London’s dominant economic role is not an accident of history but rather the result of policy and subsidy, explain Dr Iain Deas, Prof Graham Haughton and Dr Stephen Hincks.
BBC presenter Evan Davis argues that government should do more to help large and successful cities prosper. In his recent series, Mind the Gap: London v the Rest – and accompanying BBC blog – he argued that cities prosper when they have dense networks of highly skilled and creative workers intermingling in close proximity, driving innovation and promoting high-value economic activity.
Davis added that local and national economic development policy ought to concentrate support much more on the small number of cities that can fulfil this role as centres of knowledge-driven economic vitality.
London’s dramatic economic transformation over nearly 30 years, he argued, was because it attracted and retained skilled mobile labour from around the world, lured by a seductive mix of vibrant cultural environments, attractive neighbourhoods and the prospect of rapid economic enrichment. London’s growth should be celebrated and promoted.
Problems associated with rapid growth and overheating – strains on infrastructure, acute housing shortages and the social and spatial marginalisation of left behind residents – were presented simply as impediments to further growth that policy intervention should and could circumvent.
London’s prosperity, ran this argument, ought to be facilitated by accommodating growth pressures: providing developable land, ensuring a supply of affordable housing, investing further in infrastructure and continuing to meet demand for labour by stressing the city’s openness to newcomers.
But in an open access paper published last month in Environment and Planning we questioned the conventional ideas that underpinned Mind the Gap.
Evan Davis’s treatise said little about the role of policy in underpinning London’s transformation from a declining city in the 1970s to a world capital today. Yet government played an instrumental role in enabling London’s growth.
National policy promoting the financial service sector has been central to this. Associated spending accommodated London’s growth via multi-billion investment in infrastructure. That skewing of infrastructure spending towards London is seldom acknowledged.
Treasury data demonstrate the capital’s favourable treatment. London is consistently the best funded of the English regions, exceeded only by the special cases of Northern Ireland and, to a lesser extent, Scotland and Wales. London’s growth has been highly dependent on state subsidy.
Moreover, data on disaggregated public service expenditure suggest a pattern for the English regions that runs counter to regional policy. This challenges the implicit argument of Mind the Gap that past spatial policy (determining development and land use) has been ineffective in re-energising declining economies – and that public money should focus on stimulating agglomerative growth in a few large urban areas, instead of trying to narrow inter-regional inequality. Past policy for cities and regions, runs this line of argument, is wasteful because it props-up areas that are less ‘productive’ than London.
But previous regional policy should not to be so readily dismissed. It is unrealistic to expect regional economic transformation given the degree to which regional imbalances have been ingrained over a century and more.
Even at its peak in 2005/06, the national budget of £2.2bn for Regional Development Agencies (RDAs) represented only 0.2% of national output. In the highest funded RDA – One North East – peak spending was £240m: a mere £95 per person, or 0.75% of regional economic output. These are miniscule sums, dwarfed by public expenditure directed towards London.
Today the contrast is even more striking with RDAs replaced by Local Enterprise Partnerships – nominally private sector bodies raising their own resources, with only modest financial support from government. Viewed in the context of this and the hidden subsidy to London and its region, it is unsurprising that regional economic disparity is intractable.
Mind the Gap repeated the view that past policy for cities and regions has detracted from national productivity, with resources better used to enable London’s growth to be maintained, while creating mini-Londons elsewhere.
What was missing was any lateral thinking on how to offset the growth pressures accumulating in London. Yet the solutions to London’s problems of overheating rest not in the capital, but elsewhere in urban Britain. The sensible response to London’s spiralling house prices lies not in liberalising planning and releasing more land for development, but in focusing economic development policy on struggling cities and regions to bolster their demand for labour and displace some of the pressures from the South East’s existing hot spots.
Supply-side policies over 30 years on land and labour in London and the South East failed to resolve growth pressures, leading to acute localised wage and house price inflation. Concerned residents of the Home Counties might be best advised to lobby for more investment in the North to ensure housing is affordable in the South East, rather than fighting green belt encroachment.
Boris Johnson, London’s mayor, argues that investing in already prosperous London is justifiable because the city is a net contributor to the exchequer and the benefits trickle-down to the rest of the country. “A pound spent in Croydon is far more of value to the country than a pound spent in Strathclyde. You will generate jobs in Strathclyde far more effectively if you invest in parts of London”, he told the Huffington Post in 2012.
A better argument would be to invest more in Britain’s provincial cities, linked to a genuinely integrative national spatial policy. That is the best way to maintain London’s prosperity.
- This is an edited version of a post that first appeared on the Cities@Manchester blog