‘How to Create Great Jobs: Towards a Regional Industrial Strategy for Tees Valley: A Report for the Trades Union Congress by the Centre for Urban and Regional Development Studies, Newcastle University’ Peter O’Brien, Mike Coombes, Stuart Dawley, Lewis Evans and Andy Pike September 2017 Contents Executive Summary ................................................................................................................. 2 1. Introduction ....................................................................................................................... 4 2. Putting Industrial Strategy in Context ............................................................................ 6 UK Industrial Strategy ................................................................................................................. 6 TUC and Industrial Strategy ........................................................................................................ 7 Principles of (Decentralised) Industrial Strategy ................................................................................. 8 3. An Assessment of the Tees Valley Economy ................................................................ 10 4. Foundations of a Tees Valley Industrial Strategy ......................................................... 18 Strategy: Improving ‘Industrial Competitiveness’ .............................................................................. 20 Strategy: Inclusive Growth ........................................................................................................... 23 Tools: Carbon Capture and Storage (CCS) .................................................................................... 26 Tools: Skills ............................................................................................................................. 27 Tools: Infrastructure ................................................................................................................... 29 Tools: Funding and Financing Investment ...................................................................................... 30 Tools: Place Attractiveness and Inward Investment ........................................................................... 35 Tools: Anticipating, Avoiding and Mitigating Industrial Shocks ........................................................ 36 Actors: Local Authorities ........................................................................................................... 37 Actors: Tees Valley Metro Mayor and Combined Authority ............................................................. 40 Actors: UK Government ............................................................................................................. 43 Actors: Trade Unions ................................................................................................................ 43 5. Conclusions and Recommendations ............................................................................. 46 Annex 1: Statistical Analysis of Tees Valley Combined Authority Area ......................... 49 1 Executive Summary This report was commissioned by the Trades Union Congress (TUC) to gather and analyse evidence, and then propose policy recommendations, in support of the case for a new Regional Industrial Strategy for Tees Valley. The report suggests that a Tees Valley Industrial Strategy should be centred on creating and sustaining more and better-quality local jobs stimulated by the distinct locational assets of Tees Valley and to realise its potential as a major international and national industrial hub for a just transition to the low carbon economy. The report also suggests that a Tees Valley Industrial Strategy should seek to build an economy that works for all people, especially those living in communities facing the acute consequences and implications of de-industrialisation, global financial crisis, recession and austerity. The Government has proposed a new Industrial Strategy based on a framework that identifies a more active role for the state in developing long-term, sustainable and inclusive growth in the UK’s nations, regions and localities. International evidence suggests that all governments should embrace more thoughtful, longer-term, evidenced- based strategic thinking about how public bodies, at all geographical levels, could work towards achieving desired outcomes, including improved productivity, higher levels of economic growth, and reduced social and spatial disparities. Building a strong geographical or place-based dimension into the new UK Industrial Strategy is essential in order to spread prosperity more evenly across the country. A more spatially-sensitive approach to industrial policy and strategy requires decentralised forms of industrial strategy, such as a Tees Valley Industrial Strategy. An analysis of the Tees Valley economy reveals that Tees Valley’s labour market shows many of the continued impacts of de-industrialisation, including high joblessness in a low-skill and ageing workforce. Tees Valley’s high CO2 emissions per capita (at over three times the national average) presents economic and environmental challenges, but also presents a real opportunity for Tees Valley to play a leading role in supporting the UK’s just transition towards a low carbon economy. 2 The report sets out an analytical framework to identify the strategic dimensions, tools and actors that are expected to provide the foundations of a decentralised industrial strategy for Tees Valley. We argue that the overriding aim of creating more and better jobs in Tees Valley should see the Industrial Strategy focus on improving industrial competitiveness and building and maintaining inclusive growth. A series of tools (e.g. Carbon Capture and Storage, skills, inward investment, infrastructure, funding, etc.) are proposed, and there is a pivotal role for actors, such as local authorities, the Tees Valley Mayor, Combined Authority and trade unions. This is not to downplay or diminish the role and value of other tools and actors, but instead it recognises that the TUC and unions (nationally and regionally) will need to be smart in how they allocate their resources and capacity to influence the Tees Valley Industrial Strategy, especially as trade unions have, to date, been at the margins of the new and emergent devolved governance arrangements in Tees Valley. We propose 22 recommendations, underpinned by the findings, evidence and the analytical framework set out in this report, on how the over-arching aims and objectives of the Tees Valley Industrial Strategy could be realised. The recommendations, in part, support some of the policy priorities being pursued by the Tees Valley Mayor and Combined Authority, and are directed towards Government, Tees Valley’s devolved governance institutions, local authorities and the TUC itself (nationally and regionally). Included in the recommendations are proposals for: - The Government to give its formal support for the business case prepared by Teesside Collective setting out the rationale for Tees Valley to play a leading role in UK CCS technology and industry. - The Government to support the H21 project to feed hydrogen into the national gas grid, as part of a strategy to develop the hydrogen economy. - The Government to encourage more investment in ‘waste from energy’ jobs and industry. - The Metro Mayor and Combined Authority to explore the opportunity to develop a Tees Valley Wealth Fund to manage physical assets and generate new revenues and capital to reinvest in the Tees Valley economy. - The Government to fully devolve the Adult Education Budget to Tees Valley from the start of academic year 2018. 3 - The Government and Metro Mayor Combined Authority to develop an integrated and locally-led careers support mechanism in Tees Valley covering all age groups. 1. Introduction 1.1 This is the final report of a project undertaken by the Centre for Urban and Regional Development Studies (CURDS), Newcastle University, on behalf of the TUC, which has examined the case for developing a new ‘Regional Industrial Strategy for Tees Valley’. The study is one of three pieces of research commissioned by the TUC; the other two projects are focused on the Liverpool City Region and East Anglia. In May 2017, Tees Valley was one of six city- regions in England to elect new ‘Metro Mayors’ to lead Combined Authorities, and each place has negotiated a series of devolved powers and resources from Government. 1.2 This study has been conducted against the background of the Government publishing a framework for a new UK Industrial Strategy, which advocates more specific and targeted public and private sector interventions to support industrial and economic development at national, regional and local levels. An Industrial Strategy Green Paper was published in January1 and a White Paper is expected to be published around the time of the Budget later this year. One of the fundamental questions facing the Industrial Strategy is the extent to which a national strategy can be ‘place-based’ and is able to reflect diverse regional and local economies, and the new spatial realities of devolved governance arrangements in England. Pillar ten of the Industrial Strategy Green Paper outlines some of the institutional arrangements that the Government believes are needed to bring sectors and places together under the umbrella of the UK Industrial Strategy. Here, the Green Paper is perhaps at its most under-developed, but it presents the TUC with