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Summary of Edinburgh City Region's City Deal Proposition

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Summary of Edinburgh City Region's City Deal Proposition Summary of Edinburgh City Region’s City Deal Proposition 1. The Edinburgh City Region comprises six local authorities: the City of Edinburgh Council, East Lothian Council, Fife Council, Midlothian Council, the Scottish Borders Council and West Lothian Council. This area has a population of over 1.3 million people, with a GVA of just over £30 billion, or roughly 30% of the Scottish economy. 2. At the heart of the region, Edinburgh is an international Knowledge Capital. The region is successful, with the city demonstrating a symbiotic relationship with its surrounding areas, focused on the provision of labour supply, housing, leisure amenities, and an increasing level of research and development activity. Across the region, Fife has forged a successful reputation in renewable energy technology and manufacturing, and West Lothian has developed new science and technology capabilities. In the Scottish Borders, Midlothian and East Lothian there are a range of internationally orientated companies located in their towns involved in textiles, light engineering, electronics and medical products. The region is a premier area for cultural and outdoor tourism and leisure activities. It is also the home to five top performing UK universities and a growing education sector. 3. As well as these strengths, the Region continues to be held back by issues of deep rooted inequality and needs to overcome significant infrastructure constraints and meet connectivity challenges if it is to fulfil its growth potential. 4. In the light of these strengths and constraints, Edinburgh City Region (ECR) wishes to make a step change in economic growth in the Region by seeking a City Deal with Scottish and UK Governments and establishing an associated Infrastructure Fund, with a complementary skills package. 5. The ECR proposition will deliver: a) An economically-focused infrastructure investment programme where funding will be rigorously targeted at maximising net economic growth (increased jobs and productivity) at the City Region level; b) An approach to selecting the programme of investment which ensures that: i) there is a geographic balance across the City Region in terms of the economic benefits delivered e.g. as measured by improved access to employment; and ii) Inequality is addressed through ensuring above average improvements in job opportunities for the most disadvantaged areas of the Region and an overall increase in the average wage; c) Investment at a scale that can make a real difference to the City Region’s growth path. On the basis of other City Deals approved, a fund size in the range of £1bn, leveraging an estimated additional £3.2bn of private sector investment, could provide a sustainable 5% uplift in the economy of the Region; make the economy more productive; and deliver tens of thousands of new job opportunities. d) An offer to Scottish and UK Governments to include a significant degree of local ‘self- help’ funding in terms of the overall cost of the fund; e) In return, receiving a Payment-by-Results (PbR) Deal: a mechanism which delivers central funding in return for the additional economic growth and thus tax receipts generated by the infrastructure programme at the Scottish and UK levels. Other 1 signed City Deals would deliver these Payments by Results from Government as capital grant over 30 years – some £1bn in Glasgow, Leeds and Cambridge’s case and more in Manchester’s. The fiscal benefits to Scottish and UK Governments will be considerably in excess of those sums. Based on other City Deals, and subject to defining a rigorously prioritised programme of projects, an Edinburgh City Region Infrastructure Fund over 30 years might deliver some £10.5bn in cash terms of additional tax income through economic growth at the UK level. Of which – under Smith Commission proposals – some £4.4bn would go to Scottish Government. At this stage, it is difficult to quantify how much additional local taxation would be generated and how much would retained locally. On a theoretical basis and assuming that local taxation would be the same proportion of overall tax take in future, some £440m of additional local taxation could be generated over a 30 year period. f) This process involves local risk if the investment delivers an insufficient contribution to national economic growth. Independent expert assessments will test achievements delivered. To date, a gateway approach has been used at five yearly intervals with the first gateway focused on programme delivery (outputs), and the subsequent gateways being more focused on the demonstration of additional growth and thus fiscal benefits at the national level (outcomes). 6. The Infrastructure Fund will be accompanied by a complementary skills package that targets both high end skills shortages and reduces inequality by up-skilling the workforce in the areas of the city region with low incomes and poor access to employment. 7. This sort of deal will require a three-way agreement with the Scottish and UK Governments, following on from other signed deals of a similar scale for Glasgow, Manchester, Leeds and Cambridge. This prospectus is designed to start the conversation with both Governments about how this would work. 8. In developing proposals further, consultation with the City Region’s other local and regional stakeholders will be undertaken, including business; national agencies such as Scottish Enterprise and Skills Development Scotland; and the Universities. This will ensure that the City Deal programme maximises the opportunities to tap into and unlock the ambitious plans of others in either the public or private sector to grow the Region’s economy. Strategic Context 9. The objective of improving Edinburgh City Region’s infrastructure is in line with both national and devolved government objectives: a) The UK Government’s ‘Plan for Growth’ establishes infrastructure investment as a key priority alongside supporting local growth through City Deals. b) The Scottish Government’s Programme for Government that has as its main economic plank the “Scotland’s Economic Strategy” which focuses on: “increasing competitiveness and tackling inequality by: i) Investing on our people and our infrastructure in a sustainable way; ii) Fostering a culture of innovation and research and development; iii) Promoting inclusive growth and creating opportunity through a fair and inclusive jobs market and regional cohesion; and iv) Promoting Scotland on the international stage to boost our trade and investment, influence and networks” 2 c) The Scottish Government’s Economic Strategy also recognises the role that cities have to play in contributing to a stronger Scotland: “It is also important for cities and their surrounding areas to work together as functional economic areas. Maximising the contribution of Scotland's cities, improving connectivity between them, and to their surrounding regions, is essential”. d) Scottish Government’s policy agenda for cities was set out in Scotland’s Cities: Delivering for Scotland (2011). Excerpt from the Foreword by Nicola Sturgeon: “This Agenda for Cities sets out the vital contribution that Scotland's major population centres can make in delivering the aspirations of the Government Economic Strategy. This shared agenda focuses on growth and opportunity - concentrating on developing and promoting the key assets of our cities and their regions to attract investment, stimulate economic activity and create jobs.” e) Lastly the South East Scotland (SES) Plan 2014 “Main Issues” report highlights: i) “Significant infrastructure investment will be needed to enable sustainable growth and to maintain and improve the region's competitiveness nationally and internationally. ii) Improving digital and transport connectivity, addressing network constraints and removing barriers….. to economic growth in the South East of Scotland” 10. A study for the Scottish Cities Alliance into the applicability of City Deals in Scotland identified the Edinburgh City Region, including Fife, as a viable option. Why does the Edinburgh City Region need a City Deal? 11. Edinburgh is the most productive city in Scotland, with a GVA per employee of £54,718. Whilst this is impressive in national terms, when viewed alongside international comparator cities it is less remarkable. Productivity across the region also shows marked variations, with GVA per employee varying by around £18,000 between highest and lowest performing areas. 1 12. We also find the highest proportion of highly skilled workers in Scotland in the Edinburgh City Region. This skilled, highly productive population has been a magnet for new investment, ensuring that the region has been one of the main drivers of economic prosperity in Scotland. That said, as with productivity, the region is also characterised by marked variations in skill levels. 13. There are a number of major infrastructure projects currently under way across the region, including the Queensferry Crossing and Borders Railway. There is a strong appetite amongst regional partners, and considerable ambition, to build on this momentum and deliver a step change in regional and national economic performance. This is evidenced by the current work in taking forward the Borders Railway Blueprint. 14. Despite all of its success, the region continues to be challenged by issues of deep rooted inequality and potential constraints on its growth potential and productivity. 1 Source: Office for National Statistics (2013) 3 Persistent inequality 15. Over 12% of the region’s population lives in the
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