Reflections on policy before the Powerhouse

Five years on from the publication of the Northern Economic Futures Commission report on revitalising the UK economy, Ed Cox, Director, IPPR North looks at what progress has been made in the intervening period.

• The turning point in terms of government interest in the North came when former chancellor George Osborne pronounced his enthusiasm for a Northern Powerhouse formed as “a collection of northern cities – sufficiently close to each other that combined they can take on the world.”
• At the time, our primary call for Northern businesses to create half a million jobs as we came out of recession sounded bold. Little did we think it would be achieved but that now all the focus would be on the quality and productivity of the roles created.

November marked the fifth anniversary since the publication of Northern Prosperity is National Prosperity: a strategy for revitalising the UK economy. With hindsight it could be argued that this report – the product of the 18-month Northern Economic Futures Commission – set the framework for what has since become known as the Northern Powerhouse: now a key feature of national economic discourse.

Five years on, the former commissioners gathered recently to discuss progress since their original report. Three important themes came through their conversations.

An agenda gathering momentum

First, there was general approval that the agenda set back in 2012 had certainly gathered significant momentum. Back then, in the early days of the Coalition Government, the main talk of rebalancing concerned our trade balance and the relationship between service sectors and manufacturing industry. Now, regional economic imbalance is right up there as a national economic priority and a key plank of the government’s strategy to address our woeful productivity problems.

The turning point in terms of government interest in the North came when former chancellor George Osborne pronounced his enthusiasm for a Northern Powerhouse formed as “a collection of northern cities – sufficiently close to each other that combined they can take on the world.”

Osborne’s focus on Northern cities, on significantly improved transport connections, and on the role of metro mayors reflected very well some of the priorities established by the Northern Economic Futures Commission which was the first to recommend, in particular, the formation of Transport for the North. Indeed, it would be possible to argue that of all the commission’s recommendations, this one has progressed further than any other.

Other recommendations where there has been notable progress include the devolution of skills funding; the focus on investment in innovation (not least in advanced materials, biotech and life sciences – all featured in the original report); the greater coherence of the North’s investment and trade offer (now championed by a dedicated DIT team); and the formation of a Northern Powerhouse Investment Fund as part of the British Investment Fund (exactly as we suggested).

A shifting political landscape

The second reflection was that had we known so many of the report’s recommendations would be taken up we would have been more radical. Once again, we were reminded at just how much the Northern economy has moved up the political agenda, but also how much British politics has shifted in just five short years.

At the time, our primary call for Northern businesses to create half a million jobs as we came out of recession sounded bold. Little did we think it would be achieved (in fact there are now 515,900 more private sector jobs than there were in 2011/12) but that now all the focus would be on the quality and productivity of the roles created. A recommendation now would surely call for these to be paid at the Real Living Wage and to be high-quality jobs with investment in training and progression.

And little did we know then just how detrimental the on-going programme of austerity would be both in terms of capital investment for the vital transport infrastructure needed but more subtly on the prospects for a bolder devolution settlement. Although devolution deals have included significant dollops un-ringfenced funding – as we recommended – the prospects of genuine fiscal devolution of the kind seen in most other developed nations look further away than ever with many combined authorities and Local Enterprise Partnerships too under-staffed even to contemplate taking on such significant responsibilities.

Weak pan-Northern institutions

Which brings us to the third theme: institutions. At the time, commissioners were minded to minimise the number of new bodies or bureaucracies they recommended and they stopped well short of a Council of the North. Although so much momentum has been achieved under the Northern Powerhouse banner, there is a strong sense that too much is partial, piecemeal and terribly fragmented and that this has been most obviously exposed since Theresa May became Prime Minister and cast doubts upon the whole pan-Northern initiative.

While the recent Industrial Strategy White Paper contains nods towards the importance of “regional approaches” to “help to deepen pools of skilled labour, drive competition, and increase market access” its consideration of ‘place’ – like our commission report before it – fails to grasp perhaps the most significant new finding concerning Northern Powerhouse productivity: that so many of our problems hinge upon the weakness of our pan-Northern institutions. Northern Prosperity is National Prosperity remains a relevant and timely reminder of both progress made and work still to do, but in analytical terms it has been surpassed by the more recent work of one of its commissioners, Philip McCann, whose magisterial book on the UK’s national-regional economic problem concludes that so many of those ‘drivers of productivity’ with which we are rightly concerned – education, skills, transport, innovation – are little more than symptoms of a much deeper malaise: the overly-centralised nature of our economic planning system and the weakness of our regional systems of governance. England is too big. Our city regions are too small.

Had commissioners realised the compelling importance of this argument, together with the deepening disillusionment with Westminster and Brussels as well as Northern demands to “take back control”, then we perhaps would have been more robust about the need for better collaboration and a stronger, single voice for the North. But given our collective effort has seemed to pave a way for the North through a period of unprecedented political turbulence, who knows what might be possible in the five years to come? New commission anybody?