Greg Clark is Financial Secretary to the Treasury and MP for Tunbridge Wells. Follow Greg on Twitter.

Most Tuesdays he will be writing this 'Letter from a Treasury Minister' for ConservativeHome readers. Previous versions of this Letter appeared here.

Today twenty
cities – from Plymouth to Sunderland, from Preston to Brighton – have been
invited to negotiate City Deals with the Government. This second wave of City
Deals follows an initial round of the eight biggest cities outside London.

The City
Deals take powers and budgets that were previously vested in Whitehall and put
them under local control if the city can show that by doing so they can get
better results and better value for taxpayers’ money.

For years,
the Treasury was the last government department you would go to if you wanted
to devolve powers. It was renowned as the keeper of the orthodoxy that the man
in Whitehall knows best. That is being transformed.

When I was
appointed Financial Secretary to the Treasury five months ago, I asked the
Prime Minister to continue my responsibility for working with cities, which I
had begun a year before, because I was convinced that the cities programme is
of direct relevance to the work of the Treasury.  The Prime Minister and George Osborne shared
my conviction. Yes, we must have the right macroeconomic and microeconomic
policies to create the conditions for growth – low interest rates, a determined
programme of deficit reduction, a globally competitive tax system and flexible
labour markets, to name just a few.  But
economic policy must also recognise the importance of place. After all, growth
happens not in the abstract, but in particular places where employers expand
their production or set up for the first time. These places can be attractive
and supportive to growth, or they can place impediments in its way: whether it
is the state of local infrastructure, the skills available in the local
workforce, the availability of land suitable for investment, the presence or
absence of other relevant businesses, the responsiveness of local leaders to
employers’ needs. It is essential that we do everything we can to make sure
that Britain consists of places where growth can take root and flourish.

consideration of the importance of place quickly highlights the importance of
our cities.  They are the where most people
work, most businesses are based, and most of our higher education institutions
are founded.  Over decades past, British
cities have performed less well than those in other countries. Elsewhere,
regional cities are the motors of growth of the national economy. Yet in
Britain, most of our big cities outside the capital have lagged behind the rest
of the economy.

instance, in Germany all eight of the biggest cities outside Berlin outperform
the country in terms of GDP per capita. The same goes for all but two of the largest
eight Italian cities. In France, three of the eight outperform the national
average and none fall significantly below it. But for England, seven of the
eight biggest cities outside London underperform – with Bristol the only
exception. Much the same pattern applies when it comes to the proportion of the
workforce educated to tertiary level and to per capita rates of innovation.
Despite the regeneration we have undoubtedly seen in many of our cities over
the last 25 years, there is massive unrealised potential. It is a particular
indictment of the previous Labour government that, over thirteen years in
power, the economic gap between London and the north grew larger not smaller.

It’s a short
step from recognising the importance of cities to growth to recognising that
each of them is unique. Every city has its own history, its own industries, its
own skills and attributes, its own geography, its own culture, its own
politics. When I was growing up in Middlesbrough we used to resent – and were
bewildered by – being bracketed with Newcastle-upon-Tyne by the London-based
bureaucracies when the industries, skills and character of the areas were very

It’s as
crazy to regard each city as the same – and to subject it to a
one-size-fits-all policy designed in Whitehall – as it is to assume that every individual
in the United Kingdom has skills, abilities, resources and responsibilities that
are identical to everyone else. What policy makers must do is to make the very best
of what each has to offer – to help them achieve their potential – not to make
everyone behave the same way.

That’s what
the City Deals do.  They are bespoke to
each city – it’s not a valid objection to say it isn’t done like this
elsewhere, or hasn’t been done like this before. City deals give the right of
initiative to the city, not to Whitehall: for Greater Manchester to invest
billions of local resources in transport improvements in return for a share of
the increased tax take to the Treasury; for Newcastle to regenerate derelict
sites financed through the uplift in business rates they generate; for Leeds to
work with local businesses to give employment or training to each young person;
for Liverpool to create Docklands-style Mayoral Development Zones to breathe
new life into neglected areas of the city.

As with any
deal, a City Deal can only be agreed if it offers value to both parties to the
transaction: in this case, the city and the nation. It requires negotiation, tangible
commitments on both sides, and due diligence to ensure that claims made are not
fanciful but dependable.

The first
wave of City Deals was concluded within a year and set a new direction for the
relationship between central Government and cities. Now twenty more cities will
have their chance to negotiate deals with the Government. Based on the local
enterprise partnerships these are: the Black Country; Bournemouth; Brighton and
Hove; Greater Cambridge; Coventry and Warwickshire; Hull and Humber; Ipswich;
Leicester and Leicestershire; Milton Keynes; Greater Norwich; Oxford and
Central Oxfordshire; Reading; Plymouth; Preston and Lancashire; Southampton and
Portsmouth; Southend; Stoke and Staffordshire; Sunderland and the North East;
Swindon and Wiltshire; and the Tees Valley.

This is the
latest stage in a quiet revolution in British economic policy, in which the
contribution of particular places to growth is recognised alongside countrywide
macroeconomic and microeconomic polices – and in which the Treasury is a force
for change.