Centre for Cities

Planning... for cities?

Tuesday’s long-awaited publication of the draft National Planning Policy Framework was even bigger than the England cricket team’s era-defining victory over India, at least in development circles.  As the champions of the UK’s cities, our first act at Centre for Cities was to search the document – all 58 pages – for references to cities and urban planning.  We were keen to see what signals the Government had chosen to send about the role of the reformed planning system in helping cities chart their own development course.  Our search proved fruitless.

The draft NPPF contains no mentions of ‘cities’, or indeed ‘city’, and a single solitary use of the word ‘urban’ as part of the phrase ‘urban and rural planning’.  The absence of cities is in stark contrast to the prominence of rural areas in the NPPF, where the document is very clear about its ambitions.  It sets out three objectives for sustainable economic growth, one of which is “to raise the quality of life and the environment in rural areas by promoting thriving, inclusive and locally distinctive rural economies”. The word rural occurs 15 times in the document.

The absence of cities from some of the more prescriptive aspects of planning guidance – billboard controls, isolated homes, redundant farm buildings - is of course understandable, but it is surprisingly that while the NPPF sets out aspirations for town centres and the countryside, it misses the bigger picture.  Cities are the drivers of the UK economy, housing 56 percent of the population and contributing 60 percent of the jobs.  If our city economies do not thrive, we are in trouble.  If the NPPF can find room for a dedicated section on supporting the rural economy, it could also spare a thought for the urban.

As our Cities Outlook 2011 research shows, the UK’s cities are in contrasting economic health and at different points in the economic cycle.  The planning system is a key driver of jobs growth, and cities are facing some tough jobs challenges, as our recent Moving On Up, Moving On Out? report demonstrates. To achieve the elusive growth on which the health of the economy depends, we need a planning system that understands and supports the needs of our cities, and serves their changing development needs.  Any council without a signed off Local Development Framework will be racing to complete the job before national planning policy over-rides any local control.  This is not a situation conducive to the high quality, evidenced strategic thinking that local authorities need to become proactive urban managers.

You can't have your (wedding) cake and eat it

Today's weak GDP figures come as no great surprise. The reaction is no surprise either. The Office for National Statistics points to the impact of the Royal Wedding, while Ed Balls attacks George Osborne for his lack of a 'Plan B'.

But the impact of the Royal Wedding should not be under-estimated. As shown in our June labour market note, hours worked fell considerably in April as people took advantage of the two bank holidays to have an extended break from work. But this has clear implications for the economy - you can't have your (wedding) cake and eat it.

In some quarters there is surprise that the GDP figures are so positive at a national level. Of course, this will have played out unevenly across the UK, and it may be the case that some cities saw a contraction over the quarter. As well as the Royal wedding, the Japanese earthquake has had clear repercussions for some cities, with Nissan, Honda and Toyota experiencing components shortages. Our City Tracker provides some indicative data as to how growth varied across the country.

But it's key to note here that these impacts are only temporary. Nissan's announcement this week that it is hiring 200 extra workers at its Sunderland plant underlines this point. Using one-off events to skew the growth debate isn't particularly helpful. Politicians need to take a longer term view to formulating sensible economic policy.

Business rates reform: set for a summer of debate

With its tariffs, top-ups, levys, pools and protections for business, you could be forgiven for thinking that  
last week’s Local Government Resource Review (LGRR) announcement owed more to 17^th Century mercantilism than a reform of local government finance.

Overall, Eric Pickles’ announcement on the LGRR was bold. While there are still many ways that the final settlement could end up being overly complicated, it is possible to chart a course that creates a strong, simple incentive for growth.

The basics of the new system are that local authorities will start from a baseline budget position similar to their funding in 2012-13. From this point they will then capture some of the growth in the local business rate base. The question is how much and for how long? 

In Room for Improvement, we argued that the Government should choose between a system with “resetting” – starting the baseline for each council again – and one that only allows authorities to capture a portion of the local growth in rates – which the Government has termed the “levy”. In the end it looks like the new system will include both of these elements. 

The big political question has been: will the reforms exacerbate regional disparities? Indeed, Caroline Flint asked Eric Pickles to guarantee that no council would be worse off in five years time. 

This is a strong position to take. Clearly an incentive-based system will create relative winners and losers – otherwise it could not possibly function.

The real question is whether the national benefits of encouraging economic growth justify the less attractive aspects – and remember no one is recommending a system without substantial redistribution. Equally, its not a straight North-South divide. Cities like Preston, York and Leeds would all have benefited from an incentive system between 1999 and 2010. Over the long-run few cities see their business rates decline.

With business rate retention the Government has the potential to create a simple, strong, long-term financial incentive for growth. To do this it needs to ensure that a whole host of constraints and complexities around the edges do not chip away at what should be an important reform for the benefit of England’s cities and the national economy as a whole.

Overcoming the jobs-skills mismatch

It’s been a month since the Government launched its £5 billion Work Programme, which aims to move 500,000 people off benefits and into work each year for the next 5 years.  Some task!

Across the country, as Work Programme providers and their sub-contractors begin to tackle the multiple barriers to employment their clients face – including skills, childcare commitments and decreasing demand in the local economy – they will need to grapple with the implications of two long-term trends: the changing nature and location of jobs.

Moving on up, moving on out? Overcoming the jobs-skills mismatch, the first report in our City Collaboration research programme which was published last week, not only finds that lower skilled, entry-level jobs are declining overall. It also finds they are dispersing. Over time lower skilled jobs are moving out of city centres and into the outskirts of our cities (see maps below).

For those at the lower end of the labour market this means having qualifications and skills in order to compete for lower skilled jobs and having the means to access these jobs will become increasingly important.

However, we know that lower skilled individuals tend to have much smaller travel-to-work horizons. Research by Anne Green and David Owen, for example, estimates that individuals employed in occupations, such as nurses, hairdressers and caretakers, tend to travel an average of only three kilometres, while professionals tend to travel an average of seven kilometres.

So what does this mean for policy makers? If the Work Programme is to be successful it will need to look beyond its core remit and work with partners from other policy areas. Transport and planning policy in particular will have a key impact on the success of any strategy to get people into employment. (The more we can concentrate out-of-town centres of employment, the more accessible we can make them by public transport.)

The exact policy mix required to connect people to jobs will depend on local circumstances. Looking across four case study areas: Manchester, Sheffield, Milton Keynes and South Hampshire this policy mix is what we are focusing on for our second report due in the Autumn.

Room for improvement: bold financial incentives are needed to support city economies

There are few things in life quite as exciting as the world of local government finance. But before you exit this webpage wait!

Decisions currently being taken in the Local Government Resource Review will have a really important impact on the future of cities and potentially for the national economy. 

Our new report released today, Room for Improvement, looks at the current reforms and finds that while Government is moving in the right direction there is a danger that it will fail to be bold enough. 

Alongside the New Homes Bonus, the Government is using the resource review to introduce new financial incentives for growth. The review will allow local authorities to retain some of the future growth in their business rates - which raised almost £24 billion in 2010-11 - restoring the link between local government and the local business base.

The big idea is that these incentives are needed to reward a more positive attitude to development, thereby helping tackle the UK’s high house prices and office rents. Six of the thirty most expensive office markets in the world are in the UK. Incentives should also encourage buoyant cities expand to meet demand and facilitate job creation.

We think the Government is on the right track. Our analysis suggests that allowing the retention of business rates could be a strong incentive for growth. Since the nationalisation of business rates in 1990, the growth rate of commercial space has declined and business occupancy costs have increased. 

To be effective the new incentives need to be large, simple and transparent, targeted at the appropriate people and long-term. We’ve recommended allowing local authorities to retain between 40 and 60 percent of their future business rates growth, indefinitely. 

Inescapably, introducing incentives will create winners and losers - by rewarding places that are able to expand their business base you take away some money from those that cannot. Yet in the long run most cities see their business rates revenues grow, if only by small amounts - 55 out of the 56 English cities saw their business rates tax bases increase between 1999 and 2010. 

The findings are potentially challenging for those cities that find it more difficult to attract investment and development. But this doesn’t have to be an either or choice. The report recommends a balance between locally and nationally retained business rates revenues, enabling need to continue to be addressed. 

And, if the new incentives do reduce the cost of housing and commercial property, these changes have the potential to generate a national economic benefit. This prize might justify having a little less redistribution. 

The main danger is that the Government will decide to overcomplicate the reforms or create an incentive that is just too small. The last Government came up against this problem with LABGI - an incentive that failed to radically change local behaviour. 

But with the right design, financial incentives for growth can benefit both the residential and business communities of Britain’s cities and the UK economy as a whole. Now is not the time for timid amendments.

To be or not to be? A question for local enterprise partnerships

Do LEPs need to be formally constituted bodies or can they exist as an informal entity?  This was one of several interesting questions discussed at the roundtable we held yesterday in Leeds looking at the progress and future of LEPs.  With the participants in the room holding different perspectives. 

To be: Some in the room held the opinion that the role of LEPs should include being statutory consultees in the planning process, being direct recipients of government funding, and being able to borrow and spend money.  These roles it was argued would need LEPs to be formally constituted bodies. 

Not to be: Others argued that the role for LEPs should be to act as facilitators providing forums for discussion and agreement, and as strategy setters and overseers.  All of which could be done without being a formally constituted body.

Clearly different LEPs will make different choices based on their particular circumstances – this after all is the purpose of encouraging greater decentralisation and devolution (a trend that our recent paper on LEPs highlighted).  However, as one participant reminded the room – if LEPs want greater devolution of powers and resources from central government then central government will need ‘something’ to devolve to.  An issue that more than one central government department is currently grappling with.

Whether they choose ‘to be or not to be’ LEPs will need to carefully weigh up the pros and cons of the different options before they begin knocking on the door of central government asking for more powers and resources.   

Derby and Bombardier: dealing with shocks

Train production in Derby has been taking place on the site currently occupied by Bombardier since 1876. So today’s announcement by Bombardier of its intention to reduce its Derby workforce by half is clearly not good news for the city or for those workers affected. 

As we noted in our report on Derby last October much of Derby’s success over the last decade or so has been based on its strong manufacturing base, particularly aerospace in the shape of Rolls-Royce and rail in the shape of Bombardier.  Combined these companies employ more than 14,000 people in the Derby area.   

Percent of total employment employed in advanced and nonadvanced manufacturing in Derby with and without aerospace (2008): 

Precisely because of the importance of these companies to the city and in particular the reliance of Bombardier on UK Government contracts our report highlighted the need for Derby and its partners to develop a strategy for dealing with potential risks to the rail sector. 

Drawing on research into the collapse of the MG Rover plant in Longbridge and Corus steel plant in Teesside our report highlighted five key lessons for dealing with major supply side shocks:

1. Bring together public sector agencies in a location to work together on dealing with the impact of a plant closure;
2. Advise workers on employment opportunities, legal rights, the take up of benefits and how to deal with debt;
3. Provide specific support that focuses on dealing with any health or stress related effects caused by redundancy;
4. Extend and adapt mainstream training provision to help workers to find suitable courses, providing short flexible training that workers can access while they are still in work; and
5. Provide additional funding to allow new employers to send workers affected by a closure on training courses and to pay for affected workers’ travel to training courses and job interviews.

The Bombardier announcement reminds that cities constantly need to respond and adapt to economic changes and that whilst building on existing strengths is important so is the need to find ways to support the diversification of their economy. 

Choosing the right suitor: finding the best match for Enterprise Zones

DCLG announced they have 22 bids for the last coveted 10 Enterprise Zones (EZs). With more than twice as many bids as there are spots for the new EZs, Government will need to be particularly picky in choosing the sites.

How to choose the final 10

Learning from the past, a few lessons should be considered in the selection process (outlined in our paper What Would Maggie Do?):

• EZs should be in urban areas or provide easy access to them—this better links jobs to people and helps businesses create links with each other
• Choose EZs with realistic growth potential rather than unrealistic aspirations
• Be clear how the EZ fits within a wider economic strategy—the Local Enterprise Partnership (LEP) should have done this as part of their application
• Avoid sector-based EZ schemes which can try to create advantages where they don’t naturally exist

Managing expectations

The 38 EZs during the 1980s-90s created 58,000 jobs; to date, 12 published bids for new EZs state they can create a total 160,000 jobs. We must be realistic about how EZs can benefit local economies and what they simply cannot do. Without incentives to expand employment, skills or innovation, they may not focus on fixing the root of some of the UK's most difficult economic challenges.

The real opportunity for EZs lies in how their LEPs invest business rate revenues. By allowing LEPs to pool money and fund specific projects, LEPs can target the issues which have held back their economic growth such as improving skills, linking people to jobs, and innovation support.

Enterprise Zones will not be the spark that jumpstarts the UK economy. If selected and managed correctly, though, they can be used to support economic growth in the UK’s cities.

A relaunch to be proud of

Nick Clegg today relaunched the Government’s plans to hand over greater financial powers to local government. He announced that councils in England will be allowed to keep the business rates they collect rather than paying them into Treasury.

In actual fact he didn’t really reveal anything we didn’t already know. But it’s good to see the Government throwing some political leadership behind the reforms, because they’re really very important.

Currently, English city councils get no direct financial benefit from supporting new development. There’s evidence to suggest that this has constrained their expansion, restricted the supply of offices and factories, and ultimately driven up the cost of the premises for business. This has been detrimental for economic growth.

As part of the reforms, the Government will ensure that no local authorities will be worse off in the first instance. This is important because it doesn’t make sense for places to have less money on day one as a result of the policy change and gives local authorities the time to adjust to the new financial reality. In order to be effective, the scheme will have to impact on live decisions in the planning process.

Overall the design of the new system will be crucial for how strong an incentive for growth it creates. The Government has some big decisions to make. We think the reforms will need to create a large, simple and long-term benefit to incentivise local authorities to accept and promote development. The Centre for Cities will be publishing detailed recommendations on how we think the Government should relocalise business rates in July.

The mayoral debate continues

I chaired the launch event for our report on elected mayors this morning, and we got #electedmayors trending in Birmingham.  We were hosted by KPMG and speaking on the panel were Lord Adonis, Jerry Blackett, Jim Hancock and KPMG’s John Atkinson. 

A number of interesting points came out of the discussion:

• There is a strong case for Metro Mayors, operating at the functional economic area of a city – although Lord Adonis warned of the “best being the enemy of the good” and gave the examples of schools and buses as two areas where a local authority mayor could make a big difference to a city.
• The idea of shadow mayors was given short shrift– with Lord Adonis describing the idea as a “democratic nonsense”, that he thought was unlikely to get through the Lords.
• Jim Hancock, reflecting on his 35 year career as a political commentator, welcomed the potential of elected mayors to raise the profile of local government and the important functions it serves.  But he warned of the potential “dead hand” of local council opposition being a threat to a “Yes” vote in May 2012.
• Jerry Blackett was concerned about how the relationship between LEPs, which are only just now finding their feet in the institutional landscape, and elected mayors would work – with a local authority mayor being potentially destabilising, and a LEP mayor perhaps being an undeliverable outcome.  He was clear that leadership relies on partnership and “followership”, however, saying, “Strong city leadership doesn’t have to take the form of a 'big man'."
• Jerry also called for more clarity from central government on what additional powers an elected mayor in Birmingham would have.  A survey of Birmingham Chamber of Commerce members revealed that while 36% of those surveyed were supportive of the idea of an elected mayor, compared to 22% against, 42% didn’t know or hadn’t decided.  His question – and I’m sure it’s one being asked across the 11 cities - was “What could we do tomorrow with a mayor that we can’t do today?”  It’s clear that there is more still to be done to make the case for elected mayors in the cities that will be voting next May.

The mayoral debate is one that will continue to be high on the agenda in the coming months as the Localism Bill progresses, and it’s important that these outstanding issues and concerns are addressed if cities are to get the opportunity to make the most of mayors’ potential.  

See more photos from this morning's event on flickr: ttp://www.flickr.com/photos/52038120@N03/sets/72157626835223135/