Ed Cox is the Director of IPPR North.
The Northern Powerhouse is gathering steam. When George Osborne unveils his Budget on 8th July, we are certain to hear more of his plans to “create a balanced, more healthy economy for working people across our United Kingdom”.
The North’s businesses will be the backbone of this plan, but what do bosses think of the project so far?
In the first survey of attitudes towards the Northern Powerhouse, we found that businesses across the North – small, medium and large – are overwhelmingly supportive of the principle of devolution and are enthusiastic about its possibilities.
They are quick to point to the problems with the centralised, decision-making process made remotely in Whitehall, and were keen to see more decisions made ‘closer to home’, to allow investment in key areas such as skills, transport and planning to be targeted to fit the local economy. This echoes what national business bodies have already said, notably the CBI, FSB and IoD, all of whom have been enthusiastic about the prospects of a resurgent Northern Powerhouse.
Assured of the support of Northern businesses, the Chancellor should proceed full steam ahead. But he should be mindful that those same firms will be watching keenly to ensure that his actions match the rhetoric.
One important yardstick will be the amount of government investment in major infrastructure projects across the North. Transport connections and infrastructure are the foundation on which a prosperous Northern economy is built. As yet, however, no additional spending has been confirmed for the North, and the Transport Secretary Patrick McLoughlin announced this week that he would be putting on pause the planned electrification of the key Manchester to Leeds Trans-Pennine train line.
This is the opposite of what’s needed, as it will further stall planning and deter potential investors. In the July Budget and the Spending Review due in the autumn, the Chancellor has two opportunities to make a much bigger financial commitment to the Northern Powerhouse than has been made so far. This would send a strong signal to investors and businesses that he is serious about really firing up the engine of the powerhouse and opening the North up for business.
One way of allaying any doubts about the financial commitment is for Osborne to follow his new-found devolution instincts, a radical way of thinking brought about thanks to Greg Clark over at DCLG. Plans are afoot to create a Transport for the North body to match the role Transport for London (TfL) plays in the capital. But businesses say we could do better than just match TfL: they see radical devolution over transport powers and budget as a counterbalance to the historically skewed investment patterns that favour London above other English regions. IPPR North believes TfN could ultimately grow into an ‘Infrastructure for the North’, taking on economic development responsibilities at a pan-Northern level and giving the North the clout and scale it needs to compete with London, Scotland and in the global economy.
Beyond infrastructure, firms also want to see further fiscal devolution, where business rates would be kept locally and Northern regions rewarded for creating growth by keeping the proceeds from it. The Government is currently reviewing the business rates system, but we argue that this should be the first step in a much more extensive programme of fiscal devolution that would see combined authorities be able to raise, retain and invest tax revenues at the local level, in line with much of the rest of Europe and successful regional economies which can be seen in the likes of Germany.
But who can lead such a radical agenda for the North? With the London mayoral contest taking place next year and legislation going through Parliament to transfer more powers to Scotland, there is a risk that both areas will suck up powers and resources to strengthen their economies, attract investment and create new jobs. One thing that could help is a unifying political figurehead. London has Boris, Scotland has Nicola Sturgeon – but who is speaking up for the North?
Neither the Government nor the North can afford for the North to be squeezed. Businesses that we spoke to had reservations about the current capacity of local government to manage new powers, and to act collectively in the interests of the whole region. What is needed is for town hall leaders to put aside local rivalries, and to act creatively and urgently to seize the current opportunities for further devolution.
Within the space of a year, the Chancellor’s idea of a resurgent ‘Northern Powerhouse’ has gained impressive support from businesses across the North. Our research has shown that the majority of firms are confident of the commercial benefits of locating economic decision-making at a more local level. This should add further encouragement to national government to press ahead with its Cities and Local Government Devolution Bill and to work hard to ensure devolution in England remains a central feature of its programme.
Money, power and leadership will be needed to ensure that happens and that the powerhouse does not run out of steam before it’s even fired up.