THE UK’S LARGEST 15 METRO AREAS AS MEASURED BY ONS BUILT-UP AREAS

Glasgow Edinburgh

Tyne and Wear

Belfast

West Yorkshire

Greater Manchester South Yorkshire

Merseyside East Midlands

Leicester

West Midlands

London Cardiff Capital Region Bristol

South Hampshire

4 EMPLOYMENT RATES AND POPULATION SIZE FOR SELECTED UK METROS

65.7% 73%

64.5%

64.6%

68.9%

68.2% 66.8%

67.6% 65.9% 65.9%

63.4% 70.1%

71.8% 67.7% 74.3%

70.5% 70.3% 75.7%

5 and surrounding areas of over 500,000 “Only with increased powers to cities residents),1 the City Growth Commission will we be able to integrate public and argues that a reconfiguration of our private investment successfully to take political economy is needed with city- advantage of emerging opportunities regions at its heart. This report explains and to get the right balance between why and how it can be achieved. Note transport, land use, and welfare. The that, as with our previous reports, the Commission has given further voice terms ‘city’, ‘city-region’ and ‘metro’ to these needs.” are used interchangeably. Bridget Rosewell, City Growth Commissioner

Acknowledgements The RSA City Growth Commission “It’s fantastic that George Osborne was so is grateful for all the individuals, RSA positive about this – it’s possibly the most Fellows and organisations that have progressive statement a Chancellor has submitted evidence, provided additional made on this issue in the last 50 years, so research material and feedback, and it really is worthy of celebration.” facilitated our extensive engagement Rohan Silva, City Growth Commissioner in response to with political, business, academic and Chancellor’s speech 23 June 2014 civic leaders. We would like to thank our partners and funders: Core Cities, London Councils, the Greater London “We can’t go on with the over-centralised Authority, Local Government Association, system we currently operate in the UK. New Economy, British Private Equity City-based economies need control over and Venture Capital Association and their own resources.” Joseph Rowntree Foundation. Tony Travers, City Growth Commissioner Particular mentions go to Charlotte Alldritt and the Commission Secretariat (Julia Wilcox, Jonathan Schifferes, Brhmie “This is a moment of great Balaram, Thomas Hauschildt, Catherine opportunity for our great British Leech), Alexandra Gardiner, John Holden, cities. Globally we are seeing a move James Odling-Smee, Jeremy Skinner, toward more decentralised political Piali Das Gupta, Damien Smith, Karl economies, with cities as the drivers la Ferla, Chris Murray, Claire Coulier, of growth and social innovation. Peter Sharratt, and the RSA. Here in the UK, the aftermath of the Scottish vote has created the potential for ‘Devo Met’ for our major conurbations. Cities now need to demonstrate the ambition and determination to seize this opportunity. And the main political parties need to work together in supporting this.” Ben Lucas, City Growth Commissioner

“For decades cities have looked to Whitehall for resources and permission. It is now time for Whitehall to look to cities for innovation and progress. The result will be not only more successful cities, but a more prosperous and inclusive nation.” Bruce Katz, City Growth Commissioner

6 CONTENTS

ABOUT THIS REPORT 2

FOREWORD 8

1. VISION: THE AGE OF THE CITY 16

2. EMPOWERING UK METROS 18

3. THE ROAD TO DECENTRALISATION: 27 SECURING GREATER AUTONOMY

4. THE ROAD TO DECENTRALISATION: 28 MEASURING PROGRESS

RECOMMENDATIONS 34

ANNEX 1: DEFINITION OF 15 MAJOR METROS 39

ANNEX 2: METRO GROWTH FORECASTS 41

REFERENCES 42

7 FOREWORD BY JIM O’NEILL

12 months ago we set out with a simple, We spent some considerable time albeit extremely ambitious goal, namely discussing what we meant by a city, and to think of specific recommendations that outlined in our first publication, Metro might be adopted by our national policy Growth; the UK’s economic opportunity, leaders aimed at boosting the trend growth we decided to concentrate our efforts on rate of the UK economy. We deliberately the 15 largest metro areas. We identified chose to exist for 12 months so we could the top 15 above a cut-off point above finish in good time ahead of the 2015 500,000 inhabitants. By doing this, and general elections, in order to influence the in our subsequent thoughts, we have not main political parties in their campaign to decided that other cities or indeed, any seek votes. Early into the process, we realised other area of the UK is not worthy of that to have true influence on the nation’s specific efforts or more powers, but we have long-term growth trend, we would need to to concentrate our efforts somehow and get buy in from all major political parties. somewhere, and consistent with our core The kind of interventions that might work rationale related to boosting trend economic would need all party support and could growth, it is these 15 – including Greater not be subject to the usual vagaries and flip London – that are most important. flopping associated with the election cycle. It is worth reiterating that, our ideas We didn’t expect that, significantly are most definitely not expected to be at before our 12 months were over, all the London’s expense. On the contrary, we major political parties would accept our have thought long and hard about trying case for bold efforts to help diverse urban to complement London’s growth and to areas boost their growth rates, including replicate some aspects of our capital’s the devolution of some decision making fantastic success, especially the scale powers to them. But as we have approached of its agglomeration, which is amongst this final report, having hosted events at London’s great attributes. each of the major political parties’ annual When we focused on the simple issues, conferences, this appears to be the case. two stand out. One, London is the only Now, we hope with this report to give a metro area in the UK that registers in a further nudge towards action. As the saying list of the most significant global cities. goes, action speaks louder than words. We have focused on how other cities can We set out early in our existence to do things perhaps together to help create frame the case purely from the economic some of these agglomeration benefits. perspective; we wanted to pursue ideas Two, the UK is one of the most centrally that, if implemented, would boost the driven countries in the world when it comes national growth trend, and not to accept to tax raising and spending. So we set that it is a zero sum game, giving more ourselves the question, could it be the case to city A would not simply be taking that by giving our metro areas (and others) from city B. This principle lies behind more power we could confidently expect a all of our ideas and proposals. positive economic and social impact?

8 Of course, the Scottish referendum of key requirements, such as the creation hung over the Commission’s deliberations of a Northern Oyster to truly pull this throughout, and while no doubt its intensity off, some of which might not necessarily and outcome influenced the minds of some require new powers for any of these cities, about the case for our cities across the UK, but would probably require some new we like to think that it was the clarity of integrated transport authority. argument and ease of rationale that we, Another key finding of ours is the and others, have used, that have helped geographic diversity of our excellent bring us to where we now are. Universities and in addition to, again, Many of the Commission staff and being pleased by the Chancellor’s call for Commissioners have travelled around the “a northern version of the Crick Institute”, country this past 12 months, witnessing we believe there are simple initiatives the beauty and remarkable vibrancy of our that can be undertaken to boost further cities. Amongst the many I must thank as the importance of our universities, their Chair are the people from those cities who importance to our cities, and their role have been so eager and welcoming to host us, in encouraging students to stay in the and relay to us the strengths, opportunities cities where they graduate. We outline and, in some cases limitations, of their specific ideas here and in a separate report, current state of play. I, myself, have travelled UniverCities: The Knowledge to Power UK to many and it has been an enlightening Metros, and again, note most of these ideas and enriching experience. don’t require any devolution of powers. So to our ideas and recommendations, Which leads me to the most contentious of which this document sets all of them, part, the critical issue of devolution, following up on the 5 previous specialist something that has caught the imagination publications we have released. of all since the Scottish vote, and has Agglomeration, as I said, has been a involved repeated intense discussion between huge influence on our thinking, and as our Commissioners. In my view, some we discussed in our special report on devolution to our cities is a necessary but connectivity, Connected Cities: The link not sufficient condition for the delivery of to growth, bolder efforts to boost our stronger trend economic growth nationally. infrastructure, both digitally but especially As a Commission we support the physically, are crucial. It has been very case for the devolution of skills funding, pleasing to see the Chancellor respond something we also outlined in a special to the core of this issue by calling for a report, Human Capitals: Driving Metro ‘Northern Powerhouse’, just as it has been Growth by Investing in the Workforce, to see the response of cities through the given its key importance to our economic ‘One North’, and indeed, also ‘Midlands future and those of our children. On Connect’. If our closely geographically broader aspects of devolution, we also agree located cities can have the best transport that the case for significantly greater powers between them, allowing their current, to the 15 metro areas should be open to all and potential future consumers and of them through time, and we lay out in producers to feel as though they are all detail the sort of requirements necessary to part of one urban mass, then the benefits warrant it. Some of us, typically those that that typically accrue to London could travelled to the various metro areas the most, be repeated elsewhere. As I have become had the most opinionated views as to which fond of saying, but could do with a better might be more ready than others, myself acronym, “ManSheffLeedsPool” and the included. Given our central purpose of concept of this 7 million person region trying to think of boosting trend economic finding it as part of everyday life easier growth, almost by definition, the current 5 to move around within this area, could metro areas that have Combined Authorities generate many agglomeration benefits. seem to be the best placed, along with Our recommendations include a number London for warranting earlier steps.

9 But we should be clear that the process our kind sponsors and supporters, as of devolution we have described will require well as those who hosted us on visits as cities to have more robust governance, policy I mentioned earlier. I would also like to making and economic delivery functions thank Charlotte Alldritt, especially, together in place. Even those who appear to be most with all the other staff from the RSA, who in the vanguard will need to address these have worked so tirelessly and endlessly, challenges to demonstrate that they are in making sure we thought about all the ready for substantial devolution. Critically, right issues and had our minds opened to they will need to be prepared to share the ideas of others. It was of course also more risk with central government if they absolutely fantastic that the RSA itself are to benefit from substantial fiscal and decided to support this Commission. funding devolution. It seems to a majority, Lastly, I would also like to thank all the but not all, of Commissioners that at the Commissioners, listed below, for their own outset only London, Manchester and West fantastic contributions, which all came Yorkshire may be ready to manage these voluntarily and despite their own busy risks and therefore to apply for devolved and important lives doing other things, status. But this is a fast developing process, and them having to suffer my prodding and and other city metros – such as the North provocations in our desire to get something East – may well be ready for this very soon. done that we would all be proud of. Which brings me to my thanks. Now it is simply down to the It has been a remarkable 12 months national political leaders, the Treasury with our Commission lucky enough to and other senior civil servants along get a fabulous hearing from all those we with the bold and accountable of our pushed and pestered, and we thank all local authorities to deliver.

at the outset only london, manchester and west yorkshire may be ready to manage these risks. but this is a fast developing process, and others – such as the north east – may be ready soon

10 KEY TAKEAWAYS

The City Growth Commission focuses that will not be solved by anything on city-regions, or ‘metros’ as the less than a radical reshaping of the main drivers of economic growth in UK’s political economy. an increasingly knowledge-driven, To achieve this transformation the global economy. Metros, as defined by Commission advocates a clear shift Bruce Katz and others,4 are the larger towards a more decentralised political constellations of cities and towns that system where metros have the budget constitute a functional economy within and policy making flexibilities to built up areas. Over the course of the respond to shape their economies. last 12 months, we have seen the number We also recommend a number of supply- of Combined Authorities formally side policies that enhance connectivity, established increase from one to five and skills and innovation at the scale of there are more in the pipeline as many city-regions. Agglomeration effects local authorities understand that scale are crucial; sustainable UK growth is the key to unlocking public service will rely increasingly on our major efficiencies and managing strategic cities doing for the North West, North economic development. East, West Yorkshire and Midlands – At the heart of the cities agenda is for example – what London does for an economic imperative; we need the South East 5 – driving investment, to maximise the productivity and productivity and growth: growth potential of agglomeration and Enhancing Connectivity: The connectivity if we are to tackle the fiscal Commission argues for accelerating challenge still ahead. Public finances are digital and physical connectivity within struggling to keep pace with mounting and between large metros, building on costs of an ageing population and schemes such as One North 6 to drive growing demand for welfare support and the creation of a series of economic public services. Most major cities have a powerhouses including the North, North ‘fiscal gap’ that reflects this discrepancy East, and Midlands. Connectivity within between their attributable tax revenues metros drives agglomeration, and with and their level of public expenditure. it higher productivity and growth. While some places will continue to Connectivity between metros enables be more prosperous than others, it is the UK economy to thrive as a system not sustainable for the UK to rely on of cities. In particular: redistribution from these few. Cities • An integrated payment system, across the UK need to be empowered an Oyster card for the North, to enable to unleash their creativity and innovation ease of travel across the One North potential, improve their connectivity transport area. This principle could and boost their productivity. The scale apply to the Midlands Connect of the challenge is huge. If Greater proposal, bolstering this pan- Manchester – our second largest metro metro powerhouse. area – is in annual £4–5bn fiscal deficit to HM Treasury, the underperformance • The Commission also heard of our major cities is a problem repeatedly from organisations and

4. See Katz. B., and Bradley, J. (2013); Barber, B. (2013) 5. A full list of our recommendations can be found in Recommendations 6. ‘One North; A Proposition for an Interconnected North’ (2014) www.manchester.gov.uk/downloads/download/5969/one_north

11 local authorities about the need to, metros to target skills training with and current difficulties associated the jobs they aim to create. In particular: with, enhancing supply of high-speed • Metros should administer Adult broadband. The UK has a burgeoning Skills Budgets with reference to digital industry and other sectors are evidence-based skills strategies increasingly dependent on access and other advice prepared by the to fast, reliable connections. We Local Enterprise Partnership (LEP). should seek to emulate Singapore’s Ultimately, devolution of skills 1Gb/s broadband speeds in the near funding should extend to 14-to- future, the minimum needed to drive 19-year-old provision so there are additional inward investment to our seamless employment and skills cities. Government should launch a pathways for young people. comprehensive review on how our current and future needs for digital • Lifting the cap on Tier 2 infrastructure can be met in major skilled migration and license metros, including London. metros to become sponsors on behalf of small and medium Improving Data: Metros need to improve enterprises (SMEs) would reduce their capacity to collect and analyse the administrative costs associated data about the economy and public with recruiting international talent. services, including the demand for and outcomes of such provision. Without Innovation and Higher Education: robust, granular data, metros are limited The Commission heard frequently of in their ability to plan and commission the potential impact universities could effectively; aligned service budgets and have on innovation, job creation and an integrated reform agenda hinge on investment – as well the ability of cities to the power of timely, accurate information. attract (and increasingly retain) talent and investment. As a result, we recommend: Housing and Planning: Armed with robust data, metros should take on • New freedoms and flexibilities for strategic planning authority powers, metros to establish Metro Investment aggregating up decision-making to Funds for Higher Education (MIFHE) Combined Authorities (or equivalent) from devolved skills budgets to to coordinate investment across the provide additional funds for research city-region. This should allow for cities to and teaching within their metro align housing and transport development area that impacts on local growth. across their travel to work area and would • New initiatives led by metros follow a similar model to that between should provide local graduates every London Boroughs and the Greater opportunity to find employment in London Authority (GLA). Planning at the the metro labour market, including metro level will allow authorities to make a centralised Graduate Clearing it easier to reclassify poor quality Green system which pools rejected Belt and promote Green Belt swaps, graduate recruitment applications where applicable, engaging with local in metros and recycles them to people to create buy-in for more flexible local firms with vacancies. arrangements for enhancing economic, social and environmental value. • Graduate Entrepreneur Visas should be extended by allowing Tailor-made Skills: The Commission Higher Education Institutions (HEIs) calls for skills funding to be the or local UK Trade & Investment responsibility of city-regions, enabling (UKTI) outposts in the UK’s Core

12 Cities to pilot a flexible form of the • Multi-year finance settlements visa which would extend the eligible of between five and 10 years time period of students who have (depending whether resource left the UK to apply for an extension or capital). from one year to five. • The ability for metros to negotiate Decentralisation would enhance Payment by Results mechanisms, these economic benefits by building of the work of Manchester, empowering metros with the capacity Glasgow and Cambridge, to benefit to respond more dynamically to the from the proceeds of growth. needs and opportunities of their The City Growth Commission offers economies. Those metros with the a roadmap for metros to bring forward most robust governance structures, bids for Devolved Status, led by an which have a track record of delivery independent committee in an open and risk management, should be and transparent process (see page considered for ‘Devolved City Status’. 24). Establishing this process should This would grant the same consultation be run in parallel to that of devo max rights as the Devolved Administrations for Scotland, with draft legislation for within Whitehall decision-making and enabling powers (even if these are UK government structure.7 Powers and not commenced) by January 2015. responsibilities would be agreed between the Devolved City-region and central In addition to central government government and might vary by time and devolving powers, all metros will need place.8 However, they might include: to raise their game, building governance, policymaking and evaluation capacity • Greater flexibility of capital reserves and developing their own vision for and more borrowing flexibility, city-led growth. As well as ensuring including ability for the most devolved robust governance structures are metros to borrow from sources other in place, metros will also need to than the Public Works Loan Board improve their capacity for data analysis, (eg open markets). working with the Office for National • The freedom for the most devolved Statistics (ONS), local LEPs and other metros to raise and fully retain a academic partners. They will also have suite of taxes (at the very least the to collaborate effectively within and whole of Business Rates, Council beyond their boundaries. Tax, though preferably more in Considerably more work needs to line with the Communities and be done to push the UK’s political Local Government (CLG) select economy firmly within a new, committee and London Finance decentralised framework. The might Commission proposals), offsetting of our cities has long been underplayed these revenues in a net neutral in the economic narrative of the United grant settlement with HM Treasury. Kingdom, with the concept of urban • Freedom to spend grants without growth associated more with urban ringfencing, enabling city-regional sprawl and unwanted development. pooling of budgets.

7. See Memorandum of Understanding for Devolution (2012) ‘Communications and Consultation’ page 4: www.gov.uk/government/ uploads/system/uploads/attachment_data/file/316157/MoU_between_the_UK_and_the_Devolved_Administrations.pdf 8. There is no reason other places could not apply for the same powers and flexibilities further down the line, so long as they demonstrated sufficient scale (eg via formal collaboration between local authorities) and sought to operate at an appropriate economic geography (ie aligned to the wider functional economic area). As the drivers of growth we propose metros should be the vanguards of change

13 However, many of our cities and their responsibilities of devolution. But hinterlands have a strong industrial some metros do already exhibit many heritage of which they can be proud; of the qualities needed to take the during the 19th century, metropolitan opportunity to power their economic industrial growth drove national futures with greater autonomy. For economic success. The challenge is these metros, central government must now to ensure these places have the step back as soon as is practical. capacity to fulfil their economic potential Decentralisation and devolution are in the 21st century – whether through not a panacea; supply-side measures connectivity with London and other (ie those that enhance the business global cities (particularly in the emerging environment) nationally administered markets) or by fostering their innovative through, and in consultation with, economy in relatively new sectors such our major metros are needed to as digital technologies and data analytics. enhance the growth of our cities and Decentralisation should be understood the UK economy as a whole. The as a tool to foster growth of our city- diagram below illustrates how, using regions. National government needs examples of initiatives considered by to respond to the fiscal and economic the Commission, some measures will challenge. Public spending pressures apply to all metros (and sometimes differ between metros, and centralised be universal to all local authorities) attempts to manage down the deficit and others will be metro-specific. and national debt will be futile – and Metro-specific initiatives could be unsustainable – in the long term. led by central policy (eg in the case Our recommendations do not of national transport infrastructure) immediately apply to all metro areas, or, at the opposite end of the spectrum, as some are not yet ready or do not through fully devolved powers. wish to take on the challenges or

£79BN

if the uk’s top 15 metros were to realise their potential, it is estimated they would generate an additional £79bn growth 9

9. This estimate is calculated by estimating the potential additional growth that metros could achieve if the 14 non-London metros were to grow at the UK average (forecast by the Office for Budget Responsibility) between 2013 and 2030 compared to their past growth rate between 1997 and 2012 and if London were to maintain its growth rate between 1997 and 2012

14 Devolved powers

Discretionary fiscal powers (eg Metro Business Rate, Council Tax)

14–19 and Adult Skills

Place-based metro Abolish Council budgeting and Tax referenda commissioning Universal Metro specific

One North, Midlands Connect

Minimum 1 GB/s broadband speed

High Speed 2 National Insurance, Phases 1 and 2 Income Tax, Corporation Tax, VAT

Central supply-side measures

the scale and connectivity of metros presents an ideal business environment; urban economies are the beating heart of growth

SYSTEMS THINKING FOR CITIES dependency, social care and public AND THE UK health, for example, frees up resource to invest in productive forms of It is vital that metros are able integrate economic development spend; and, public service reform with their wider • Allows for an effective, efficient economic strategy. Central government system of cities, connected similarly needs to ensure its social and physically and digitally across economic policies are aligned at national the UK and the rest of the level, and in regards to the impact of world, leveraging foreign direct national policy on local areas. investment and attracting global • Enables cities to thrive as whole talent. This involves capitalising systems, creating socially inclusive, on our network of world-class environmentally sustainable places universities and research facilities, where people want to live and work. as well as a national long-term Critical to this agenda is place-based infrastructure plan with a clear route commissioning and alignment of map for delivering additional aviation public service budgets. Managing capacity and high-speed broadband. down the costs of complex welfare

15 1. VISION THE AGE OF THE CITY

We live in an urban age. Cities and their tri-national metro-regions, 11 reinforcing hinterlands are increasingly powerful the political economy of urban economies. in national and global politics and are It is not just countries that compete on driving economic growth in developed the global stage, city-regions are rising in and emerging markets across the world. economic and political importance, and This trend is set to continue, with city- those countries that allow their metros regions, or ‘metros’, becoming ever more to flourish within a framework of strong, important. In an era when all competitive accountability governance are doing better. industries – from high value services to Citing the Organisation for Economic Co- manufacturing and logistics – are becoming operation and Development (OECD) (2014) knowledge-intensive, the impact of clusters, the Chancellor recently acknowledged networks and agglomeration effects on “cities around the world with fragmented productivity and growth is all the greater. governance structures have lower levels As the McKinsey Global Institute finds, the of productivity than those that don’t. scale and connectivity of metros presents Six percent lower.” 12 an ideal business environment;10 urban Economic growth means more than economies are the beating heart of growth. simply increasing Gross Value Added (GVA). The concentration of the key ingredients To avoid spiralling costs, whether from for growth in cities is having a profound welfare and public services or adaptation to effect on the global economy. Urbanisation climate change, distribution of the proceeds is driving growth across the world, improving of growth across the city-region will need to living standards and helping to offset some be channelled to increase social productivity of the associated costs of economic success and environmental sustainability over the (eg ageing societies, increasing incidences long-term. For example, the Commission of chronic health conditions and climate heard from several cities about their concern change). Even as fertility rates decline, regarding economic and social inequality – a cities are growing, fuelled by domestic problem that puts additional strain on public and international migration. By 2030, urban services and welfare, already under pressure areas are expected to house 60 percent of from increased demand and diminishing the world’s population and generate up to resources. Reforming public services and 80 percent of global economic growth. creating inclusive economic growth must be The growth of future cities is unlikely seen as the flip sides of the same coin. to respect political, even national, The key ingredients for economic growth boundaries. The US National Intelligence include innovation, skills, capital and high Council estimates that by 2030 there will quality infrastructure (see LSE Growth be at least 40 large bi-national and Commission, 2013).13 But the way these need

10. McKinsey Global Institute (2011) 11. US National Intelligence Council (2012) 12. Osborne, G. (2014) 13. Besley, T. and Van Reenen, J. (co-chairs) London School of Economics Growth Commission Final Report, 2013

16 to be brought together to enable productive assets, such as transport infrastructure, economic activity varies by context and need to be matched to human factors circumstance: even in an increasingly virtual including the skills and entrepreneurialism economy in which vast amounts of goods of local people. Only then can the growth and services are traded (or only, in certain potential of a place be realised. cases, exist) online, place matters. Physical

reforming public services and creating inclusive economic growth must be seen as the flip sides of the same coin

ROLE OF SMALLER CITIES of Key Cities,14 for example Wakefield in West Yorkshire and Sunderland in Our primary focus in this report has Tyne and Wear. It is worth noting that been on how to accelerate agglomeration the collaboration inherent in Combined benefits that would enable our largest Authorities is reflected in the fact that metros to grow in collaboration with none of the 5 Combined Authorities is each other, across urban regional areas chaired by a Leader of a Core City. We such as the North, the Midlands, and the also recognise the economic contribution North East. Of course, where Combined of smaller cites (see Box below, ‘Learning Authorities have been formed, these from smaller cities’). consist of both Core Cities and a number

14. See www.keycities.co.uk

17 2. EMPOWERING UK METROS

As we argued in our report, Powers to a fixed pot of national expenditure. Grow: Local Governance and Finance, The UK has the most centralised system innovative, competitive and resilient of public finance of any major OECD economies are built on stable institutions country; sub-national taxation accounts that engender trust between trading for only 1.7 percent of Gross Domestic partners, encourage investment in Product (GDP), compared to 5 percent infrastructure and public services, and in France and 16 percent in Sweden.16 build socially productive communities. To compete on the global stage, the One of the UK’s strongest attributes City Growth Commission argues that as a major global economy is the strength UK metros need sufficient decision-making of our institutions. The World Economic powers and financial flexibilities to become Forum’s annual Global Competitiveness financially self-sustainable. Social and report regularly ranks the UK in the top democratic arguments for devolution 20 countries (out of 144) for the strength have been made by others 17 and have of its institutions. In 2014/15 the UK was risen in profile over recent months. ranked 12th in the world for this indicator.15 While the City Growth Commission Our trusted legal system forms the backbone recognises these, we concentrate on the of many international contracts; our mature merits of the economic case for change. and transparent legislative system helps to Working with local partners to support minimise political risk for investors over growth and deliver high quality outcomes, the long term; our independent Bank of metros need to be empowered to shift England depoliticises our monetary policy, resources into more preventative and and, balanced regulation provides a stable productive investment, helping to tackle platform for competition in global markets. the long-term causes of social inequality However, the configuration of our and barriers to growth. Led by city-regions, political economy – while encouraging public service reform becomes the flip side this healthy business environment at the of the same economic coin. aggregate level – is, in our view, holding The size of the economic imbalance, our metros back. The UK economy is falling where only one of our cities outside short of its potential as our cities, with London is more productive than the their concentration of labour, capital and UK national average (Bristol), is an information flows, are stifled by the overt indication of the fiscal challenge we face. centralisation of policy decision-making. Whilst difficult to quantify due to lack of While global competitors are free to metro-level data (see ‘Data driven growth invest in their major cities, UK metros are and public service reform’ below), the fact at the mercy of central government, that our second largest city-region is in permanently bidding for a share of fiscal deficit to central government (ie it

15. World Economic Forum (2014) 16. T. Travers, ‘Local government’s role in promoting economic growth: Removing unnecessary barriers to success’, Local Government Association (2012) 17. See for example Communities and Local Government Committee (2014) and Institute of Public Policy and Research (2014a)

18 raises less in tax than it receives in public Allowing cities to grow and to take more revenue) is a strong indication of the level responsibility for closing their own fiscal of the problem. We cannot continue to gap through place-based budgeting and rely upon redistribution from our most local public service reform, will be critical productive parts of the economy, Greater to managing UK deficit reduction. London and the South East, to meet our public service needs over the long term.

POTENTIAL METRO GROWTH (2013/14) and set to only become surplus in 2018/19. The Treasury recently calculated the potential growth that could be achieved If instead the metros continued to grow if the Northern Powerhouse were to grow at the average rate of growth seen at the same rate as the forecast growth between 1997 and 2012, their nominal for the UK as a whole.18 New Economy GVA would be £864bn higher. The have employed the same methodology to difference between the two is £79bn – calculate the boost in economic output in equating to the potential extra benefit the 15 largest metros in the UK, if they were achieved from growing in line with the UK to grow at the same rate as the UK as a as a whole (with London maintaining its whole between now and 2030 (with London historic growth rate), worth approximately maintaining its historic growth rate).19 5 percent of the UK’s current GDP. Between 1997 and 2012, the non-London Applying GVA deflators to give real term metros grew more slowly than the UK as prices at 2012 levels, this equates to a a whole. The average annual growth rate real potential additional growth of £60bn, in GVA for the 14 non-London metros was equating to £1,677 per capita, in these 3.87 percent, below the whole UK average metros, in real terms. annual growth rate for this period of 4.13 Unlike previous attempts to regionalise percent. London’s nominal growth rate UK – particularly English – government, was 4.81 percent per annum. the City Growth Commission believes Employing the same methodology, if we will need a growing focus on between 2013 and 2030 the 14 non- collaboration between geographically London metros were to grow in line with proximate cities, capitalising on the the Office for Budget Responsibility’s agglomeration effects at an even larger (OBR) forecast for average nominal scale to drive our economy in the face of growth in GVA for the UK, and London increasing global competition. Just as scale were to maintain its historic growth and agglomeration effects enable London performance, their GVA would be £943bn and the South East to generate higher higher in 2030 than in 2013 (see Annex 2). productivity and output, so the UK should This would make a significant impact on increasingly be able to rely on the prosperity the UK’s net debt, set to be £1.6 trillion in of the emerging ‘Northern Powerhouse’, 2018–19; and more quickly wipe out the as well as others such as the North East, UK’s structural deficit, currently at £94bn the Midlands and the Bristol-Cardiff city- regions across the Severn.

18. G. Osborne, “On the pathway to a Northern Powerhouse”, 5 August 2014 19. Manchester New Economy used figures from the ONS and the OBR’s forecasts to calculate the boost in economic output in the UK’s 15 largest metro areas. London is treated separately and estimated to continue to grow at its historic growth rate since it grew above the national average for this period. If given greater flexibility, London may grow above this trend but this has not been modelled here. Regional economic output is measured annually by the ONS. The published data estimate the Gross Value Added (GVA) in each region in nominal prices. 2012 is the latest data that we have for GVA data so we estimate growth over the past 16 years as 1997–2012, and growth over the next 18 years we mean 2013–2030.

19 COMBINED POPULATION AND FORECAST GVA FOR SIX ‘POWERHOUSE’ SUPER CITY REGIONS

Powerhouse Population Expected Uplift from Comprising Metros Super City GVA 2030 trend (£m) Region (£m) 2012 prices* London 12,578,981 708,524 0 Greater London

North 6,928,350 232,580 19,421 Greater Manchester, West Yorkshire, South Yorkshire and Merseyside Midlands 4,309,609 138,933 28,261 East Mids, West Mids and Leicester Central 2,454,407 77,740 4,693 Glasgow and Edinburgh Scotland North East 1,486,939 33,231 4,212 Tyne and Wear and Tees Valley (NB Tees is not one of our top 15) Severn 1,485,907 59,018 782 Bristol and Cardiff

* Based on London maintaining growth rate and other cities meeting UK average

Delivering public service reform for • Raise economic productivity and sustainable growth boost the long-term growth potential The British public has increasingly of the national economy. expressed a preference for ‘Scandinavian- • Achieve greater fiscal sustainability style high-quality public services but with at a local and national level with low American-style taxes’.20 However, power to direct more of their without more place-based, data-driven respective tax and spend. and outcomes focused policy making • Manage rising demand for public services and accountability, expectations of the such as health and social care by taking breadth and quality of public services longer term, preventative approach; and will have to be reconsidered. • Reduce environmental impact by The declining pot of public funds and managing the transition to low- ever-rising need for services to support the carbon production and consumption. UK’s ageing population mean that a large gap is opening up, most noticeably at the Inequality within and between metros local level, where much of the effects are felt; Economic growth is vital if we are to the gap between expenditure and funding is meet the increasing demands on our welfare expected to widen to £12.4bn by 2019/20.21 system and public services. However, a no The scale of metros means they less important issue is how the proceeds of are best placed to drive the strategic growth are distributed. In theory, the UK’s integration of public services and economic centralized fiscal system enables tax-based development. With effective place-based government revenues to be distributed so budgeting – enabling alignment and/or that inequality between households and pooling budgets and accountability at amongst cities and regions are minimised. local level – metros have the potential to: Thus enabling a more even distribution

20. Ipsos Mori, ‘Social Research Institute Summer Review’, (2012) 21. Local Government Association, Future funding outlook 2014: Funding outlook for councils to 2019/20 (2014)

20 VARIATION WITHIN REGIONS IN ECONOMIC VALUE PRODUCED PER PERSON, 2012

Northumberland £12,049 North East £20,163 Darlington

Wirral £11,599 North West £25,947 Warrington

Barnsley, Doncaster & Rotherham £13,050 Yorkshire & Humber £24,770 Leeds

South Nottinghamshire £13,120 East Midlands £26,748 Nottingham

Dudley £12,608 West Midlands £23,537 Solihull

Southend-on-Sea £15,406 East of England £24,155 Hertfordshire

Isle of WIght £14,023 South East £34,978 Berkshire

Cornwall and Isles of Scilly £13,036 South West £27,200 Swindon

Isle of Anglesey £10,364 Wales £21,239 Cardiff&Vale of Glamorgan

North of Northern Ireland £12,382 Northern Ireland £32,737 Belfast

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Note: Within Greater London, GVA ranges from £13,928 in Outer London (E&NE) to £127,127 in Inner London (West)

of social and economic outcomes, that it will exacerbate inequality between levelling the playing field for private sector places and constrain the ability of central investment, job creation and growth. government to redistribute accordingly. £13,928 Outer LondonIn practice,– there are stark inequalities Indeed, this might be the case and£127,127 more East & betweenNorthEast and within cities and their London than one witness at the Commission’sInner London – West surrounding areas. Centralisation has formal evidence hearings made this point.22 0self-evidently20,000 failed to tackle40,000 the issue60,000 80,000However,100,000 the extent to120,000 which centralised140,000 of uneven economic development and efforts to redistribute resource and public service outcomes. Often these minimise variation in local outcomes failures compound one another so that had been effective is not at all clear. For poor skills, health inequalities and low example, Alan Harding, Professor at the levels of private investment are concentrated Heseltine Institute in Liverpool, noted in particular pockets of our towns and cities. “many places that were poor 30 years ago Whilst not a panacea for tackling are still poor now” as cities policy – to inequality, the Commission argues that the extent it exists beyond the collection decentralisation would begin to enable of other decisions impacting at the metro greater coordination of public and private level – “hasn’t made a lot of difference”. activity and investment, leveraging other What, he asked, explains why those policies important supply-side measures. Given do not work better than they could or the UK’s current political economy should? The answer lies in the fact that city- and variation in outcomes and life regions are not uniform in their economic chances, we believe decentralisation is activity, social productivity or needs. a necessary (but not sufficient) first step. Centrally determined policy, lacking local A common argument levied against information and coordination, relies on the decentralisation and city devolution is mere hope that one size fits all.

22. City Growth Commission Public Evidence Hearings (2014), minutes from which are available here: www.citygrowthcommission.com/evidence-for-evidence/public-evidence-hearings/

21 With the right fiscal and financial government will still have a role in setting flexibilities, metros could be sufficient and administering taxes where there is a in scale, ambition and reach to raise and clear argument for national rates to avoid redistribute revenue within their own areas. undue complexity or perverse cross-border This is already starting to happen in some behaviours (eg income tax, corporation areas that are setting up business rate pools, tax or VAT). Similarly, local government spreading the gains from places within the finance will still need to be allocated from city-region that have a higher tax base and central coffers for places that do not have growth potential to those where the strain the administrative capacity or economic on public resources is greater. Over time, basis for financial, let alone fiscal, self- however, effective economic development sufficiency. This might sensibly be achieved should allow the proportion of revenue to by specific interventions in low-growth areas. be reinvested in productive forms of capital Inequality of outcomes within and between to increase, enabling the welcome rise – metros will persist to some degree, and we some argue – of “postcode choice”.23 might need to learn to accept this. However, City devolution does not remove the a coordinated approach at the scale of the need for redistribution entirely and the City city-region offers the best chance of tackling Growth Commission makes clear that central some of its causes and consequences.

DATA DRIVEN GROWTH AND PUBLIC At home, government has pushed the SERVICE REFORM role of transparency in public service reform and accountability (eg hospital Metros need to improve their capacity complaints and GP outcomes) and in to collect and analyse data about the driving economic growth (eg via the economy and public services, including Shareholder Executive in the Department the demand for and outcomes of such for Business, Innovation & Skills (BIS)). provision. Without robust, granular On the global stage, the Prime Minister data, metros are effectively planning made transparency one of three major and commissioning blind; aligned pillars of the UK’s Presidency of the G8 service budgets and an integrated in 2013 to expose tax evasion, money reform agenda hinge on the power laundering and corporate corruption. of timely, accurate information. However, paucity of data continues to In the last few years the UK has made be a problem in enabling national and considerable strides in the degree to local policymakers to design and evaluate which government departments and appropriate, cost-effective interventions public service agencies publish data in – whether in attempting to stimulate open, readily accessible formats.24 Upon economic growth or to tackle complex entering office, the current coalition set patterns of public service dependency. out an ambition to make the UK the most We recommend a radical improvement of transparent government in the world. It local administrative data sources through built on the previous government’s data a consortium of the ONS, government store, data.gov.uk, publishing thousands departments, businesses and academics. of datasets including departmental spend, live transport timetables and Some Combined Authorities and LEPs registered social investment. have started to improve the quantity and quality of data they use in decision

23. City Growth Commission Manchester Evidence Hearing (2014) 24. See UK government Open Data Strategies at www.data.gov.uk/open-data-strategies

22 making, working within the parameters Commercial confidentiality remains of data protection to share, link and an issue for many private sector analyse relevant data. However, there providers of public services, but remain some significant barriers to better there is a strong case for timely and use of data in driving intelligent strategic accurate data reporting – especially design and delivery, including: of outcomes over the short and longer term – to be mandatory for • Quantity – granular local level data contractors. The degree to which this is often limited. For example, while information is put in the public domain GVA data is available at local authority (as opposed to being kept securely level, many other economic indicators for use by local/central government) (eg innovation, labour productivity) might vary according to the sensitivity are only available at sub-regional or of the data in question. regional level. For metros to identify and understand patterns of service • Skills – metros often lack the capacity usage, commuter flows, pockets of and capability to select, match and new enterprise and skills shortages, analyse data across the city-region data needs to be collected and and its services. The Commission comparable at the relevant geography. argues for LEPs to take a leading role in providing this intelligence, combining • Quality – where local data is available their qualitative insight from their it is often out of date or unreliable. business networks with quantitative This is sometimes due to the data data designed to understand local no longer being collected, or being needs, opportunities and the barriers to aggregated at a different level of growth over the short and longer term. geography. Sometimes it is a result of the need to verify data which is not Metros need to consider how they are clean at source, delaying publication using data to: and preventing timely analysis. There • Understand local needs and where is a significant opportunity for use their economy is strongest. of real time information, especially as systems and working cultures • Identify the barriers to local growth improve to provide more accurate and how they might overcome these. data at the point of collection. • Detect patterns of public services • Access – not all public service usage, including who, how and when. providers are obliged to collect or • Align strategies for public service report data that might be useful reform and economic development. for strategic coordination and decision making at the metro level. • Evaluate the success of interventions.

Managing Change: How to deliver? and quality of their policymaking, risk City-regional devolution needs to be a management and economic modelling process through which the UK’s major capability. Even the most advanced metros metros can benefit from new powers and in this regard accept the need to develop flexibilities that match their ambition and internal capacity to fulfil the potential capability. It means many city-regions of city devolution. need to improve significantly, for example, It also means central government will the accountability of their governance have to make a conscious shift to realise

25. Communities and Local Government Committee, ‘Devolution in England: The case for local government’, (2014)

23 PROCESS OF INDEPENDENT • In accordance with the DCLG Select EVALUATION OF BIDS FOR DEVOLVED Committee report on fiscal devolution STATUS CITY-REGIONS (2014) 25 the chair of the independent Committee would be appointed The City Growth Commission has subject to a confirmation hearing recognised the potential of the Combined before the DCLG Select Committee Authority model, enabling places to collaborate along boundaries they • A standard set of criteria would be identify with and aligning relevant LEP devised by the Committee by March boundaries accordingly. For Devolved 2015, against which bids will be Status metros there will also need to be assessed in an open and transparent a form of governance that provides direct manner (aware that several measures, accountability. Given the history of recent such as quality of leadership will be attempts by this Government and its difficult to define and measure). predecessor to win support for mayors • Bids would be received following with few extra powers and for confined the general election on a rolling boundaries, we recognise that this an basis, the first from May 2015, with idea that has unhelpful baggage. ‘Metro the Committee empowered to call Mayors’ would be different because metro leaders and other relevant they would be new types of office, with stakeholders to give evidence new powers, across a whole Combined to assess eligibility against the Authority area. Metros may develop Committee’s criteria. convincing alternatives to directly elected mayors, but they would need to provide • The Committee would recommend an equally compelling form of direct to government within a specified time accountability. period whether individual metros (eg as Combined Authorities) should In recognising Devolved Status for proceed to negotiate the specifics metros, the key is ensuring the quality of their Devolved Status. and scale of governance is sufficient to manage the associated financial • A presumption in favour of devolved and policy risks. The Greater London powers would operate and Authority model, for example, could see government would be required to the development of sub-metro Combined explain to parliament when and why it Authorities, setting and delivering decided against the recommendation strategic priorities within their boundaries of the independent Committee. (and constituent local authorities) • Metros’ Devolved Status should while working in co-operation with the be reviewed at least every five years, overarching mayoral structure of the GLA. enabling metros to bid for, and Metros that demonstrate competence propose, new powers. and a track record of delivery should then While this timetable is tight, it ensures be awarded additional administrative, ‘Devo Met’ continues to happen at financial and fiscal powers, subject to pace, building on the momentum of the following process: the City Deals, Growth Deals and • An independent Devolution Committee anticipated progress in the 2014 should be established by January Autumn Statement. Furthermore, it 2015 to evaluate metro applications would allow any financial and/or fiscal for Devolved Status, taking the settlement to be a central part of the process outside of the immediate 2015 Comprehensive Spending Review. political and Whitehall arena.

24 its own rhetoric. The Local Growth Deals –– Constitutional change – due announced in July 2014 were initially consideration needs to be given intended to enable single pot financing to the role of parliamentary of strategic economic priorities agreed accountability in local public by LEPs and local authorities. By the services design and delivery as well time they had been through the Whitehall as city-regional economic growth. machine, they amounted to little more than How might City Regional Public central government approval of finance Accounts Committees, for example, and delivery of specific local projects that be integrated within the evolving happened to align with ministerial priorities. current system? Such centralisation veiled as localism needs –– Tendency to centralise – what to stop. The question remains, and we incentives or structures need to turn to others to consider this, how does be put in place to minimise the Whitehall need to reform to support the risk of falling back into the default process of decentralisation actively? Over mode of ‘Whitehall knows best’? the long term, what will decentralisation • City-level government: and city devolution mean for the Local –– Corporate capacity – how can Finance Settlement and Barnett formula metros (and, where appropriate, (the mechanisms for determining how central LEPs) enhance their capacity for government expenditure is distributed)? governance, policymaking, long To compete on the global stage, UK term strategic planning, risk metros need sufficient decision-making management, data collection and powers and financial flexibilities to become analysis and stakeholder engagement financially self-sustainable. Delivering (including national government)? this change will pose serious questions for –– Collaboration – how can metros central and city-level governments, especially improve the quality and degree of for their working cultures, capacity and collaboration across administration accountability mechanisms: boundaries, enabling robust • Central government, including governance structures that are national politicians, political parties resilient over time and under pressure? and Whitehall officials: –– Appetite – how can metros –– Culture change – just as many become empowered to maximise businesses are flattening their the powers and flexibilities they organisational structures, already have, and to devise and governments are also realising deliver a bold ambition for the new the power of convening a wider set era of decentralised government? of public, private and civil society partners, moving beyond direct command and control of resources. How can this shift in style of power be embedded in the structure of central government and its departments? Over the longer term, does decentralisation erase the need for large domestic policy spending departments?

25 3. THE ROAD TO DECENTRALISATION: SECURING GREATER AUTONOMY

To be recognised as having Devolved executive into their model of strong, Status metros will need to demonstrate they stable governance. are able to take on the risks associated with devolution. The diagram below illustrates Key questions for evaluation a framework by which metros can be • Has the metro an effective geography, assessed on their suitability for devolution. defined by its wider functional It demonstrates that a combination economic area? of capabilities and economic strength • Does the metro have a strong track is needed to ensure cities have the record of collaboration between its administrative capacity to mitigate and constituent Local Authorities? manage downside risk, as well as maximise • Does the metro have a robust system economic opportunities. As metros are of governance, enabling effective able to generate and increasingly rely upon decision-making and accountable their own revenues, so too must they be leadership and management? able to cope with volatility of revenue from • Does the Metro have a rigorous approach devolved taxes over the business cycle. to risk management and has it clearly demonstrated its risk capability? Capability in Governance and • Has the metro demonstrated capacity a proven track record to work with other metros and central A robust, accountable model of governance government to devise and deliver is needed for effective collaboration between regional or national projects? local authorities to ensure decisions can be taken in the best interest of the city- Growth potential and economic success region. The Combined Authority model In order to weather the volatility and demonstrates great potential in delivering downside risks that come with devolution, this strong and stable structure, enabling metros will need to demonstrate their places to cooperate along boundaries economic success as well as their future they identify with and align relevant growth potential. Growth promotion in a LEP boundaries accordingly. city means putting strategic plans in place However, there might be other to support, promote and encourage the resilient forms of governance that metros creation of innovative and successful clusters choose to adopt, with varying degrees across sectors, connecting people with high of formality and flexibility. For example, quality transport infrastructure, enabling metro governments may also consider information flows and attracting talent the applicability of introducing a directly from across the country and globally. accountable ‘Metro Mayor’ or chief

26 Key questions for evaluation economy, including its current strengths • Does the metro have a clear vision for and weaknesses, and the potential its economy and public service reform challenges and opportunities for the over the long term, and a feasible strategic medium to longer term? economic plan to deliver this ambition? • Does the metro have an effective, –– Eg has the metro considered co-terminous Local Enterprise how to nurture its innovative, Partnership with robust, collaborative enterprising economy, and attract business leadership? and retain high skilled talent? • Does the metro have an established –– Eg has the metro (plans for) an integrated economic development delivery capacity? transport authority designed to improve • Does the metro exhibit signs of economic connectivity within the city-region? potential, including established and • Does the metro have a firm, data-based emerging areas of growth success? understanding of the structure of its

DEVOLVED STATUS VENN DIAGRAM

capability in growth governance and potential a proven track and success record

SCALING INNOVATION: LEARNING enterprise – ensuring local firms FROM SMALLER CITIES capitalise upon supply-side advantages such as local graduates to build growth Top down inward investment and major from the bottom up. By working with infrastructure projects, can only go so major institutions, especially anchor far in stimulating growth. For growth to institutions rooted in place, metros can be sustainable within a place, metros use devolved powers to help foster need to nurture local innovation and clusters of growth industries, in particular

27

in new knowledge-intensive sectors. This department, learning the lessons of approach is relevant to large metros and partnership from long-established smaller cities. As the Commission argued industrial clusters; the University of in its UniverCities report, the distribution Bristol has over many years made of world-class universities across UK joint staff appointments with Toshiba, regional cities is a key asset to build upon speeding up technology transfer and in economic development strategy. supporting a key growth industry. Cambridge is an example of innovation Small and medium sized cities are also led, bottom up growth within a smaller driving much of the growth of the UK’s city. Despite the constraints of limited advanced manufacturing base, such as land supply and infrastructure capacity, Coventry, Derby and Sunderland. Cambridge is growing employment Stemming from research and teaching through knowledge-based local firms excellence within universities and the that feed off of its world-leading health system, the UK is home to an university. Over the last 20 years the city internationally competitive offer in life has seen particular rapid growth in high- sciences. Consolidating its advantage technology companies. The number of of scale and connectivity, the Mayor SME companies now associated with the of London recently invested alongside University exceeds 1,000 with over 1,500 the Higher Education Funding Council firms across the Cambridge Tech Cluster, for England in the MedCity initiative, also known as ‘Silicon Fen’. spanning Oxford, Cambridge and London. “We have the most extraordinary MedCity is designed to bring together the ecosystem here between the academics, regional offer across business activities entrepreneurs and angels investors. and public sector investment. Supporting But it’s a bottom-up ecosystem that such cross-fertilisation is fundamental has developed over time and keeps to a successful innovation ecosystem. feeding on itself.” 26 The Chancellor recently endorsed Vice Chancellor Cambridge University, the development of a Crick Institute Professor Leszek Borysiewicz, 2014 for the North, building on expertise at universities and other institutions in Other cities have seen impressive northern metros. partnerships of public institutions and private investment. Hull School of Art and The Welsh Government has also Design has fuelled the growth of creative developed an Institute of Life Sciences in industries in the city, now evident in £15m conjunction with Swansea University, and of private investment in the Centre for collaboration between all these networks Digital Industries – a new workspace at – involving cities large and small, private the heart of the redeveloped waterfront. and public investment – will enhance the The University of Lincoln is working with UK’s offer in the increasingly globally Siemens in growing its new engineering competitive life science market.

26. M Pagano, “Why Cambridge is at the heart of Britain’s economic recovery”, (2014)

28 4. THE ROAD TO DECENTRALISATION: MEASURING PROGRESS

The RSA City Growth Commission is an can be taken in the short run, particularly independent inquiry, set up to understand in setting up the processes through which how we can enable our cities to thrive for the decentralisation could be determined and sake of the UK economy as a whole. We have the enabling legislative programme put in proposed a number of supply-side measures place. The Commission argues that the designed to improve the UK’s system of cities timetable for ‘Devo Met’ should run in as well as devolving greater financial flexibility parallel to that of Scotland’s devo max, and policy making control to metros. to realign the UK’s economic, political and In presenting here our final conclusions constitutional settlement with city leadership and recommendations, the Commission and accountability at its heart. draws its current programme to a close. The City Growth Commission intends to Throughout the course of our inquiry evaluate these short-term measures in 12- we have seen a significant political shift months’ time, gathering the Commissioners towards the role of city-regions in boosting again to review the extent to which: opportunities for jobs and economic growth. • Pre-election commitments emphasised However, considerably more work needs to city-led growth and accountability. be done to push the UK’s political economy • The departmental formation of the new firmly within a new, decentralised paradigm. Government reflects a commitment to The might of our cities has often been Devo Met. underplayed in the economic narrative of the • The first parliamentary session made United Kingdom, with the concept of urban provision for legislative change (where growth associated more with urban sprawl appropriate) in line with the planned and unwanted development. However, many devo max timetable. of our cities and their hinterlands have a • The Spending Review includes place strong industrial heritage of which they can be based funding settlements enabling metro proud; the challenge is to ensure these places based service integration and public have the capacity to fulfil their economic service reform. potential in the coming decades – whether • The processes for determining which city- through connectivity with London and other regions are recommended for taking on global cities (particularly in the emerging formal additional powers and flexibilities. markets) or by fostering their innovative • The specific financial, fiscal and policy- economy in relatively new sectors such as making powers devolved to those digital technologies and data analytics. city-regions granted Devolved Status Cities are not starting from scratch, but and how these relate to new and existing building this capacity for city-led decision devolution arrangements in Scotland, making; accountability and growth will take Wales, Northern Ireland and London. time. In turn, evaluating success will be a long-term venture. There are steps that

29 Key milestones for 2015 (with expected 2. Civil service and Parliamentary reform – timeframes in brackets) include: draft To what extent has central government, legislation for Devo Met (January), in conjunction with major metro leaders, publication of political manifestos made progress on Whitehall reform (February/March), General Election and (eg transitioning towards a single local formation of the next Government (May and national civil service)? 2015), first Budget (May/June), Queen’s –– How have the Departments of State speech (June) and the Comprehensive been restructured or incentivised to Spending Review (July). We would expect ensure the process of devolution is to see cumulative, step-by-step progress embedded within central government towards the establishment of devolved and cannot revert to the default mode Metro status at each of these milestones. of centralisation? The RSA will continue to build support –– Has the impact on parliamentary for the Commission’s recommendations accountability been duly considered across Whitehall, Westminster and the (eg with Public Accounts Committees metros, and the Centre for Cities plans for Devolved Status metros or groups to develop a White Paper on how these can of city-regions?) be implemented. 3. Partnerships – To what extent are metros building effective partnerships within Five Progress Tests their boundaries, fostering collaboration Over the longer term, we look to other and risk sharing amongst their constituent organisations to evaluate the UK’s journey local authorities? towards greater decentralisation. These –– Are metros starting to work together organisations include the RSA and the more openly (eg to deliver pan-metro Centre for Cities, as well as academic projects such as Midlands Connect research institutes, such as the What Works and One North)? Centre for Local Economic Growth, London –– Are metros improving their capacity School of Economics or the Centre for Urban to work effectively with central Regeneration Studies. Each of these will government, driving a more mature bring their own angle to the question, but we relationship with national government would recommend any criteria for evaluation to create a thriving system of cities? include five main aspects: –– Are metros working more closely with 1. Funding – What measures are in place public services and providers, as well as in the short to medium term to enable business, universities and communities? Devolved Status metros the ability to pool How are accountability mechanisms their budgets from individual spending adapting to support this change? departments, EU funds and other sources 4. Speed and direction of travel – Are of revenue (including private investment)? the processes of decentralisation and –– To what extent has central devolution responding to the pace of the Government, in conjunction with most advanced metros and supporting major metro leaders (in England and others to follow suit in time? the Devolved Administrations), made –– Are the legislative requirements making strides in reconsidering the Barnett progress, in line with the devo max formula and Local Government timetable (or sooner, as appropriate)? Finance settlement process? –– What prospects are emerging for the –– Over the longer term, what proposals next stages of city devolution? are being considered regarding the ratio 5. Cities’ capacity – Are metros continuing between city-regional and national to drive the agenda actively, building their revenue generation and retention? own capacity to take on greater risks and ensure their governance structures are fit for purpose?

30 –– Are metros learning from one another as they each follow their own journeys towards greater autonomy? –– Are metros shaping their own economic destiny, increasingly empowered to challenge central government and their own local politics to secure a more sustainable future for their communities?

31 RECOMMENDATIONS

In the wake of the Scottish independence central government must relinquish referendum and with an urgent timetable control as soon as is practical. For for devo max in train, now is the time further detail, please see the Commission’s to consider how ‘Devo Met’ and a range previous reports available on our website.27 of bold, supply-side measures can boost UK growth over the long term and put 1. Significant shift – from the centre to our economy on a more sustainable, metros – in the design, delivery and inclusive footing. decision-making of policy and finance, The City Growth Commission argues enabling metro leaders to: that city-regions or ‘metros’ within all • Coordinate resources across their nations of the UK represent the appropriate city-region and make strategic policy scale for making more localised, strategic and finance decisions via place-based decisions to achieve public service budgeting and investment strategy. reform and long-term economic growth. • Make more informed, locally By empowering metro leaders to plan, tailored and responsive decisions commission and deliver in the best interest based on evaluation of local data of their city centres and hinterlands, as and evidence, provided by the well as to work with one another and LEPs, co-terminus at metro level. central government, we will maximise • Work with other metros to develop the scale of economic opportunity. effective ways of integrating public The City Growth Commission does service reform and economic not argue for a top-down blanket policy development across a wider range of devolution, but a process through of policy areas (some of which fall which the UK’s major metros can benefit outside Combined Authority or from new powers and flexibilities that local authority remit). For example, match their capability and ambition. City- how to connect health and social regional devolution hinges upon effective care reform plans into their wider governance and accountability structures, economic and social productivity visionary leadership and the economic strategies, by bringing together relevant growth potential to ride the difficult organisations (eg NHS England, Public storms of decentralisation and devolution. Health England, Health and Wellbeing City-region devolution is therefore not Boards, Clinical Commissioning for everyone – or at least not immediately. Groups) to facilitate delivery of shared But it might be available in varying forms outcomes and strategic investment. for all of England in the longer-term. This will enable metros to generate There is no reason why county-based efficiencies and drive economic variants of metro devolution could not occur. growth across the city-region. Our recommendations do not immediately apply to all metro areas as 2. Significant shift in fiscal powers – from some are not yet ready to deal with those the centre to metros – by ensuring leading challenges or responsibilities. But some metros have greater flexibility over their cities do already exhibit these qualities spending and borrowing arrangements. and are eager to take the opportunity While keeping in line with the Prudential to power their economic futures with Code and in-year budgeting, metros that greater autonomy. For these cities, have demonstrated their capability to take

27. www.citygrowthcommission.com

32 on commensurate risk and responsibilities within Whitehall. Over the long-term, should have the freedom to explore this principle could then be applied to alternative borrowing options beyond other areas of national government the Public Works Loan Board. In addition, policy, where metro leaders assert greater these metros should be empowered via: influence over national policy decisions, • Multi-year finance settlements of alongside governing their own metros. between five and 10 years (depending whether resource or capital). 4. Supply side measures to enhance skills and • The ability to retain a proportion connectivity by redirecting welfare spend of the tax proceeds of growth to more preventative and productive through outcomes-focused finance outcomes. City-regional budgeting and models (eg Tax Incremental Financing powers to reform local public services (TIF) or Earn Back-style models, are the flip side of the economic coin. where appropriate). • Investment appraisal – the Green Book • Freedom to spend grants without advocates use of its Cost Benefit ringfencing, enabling city-regional Analysis (CBA) tool for demonstrating pooling of budgets. the economic and financial case for • Greater flexibility of capital reserves investment alongside other information and more borrowing flexibility, and evidence as part of the five including ability for the most devolved business case model. However, its metros to borrow from alternative application routinely underestimates sources (eg open markets. the relevant spatial impact (eg land • The freedom for the most devolved value uplift). The Commission calls metros to set and fully retain a suite for appraisal methodology and its of taxes (at the very least the whole application by government departments of Business Rates, Council Tax, though to take account of the importance of preferably more, in line with the CLG place. More radically, government select committee and London Finance should also consider how it can Commission proposals), offsetting account more readily – and reward at these revenues in a net neutral grant scale – the impact of local growth and settlement with HM Treasury. investment projects in its allocation of capital and resource income. Note we recommend that the LEPs in For example, while steps are being each metro leverage their role as business taken in government to improve engagers to work with Business Improvement appraisal so that it is viewed within Districts and other relevant organisations a wider local and national context, to aggregate the business voice, testing greater consideration should be given proposals before they are put into practice. to the sequencing and complementarity of other public and private projects 3. Metro representation in national decision (eg planning transport infrastructure making via special attendance or investment alongside upgrades to the even a permanent seat at cabinet and telecoms network). sub-committee meetings. National • Digital connectivity – The Commission infrastructure decisions, for example, are repeatedly heard from organisations inherently a matter of city importance – and local authorities about the enabling physical and digital connectivity constraints on the supply of high- between metros across the country. speed broadband. We therefore As such, political and officer-level call for government to launch a representation from some of the largest comprehensive review on how our metros would enable decision making current and future needs for digital as a system of cities rather than a infrastructure can be met. We should centrally driven prioritisation exercise also be ambitious about what we

33 are aiming to achieve – the UK has complementary poles of growth a burgeoning digital industry and other in relation to London and the sectors are increasingly dependent South East. Over the medium to on access to fast, reliable connections. longer term, connectivity between There is no reason why we should not these and other major metros (such seek to emulate Singapore’s 1Gb/s as Bristol and Cardiff, Glasgow broadband speeds in the near future, and Edinburgh) is paramount, the minimum needed to drive additional enabling the UK economy inward investment to our cities. to thrive as a system of cities. To date, large numbers of small • Oyster card for the North – we advocate businesses in cities and town an integrated payment system in centres have been excluded from Connected Cities which can enable ease the commercial rollout of fibre of travel across the northern region, access services (an issue recently helping create a super-connected acknowledged by Ofcom.28 While North. This could be done through the several metros have sought to introduction of a Northern Oyster, a address this market failure with contactless payment system or other public investment, strict EU State integrated technology to enable users Aid rules have proven prohibitive. to easily switch between modes of Some tough decisions are needed to transport across the region. complete the current transformation • Long term metro infrastructure plans of our digital infrastructure. – to enable a connected system of These decisions need to be made cities with metros at the heart, UK in partnership with the regulator, metros will need to create long-term incumbent suppliers, and wider strategic infrastructure plans, such as industry and public services in order London has done with its long-term to deliver a network capable of being London Infrastructure Plan 2050. best in Europe. For example, as These plans would enable metros with mobile users increasingly demand Devolved Status to have the power more capacity and higher speeds, the and long-term vision to invest in the UK needs to ensure network operators infrastructure within their city that are able to access the level of fixed creates a prosperous economic hub connectivity required; investment but also integrates with other metros’ in a fibre backhaul infrastructure plans and national plans. would help support wider –– Planning – a critical enabler of 4G and future 5G deployment. growth, planning can shape • Transport – without efficient transport markets considerably. A careful between and within metros, we hold balance is needed between creating back long-term, sustainable economic certainty over the long-term and growth. In the UK there are certain rail allowing sufficient flexibility to journeys that take longer to complete let markets grow and innovation now than they did during the Victorian to flourish. To support more era, and connectivity between northern efficient city systems, planning cities is a particular barrier to realising responsibility needs to be set at the agglomeration benefits of major the right scale to ensure strategic urban areas just miles apart. (and sometimes difficult) decisions –– Accelerated connectivity between are taken in line with the promotion metros in the North and Midlands of economic growth. to create larger economic The Commission argues metros powerhouses, to encourage should take on planning authority

28. Ofcom, Availability of communications services in UK cities: Summary report (2014)

34 powers, aggregating up decision- sufficient skills) or over-skilling (where making (eg to Combined Authorities) staff are not able to utilise their skills to complement strategic investment fully). Other issues compound these across the city-region. Metros labour market issues, including the should also be given power to inflexibilities of our housing markets, convene relevant agencies so that availability and affordability of in planning for new transport, childcare, transport and immigration for example, decisions are policy. The Commission calls for across all modes and linked to skills funding to be directed at city- relevant development schemes. regional level, enabling more strategic • Housing – the supply of housing in coordination with wider social and response to demand represents a economic policy. In particular: critical aspect of the infrastructure –– Metros would administer Adult needed to support city growth. Lack Skills Budgets with reference to of appropriate housing can severely evidence-based skills strategies constrain labour market mobility and and other advice prepared by the can distort business investment. Metros LEP. Ultimately, devolution of skills face different kinds of housing market funding should extend to 14-to- constraints. While London and certain 19-year-old provision so there are other city-regions (eg Bristol) seamless employment and skills encounter severe shortages, other pathways for young people. metros fail to supply the right mix –– LEP advice would be based of housing type and tenure, inhibiting on consultation with local diversity of economic activity. In many stakeholders, with greater cases, timely delivery of transport focus on timely, accurate and and public service infrastructure with metro-level outcomes data the development of new housing can to inform commissioning and help to unlock development. Building trigger reviews of contracts new housing is the only way we can for provision where necessary. respond to the changing patterns –– Metros could apply to the Low of economic geography. Pay Commission to review and The Commission argues for recommend to Parliament that coordination at the metro level, a Metro Minimum Wage (MMW) promoting a place-based approach be introduced. to growth. In particular, metros –– Lift the cap on Tier 2 skilled should be free to reclassify poor quality migration and license metros to Green Belt and promote Green Belt become sponsors on behalf of swaps, where applicable, engaging SMEs, reducing the administrative with local people to create buy-in costs associated with recruiting for more flexible arrangements international talent. for enhancing economic, social • Science and Innovation – University and environmental value. education and research are amongst • Skills – UK metros are increasingly the UK’s largest and fastest growing competing with cities globally to export industries,29 and world-class attract and retain investment and universities well distributed among high-skilled talent. Currently many the largest metros, across the country. metro labour markets experience Universities have played a key role in skills mismatch, where employers face transitioning the UK to a knowledge skills shortages and unfilled vacancies, economy through training graduates skills gaps (where existing staff lack in advanced skills, and through research

29. Business Innovation and Skills, International Education: Global Growth and Prosperity (2013)

35 that leads to industrial innovation. –– Graduate Clearing: a centralised In leading the UK economy to succeed system which pools rejected in global competition for knowledge- graduate recruitment applications intensive industries, universities and recycles them to local firms are a vital competitive advantage with vacancies. for metro economies. –– Golden Handcuffs schemes: Employers should be helped to The Commission’s UniverCities report pool resources to enable golden made a series of recommendations handcuffs 30 arrangements that designed to ensure that as well as being span industries and sectors, globally competitive, the contribution rewarding medium-term (three of universities to metro growth is to five year) commitment from harnessed. Recommendations include: graduates to working locally. • New freedoms and flexibilities for • Build networks through cross- metros to establish Metro Investment fertilisation between people and Funds for Higher Education (MIFHE) institutions. HEIs should co-invest from their devolved skills budgets with BIDs and industry partners to provide additional funds for to support start-up incubation research and teaching within their and acceleration space located in metro area that impacts on local innovative urban districts, invest growth. Adopting a metro approach a fraction of their endowment, to funding would encourage reserves, or pension funds, in such collaboration between HEIs and the schemes, and link students and MIFHE could aggregate small-scale graduates with mentorship among investments from philanthropic staff, alumni and business partners. funds or businesses. In the long • Expand Graduate Entrepreneur Visas term, the MIFHE could channel by allowing HEIs or local UKTI funding to widen participation outposts in the UK’s Core Cities to among metro residents. pilot a flexible form of the visa which • New initiatives led by metros should would extend the eligible time period provide local graduates every of students who have left the UK opportunity to find employment to apply from one year to five. in the metro labour market. • Incentivise entrepreneurialism These might include: at university through expanding –– ReFreshers Week: a concentrated flexible course provision (through campaign with universities to sandwich years and modular help focus graduates on extending courses and investing in seed their roots in their place of study investment programmes such in the key weeks and months as Entrepreneur First. before and after graduation.

30. Large employers, especially in the public sector, often use ‘golden handcuffs’ arrangements to secure staff loyalty among graduates. Such arrangements also provide confidence for employers to invest in staff training. However, SMEs struggle to offer such terms to address skills shortages. The North East LEP had over 600 hard-to-fill vacancies in managerial and professional roles in November 2013, but these are dispersed among small firms

36 HIGH-SKILLED IMMIGRATION per person will have fallen by 11.0 AND VISAS percent and 2.7 percent respectively. To keep the government budget balanced A national approach to immigration in this scenario, the labour income tax is failing cities across the UK in rate will have to be increased by 2.2 need of highly-skilled talent. SMEs percentage points, which will drive struggle to meet their recruitment down the average household income.” needs through immigration because NIESR (2013) 33 the system is costly and complex.31 Larger corporates and multinationals The City Growth Commission advocates have the resource to devote to reforming national immigration policies navigating the system. in favour of taking a metro-led approach which will widen access to talent: The UK has seen an increase in demand for Tier 2 (general) entry, • Lift the cap on Tier 2 skilled migration exceeding – for the first time since to signal that the UK is keen to the cap was introduced in 2011 – the attract the brightest and best by monthly allocation of 1,725 in June, limiting the barriers to doing so. July and August 2014.32 If this trend • License metros to become trusted of high demand is maintained while sponsors on behalf of SMEs, the economy continues to grow, all reducing the administrative businesses, but SMEs in particular, costs associated with recruiting will find it increasingly difficult to international talent. Metros would address skills shortages and gaps. issue two-year visas to candidates If the UK persists in restricting with firm job offers from SMEs that immigration in order to meet its have shown they cannot recruit (growth inhibiting) net migration target, domestically. At the end of the there is a risk that households in all two-year mark, SMEs should have metros will suffer in the long-term as scaled their capacity and resource GDP and GDP per person falls and to a point where they are able to average incomes are squeezed. become licensed sponsors and “If net migration is halved then by can assume responsibility for 2060 the levels of both GDP and GDP their international talent.

31. EEF and London Chamber of Commerce and Industry (LCCI) responses to the Migration Advisory Committee’s calls for evidence were explicit that SMEs (broadly, companies with fewer than 250 employees) found the complexity of the immigration system to be a barrier to recruitment of non-EEA nationals 32. Tier 2 migrants are non-EEA migrants with a job offer and sponsorship who meet the appropriate skill-level and salary criteria. The cap of 20,700 excludes intra-company transfer (ICT) visas, which make up a significant proportion of highly skilled migration. 55 per cent of sponsors who can issue an ICT visa are based in London 33. Lisenkova K, Sanchez-Martinez M, and Mérette M (2013) The Long-term Economic Impacts of Reducing Migration: The Case of the UK Migration Policy, London: NIESR

37 re gi o F w e L R AND G P c g L m F r e o o r o a x low s o gi o a e R n r RA DU A N W v d

t m c d e e e e o e u a OM O o v n a s r S W l a k e n p n e

t h

f l t t o r , o s e

e s o

d y a n

h a u Fr e U r s t W s

a

g o t h i ig n

t h u a o s n l

e

r w e av M r T ad u

st n e e t

W g f

and i h m gi o

ILIS A d

c d T e g

l a o t a w a st a

TE

IN G h pi t n t h ra d n m n t r e

y

i d s e i f a t

a t r t h s h o t o i i Lo ndo n l ? e r R m a h

n

uates un i t s TIO N r ETENTIO N t o

h a er s o s v n t

e s d b r

e i s a n betwee n f i g o t

t i e W r e h e S n s e c

c

a o i N t r i t l ee k o n

e o a p r

d n s h t h lac e d

e

a c E S g Lo n N o l f a r o p u t a st Y u u m e d

d o r f o u l r b c o r o d E k s a

e e f n g a t c :

r

e s f r

h s t H r o o u

u i t ad u t E f r r

o M

s u

e n 2 e S

S U i 0

m d A d

o g K 0 a l

p u y a / E 9

r a

r l

t h n

a a c D L o e g i t d s t y gi o n

o d r i E s m a o H

a o n u d t e n E n st f u h

ce n a n s E a . t

e t f n

t b o e e g

y r s k l

s

a

e 2 t f e n r

r m 0 o o d a y 1 p m 2 n t l o e

,

U p y d K me n e r

r

2 e 0 gi o t

0 b 9 y

n

Lo n s 2

0 t o 1 d 2 o . n 8 c a ‘ E scheme to reward loyalty Local business investment t r Me tr o G g o ej e a om m n N m o a p

p g lo cal d g t r a p l p h e er ra d r p d r t

c p a l e a i j s i o e l en te d d c o d o r e u n c s e a u 4 i u i v y nt e pp l t w t

t a e e s a a firms e i me n h o

t i r d r t hou l g d r e e y e n a d s uat e e y ra du at e s n .

s c d t h h

c d w f o a r u

de v o i u i t f n h m f l d s s

vaca n ’ r ,

e

g b e a r C l e r e cr u r op a r w

a h d le ar i a n e a ua t itm en t ci e r g l

d c p eme n i en trali s e e n s d s g .

t t m

o o a n t

pp licat ions e p w s 1 di u g

o e o wh i o d r k l m

sy s r i c n e - h g t s e

t

ou r s e l r o p m m c a a c

a

n nd ( w id e e t l m

l hr ee e i i y s h In a recent survey of HEIs, just n co n a . r

n i du s t d ch e t o e i cyc les fi

o

en a a e t pool s m o t

g d n s r r

i

i i t c fi a g e h b

d n v d s a l ua t i e e t e , fi t

he m v

s t c y h e e a e e e lo pme n n

c i r a r t et e t

r o co n H CV ) r E n s I

t t

i

a r 7 o t

i

s b n t h

u a . r t

o w i o

u h n g o

h t o l e

38 ANNEX 1

The City Growth Commission’s first in the UK (as of the 2011 Census). The 15 paper, Metro Growth; the UK’s economic include ONS-defined sub-divisions (such opportunity set out our bespoke definition as those which make up the West Midlands of metro areas. Using 2011 Census data, the built-up area) and, in several cases, combine Commission identified the largest 15 metros, neighbouring built-up areas that the ONS each with a population above 500,000.34 defines separately (eg Cardiff and Newport). These new definitions enable us to analyse In such cases, settlement gaps exceed the metros in terms of their functional economic ONS 200m threshold but our analysis of areas and travel to work patterns. other data such as commuter flows shows The Commission calculates just under high levels of economic co-dependence. 30 million people live in the 15 largest metros

POPULATION, CENSUS 2011

London Metro 12,578,981 Greater Manchester Metro 2,894,240 West Midlands Metro 2,800,248

West Yorkshire 1,777,934

Glasgow Metro 1,601,154

Merseyside Metro 1,189,386

Tyne and Wear Metro 1,110,306

South Yorkshire Metro 1,066,790

East Midlands Metro 1,000,445 South Hampshire Metro 855,569 Edinburgh Metro 853,253 Cardiff Capital Region Metro 754,131 Bristol Metro 731,776 Belfast Metro 579,554 Leicester Metro 508,916

Calculated using ONS defined built-up areas (eg Southampton and Portsmouth combine to form South Hampshire Metro). See Annex for full definitions.

34. Based on ONS-defined ‘built-up areas’, defined as developed land within a minimum area of 20 hectares; settlements within 200 metres of each other are considered contiguous. Our definition combines adjacent built-up areas with high levels of economic interdependence, as detailed in the annex

39 METRO COMPOSITION OF METRO AREA

London Metro London built-up area, plus following built up areas over 100,000: Luton, High Wycombe, Crawley, Chelmsford, Southend, the Medway Towns, Slough, Farnborough/ Aldershot, Basildon and Reading Greater Manchester Manchester, Wigan and Warrington built-up areas; includes Metro Glossop and Wilmslow West Midlands Metro Birmingham, Wolverhampton, West Bromwich, Dudley, Walsall, Solihull, Coventry, Bedworth built-up areas West Yorkshire Leeds, Bradford, Wakefield, Huddersfield, Dewsbury, Keighley, Halifax built-up areas Glasgow Metro Agglomeration

Merseyside Metro Liverpool and Birkenhead built-up areas. Comprises Liverpool, Bootle, Litherland, Crosby, Prescot, St. Helens, Ashton-in-Makerfield, Birkenhead, Wallasey, Ellesmere Port, Bebington Tyne and Wear Metro Tyneside and Sunderland built-up areas. Comprises Newcastle upon Tyne, Gateshead, South Shields, Tynemouth, Wallsend, Whitley Bay, Jarrow, Sunderland, Washington, Chester-Le-Street, Hetton-le-Hole, Houghton-le-Spring South Yorkshire Metro Sheffield, Rotherham, Rawmarsh, Barnsley/Dearne Valley and Doncaster urban areas: (Barnsley, Wath upon Dearne, Wombwell, Hoyland, Doncaster, Bentley, Armthorpe, Sprotbrough) East Midlands Metro Nottingham and Derby built-up areas: Nottingham, Beeston, Carlton, West Bridgford, Ilkeston, Hucknall, Derby, Borrowash, Duffield South Hampshire Metro Southampton and Portsmouth built up areas: includes Eastleigh, Gosport, Fareham, Havant, Horndean, Locks Heath/Bursledon/Whiteley and Hedge End/Botley built up areas Edinburgh Metro Edinburgh, Dunfermline and Livingston built-up areas

Cardiff Capital Region Cardiff and Newport built up areas Metro Bristol Metro Bristol, Filton, Pill, Frampton Cotterell, Winterbourne, Bath, Keynsham, Saltford built-up areas Belfast Metro Built-up area

Leicester Metro Leicester, Syston, Whetstone, Birstall, Narborough, Enderby built-up areas

40 ANNEX 2

Real 6,120 (2012 5,533 8,590 prices) 34 ,113 12,510 11, 25 0 11, 3 32 12,571 12,525 26,010 15,348 16,206 29,970 16,883 284,941 503,906 (modelled) Change 2013–30 Change 11, 6 4 6 32,129 57,043 21,409 21,566 10,529 16,348 30,842 23,923 64,920 23,837 49,500 29,209 23,807 Nominal 526,684 943,393

Real (2012 33,111 16,177 90,179 14,626 40,574 42,841 29,739 22,709 79,237 29,957 68,758 prices) 33,231 44,630 33,069 708,525 1,287,363 2030 growth) 19,784 (based on modellrd on (based 30,718 57,950 21,882 44,732 44,951 40,227 40,522 44,788 93,007 60,369 54,883 107,182

957,793 121,982 Nominal 1,740,769

Real 7,356 1,523 7,506 5,461 (2012 9,385 6,643 11, 315 prices) 11,478 13,746 14,901 12,973 27,202 19,000 10,968 284,941 444,399 (trend) Change 2013–30 Change 5,182 29,106 40,168 55,724 16,272 12,343 25,461 13,697 24,254 19,648 22,252 14,906 32,392 26,049 Nominal 864,139 526,684

Real (2012 61,748 60,741 10,616 16,701 31,975 21,625 41,536 38,715 38,199 23,951 prices) 25,981 29,945 34,332 83,268 708,525 1,227,856 2030 growth) (based on trend 51,723 46,413 32,515 56,214 14,437 22,579 29,276 40,573 83,676 52,494 35,227 82,530 43,280 957,793 112,785 Nominal 1,661,515

Real (2012 9,093 14 ,119 prices) 20,747 42,748 21,027 18,625 10,058 18,489 25,225 49,263 26,635 20,660 20,560 56,066 423,584 783,457 2013 (estimate) 9,255 27,108 18,818 50,138 25,319 21,027 20,951 14,369 10,236 18,956 28,240 20,636 56,062 43,508 Nominal 431,109 797,376

1997 3.71% 3.71% 4.21% –2012 4.81% 4.76% 4.79% 3.97% 3.27% 2.65% 4.34% 4.28% 3.92% 4.09% 2.98% 4.36% 4.38% annual annual growth 9,127 2012 14,171 20,737 56,274 25,319 27,850 26,734 10,095 18,694 18,558 42,907 20,662 20,636 49,446 425,159 786,367 6,165 7,563 1997 5,023 13,647 16,116 11,454 11,505 14,047 10,242 31,853 10,820 10,968 30,847 24,094

414,553 210,209 GREATER MANCHESTER BRISTOL TYNE & WEAR MERSEYSIDE CARDIFF EDINBURGH GLASGOW SOUTH YORKS SOUTH SOUTH HAMPSHIRE LEICESTER WEST MIDLANDS TOTAL METRO BELFAST WEST YORKS EAST MIDLANDS LONDON

Source: New Economy, for the City Growth Commission (October 2014) 41 REFERENCES

Barber, B. (2013) ‘If Mayors Ruled the World; Communities and Local Government Committee Dysfunctional Nations, Rising Cities’, Yale (2014) ‘Devolution in England: The case for University Press, New Haven & London local government’, First report of Session 2014-15, 30 June 2014. Available at www. Business Innovation and Skills (2013) publications.parliament.uk/pa/cm201415/ International Education: Global Growth cmselect/cmcomloc/503/503.pdf and Prosperity. Available at www.gov.uk/ government/news/new-push-to-grow-uks-175- The Economist Intelligence Unit (2013) billion-education-exports-industry ‘Hot spots 2025: Benchmarking the future competitiveness of cities’ commissioned by Centre for Cities (2014) Cities Outlook 2014, Citi Group. Available at www.citigroup.com/ www.centreforcities.org/research/outlook14.html citi/citiforcities/pdfs/hotspots2025.pdf

City Growth Commission (July 2014) Facchini G and Lodigiani E (2014) ‘Attracting Connected Cities: The link to growth. Skilled Immigrants: An overview of recent Available at www.thersa.org/__data/assets/ policy developments in advanced countries’ pdf_file/0010/1545247/RSA-City-Growth- available at www.niesr.ac.uk/sites/default/ Commission-report-Connected-Cities.pdf files/NIESR%20Press%20Release%20-%20 August%20Research%20Articles.pdf City Growth Commission (July 2014) Human Capitals: Driving UK metro growth through Institute of Public Policy Research (2014a) workforce investment. Available at Democracy in Britain: Essays in honour www.citygrowthcommission.com/wp-content/ of James Cornford. Available at http:// uploads/2014/07/Human-Capitals-City-Growth- www.ippr.org/assets/media/images/media/files/ Commission.pdf publication/2014/02/democracy-in-britain_ Cornford_Feb2014_11772.pdf City Growth Commission (February 2014) Metro growth: The UK’s economic opportunity. Institute of Public Policy Research (2014b) Available at www.citygrowthcommission.com/ Decentralisation Decade: A plan for wp-content/uploads/2014/02/Metro-Growth- economic prosperity, public service February-2014.pdf transformation and democratic renewal in England. Available at www.ippr.org/ City Growth Commission (September publications/decentralisation-decade 2014) Powers to Grow: City finance and governance. Available at www. Ipsos Mori (2014), ‘Social Research Institute citygrowthcommission.com/publication/ Summer Review’. Presentation available at powers-to-grow-city-finance-and-governance/ www.slideshare.net/IpsosMORI/ipsos-mori- social-research-institute-summer-review City Growth Commission (2014) Public Evidence Hearings. Available at www. Katz B and Bradley J, (2013) ‘The Metropolitan citygrowthcommission.com/evidence-for-evidence/ Revolution; How Cities and Metros public-evidence-hearings/ Are Fixing Our Broken Politics and Fragile Economy’, Brookings Institution Press, Washington D.C.

42 Lisenkova K, Sanchez-Martinez, M and Travers T (2012) ‘Local government’s role Mérette, M (2013) ‘The long-term economic in promoting economic growth: Removing impacts of reducing migration: the case unnecessary barriers to success’, Local of the UK migration policy.’ Abstract Government Association. Available at available at www.niesr.ac.uk/publications/ www.local.gov.uk/c/document_library/ long-term-economic-impacts-reducing-migration- get_file?uuid=25a4547d-bc7e-415f-b1eb- case-uk-migration-policy#.VCKWifldWb8 7ed57070d66e&groupId=10180

Local Government Association (2014), Future UK Government (2012) ‘Devolution – funding outlook 2014: Funding outlook for Memorandum of Understanding and councils to 2019/20. Available at Supplementary Agreements’. Available www.local.gov.uk/documents/10180/5854661/ at www.gov.uk/government/uploads/system/ L14-340+Future+funding+-+initial+draft. uploads/attachment_data/file/316157/ pdf/1854420d-1ce0-49c5-8515-062dccca2c70 MoU_between_the_UK_and_the_Devolved_ Administrations.pdf McKinsey Global Institute (2011), ‘Urban US National Intelligence Council (2012) World: Mapping the economic power of ‘Global Trends 2030: Alternate Worlds’, cities’. Available at www.mckinsey.com/insights/ US Government Printing Office. Extracts urbanization/urban_world available at www.books.google.co.uk/books ?id=GgSt4UOGonAC&printsec=frontcover#v=o- Ofcom (2014) Availability of communications nepage&q&f=false services in UK cities: Summary report. Available at www.stakeholders.ofcom.org.uk/ World Economic Forum (2014), Global binaries/research/infrastructure/UK_cities.pdf Competitiveness Report 2014–15. Available at www3.weforum.org/docs/WEF_ One North (2014) A Proposition for an GlobalCompetitivenessReport_2014-15.pdf Interconnected North. Available at

www.manchester.gov.uk/downloads/ download/5969/one_north

Osborne G (2014) “On the pathway to a Northern Powerhouse” responding to the ‘One North’ report Beetham Tower, 5 August 2014. Available at www.gov.uk/government/ speeches/chancellor-on-the-pathway-to-a- northern-powerhouse. HM Treasury analysis available at www.gov.uk/government/news/ northern-powerhouse-chancellor-sets-out-pathway

Pagano M (2014) “Why Cambridge is at the heart of Britain’s economic recovery”, The Independent, 17 February 2014. Available at www.independent.co.uk/news/business/ analysis-and-features/why-cambridge-is-at-the- heart-of-britains-economic-recovery-9134717.html

Schecter R (2014) “Talent Drain in the UK”. Available at www.nesta.org.uk/blog/ talent-drain-uk

43 SUPPORTED BY:

RSA 8 John Adam Street, London, WC2N 6EZ 0207 451 6848 @CityGrowthCom www.citygrowthcommission.com Designed by Soapbox, www.soapbox.co.uk