The role of place in the UK growth agenda

1. The role of place in the UK growth agenda Version:0.2 Date: 19th February 2013 • Author: Strategy and Communications • Approved by: • Next Review: Contact: Richard Puleston richard.puleston@essex.gov.uk

2. A metropolitan bias in UK growth policy? • In December 2011, HM Government announced its intention to: • “develop tailored deals with our core cities, devolving powers and supporting projects which will boost growth and jobs for the long term”. • Since then we have seen: • city deals agreed with England's eight core cities; • negotiations on a further 20 city deals for wave 2 cities; • sustained government support for the development of HS2; and • a range of wider policy measures to promote growth focused exclusively on England’s cities.

3. What opportunities have been extended to cities?

4. Greater powers and incentives to invest in growth Earn Back: a new payment by result model that incentivises a city to invest in growth in return for a share of the national tax take. (Greater Manchester) New Development Deals: the freedom to deliver critical infrastructure through tax increment financing, with the ability to borrow against future business rate income in key development zones. (Newcastle, Sheffield and Nottingham) Economic Investment Funds: the power to pool multiple funding streams and business rate income into a single investment fund, leverage private sector capital and invest in local priorities. Cities will be able to create self-sustaining investment funds that will reduce dependence on central government grants. (Greater Birmingham and Solihull, Bristol and West of England, Greater Manchester, Leeds city Region, Liverpool City Region and Sheffield City Region) Greater levers to deliver skills and jobs Local skills funding model: a new model of skills funding that will match local contributions (public and private) with national funding to provide a skills budget that cities will control to invest in the skills that local businesses need. (Sheffield City Region) Outcome incentives: new models to give cities greater influence over the skills system by using incentive payments or payment by results. (Greater Manchester and Liverpool City Region) City apprenticeship hubs: enabling cities to boost apprenticeship numbers by supporting SMEs take on apprentices through Apprenticeship Training Agencies, brokerage and incentive payments. (Bristol and the West of England, Greater Manchester, Leeds City Region, Newcastle and Nottingham) Localised youth contracts: local alternatives to the national 16-17 youth contract programme, with cities having the power to design and deliver local models to reduce NEETs. (Leeds City Region, Liverpool, Newcastle) Skills Bank: an employer owned mutual that will match public sector funding with private sector investment and allow businesses to buy the skills and apprenticeships that their local economy needs. (Liverpool City Region)

5. Greater powers to drive critical infrastructure Rail devolution: increase city control over rail services by devolving greater responsibility for commissioning and managing franchise arrangements for local and regional rail services (e.g. Northern Rail). (Bristol and West of England, Leeds City Region, Greater Manchester and Sheffield City Region) Devolution of local transport majors funding: matching local resources with devolved transport budgets so cities have the power and resources to make strategic transport investments. (Greater Birmingham and Solihull, Bristol and West of England, Leeds City Region, and Sheffield City Region) Greater freedoms and powers to support local businesses Local venture capital fund: a localised model that will match national funding with local contributions to create a venture capital fund that will invest in high tech start up and growth businesses across an economic area. (Nottingham) Business Growth Hubs: city led business hubs that bring together all the support, advice and services that investors and local businesses need to locate, grow and trade. (Greater Manchester and Bristol and West of England) Localised asset management: joint investment programmes that bring together local and national assets in an economic area to unlock resources for housing development and regeneration (Greater Birmingham and Solihull, Bristol and West of England, Greater Manchester, Liverpool and Newcastle). Broadband: Resources to deliver super fast broadband across cities. (Bristol and West of England, Greater Manchester, Leeds City Region, Newcastle, Greater Birmingham and Solihull). Low carbon pioneering cities: local programmes that will help cities make critical investment in green infrastructure and technology; generate low carbon jobs; and accelerate reductions in emissions. (Greater Birmingham and Solihull, Leeds City Region, Greater Manchester, Newcastle, Nottingham)

6. Youth Unemployment Fund Twenty-eight cities in England are to share a £50m fund to develop local programmes to tackle youth unemployment, the government has announced. Among the schemes, the single largest award is £5.9m to the Liverpool City Region. This will be invested in a new payment-by-results scheme targeted at helping the most disadvantaged into work. Other large awards include £5.8m to Greater Manchester to provide personalised training for people aged 18 to 24 and a local transport-to-work guarantee. In addition, £5m will be provided to the Sheffield City Region to offer intensive advisor and mentor-led support for young people, and £4.6m to Leeds to provide intensive support for those at risk of long-term unemployment. The resources for the Youth Employment Fund have come from HM Government’s failed Youth Contract programme – a national scheme designed to support communities in all areas of England. University Enterprise Zones University Enterprise Zones aim to encourage universities to engage further with business and with Local Enterprise Partnerships in driving growth at local level, and to encourage businesses with innovation potential to engage with universities. They are also designed to encourage investment in buildings on science parks providing office, workshop and laboratory space for small firms (incubator and grow-on space). The pilot comprises £15 million capital funding over three years, with additional support from UK Trade & Investment to attract overseas investment to the EZ. The success of the new zones will be seen in increased numbers of innovative small businesses clustered around and engaging with universities It is anticipated that the £15m fund will support 3-4 enterprise zones with a maximum bid per pilot of £5m. But only universities in the eight core City LEPs are eligible to apply.

7. So what’s special about cities?

8. Cities have the capacity to act as engines of growth… Output (GVA) by area type, 2011 Yes - but non-metropolitan England accounts for over half of output outside London… …and productivity tends to be higher in non-metropolitan areas. Counties London Other Source: Shared Intelligence 2013 Productivity in core-cities and other spatial economies, (£s GVA per head) 2009 Source: ONS 2011

9. Cities support clustering… …and yet other areas of England exhibit at least as much clustering as many of our wave 1 city deal areas… Number of highly and fairly clustered sectors in city and non-city areas, 2010 Source: ECC analysis of Business Register and Employment Survey 2010, ONS. …the benefits of exploiting ‘agglomeration economies’ by bringing together clusters of firms and employees can be enjoyed across the range of places.

10. Cities are at the heart of the UK knowledge economy… …but the proportion of workers in knowledge intensive sectors is higher in many non-metropolitan areas. Proportion of workers in knowledge intensive sectors by type of place, 2010 Source: ECC analysis of Business Register and Employment Survey 2010, ONS.

11. Cities have unique access to HE, ports and airports… …but there are more degrees undertaken in non-metropolitan universities. …seven of England’s ten business ports (by freight traffic volumes are in county areas… …and almost all areas of England are within 90 minutes of an international airport. Source: City Limits, ECC 2011

12. Why does this matter?

13. An opportunity missed? An artificial limitation on national recovery? A sustainable recovery cannot be restricted to cities - restricting access to growth promoting policy levers means restricting growth rather than unlocking it. Given that non-metropolitan England accounts for more than half of all Gross Value Added (GVA) generated outside London, local growth policy must recognise the role that partners across different places can play in securing a sustainable economic recovery. Inequality in democratic opportunities Cities enjoy greater effective freedoms, growth incentives and localised Whitehall budgets than their peers in other areas. By continuing to devolve opportunities to a narrow set of areas, HM Government risks defining access to decision-making power based on an arbitrary taxonomy of areas rather than by reference to need and the economic return to UK PLC. Growing socio-economic inequalities Any additional growth unlocked through devolution can fund public services designed to help address socio-economic challenges . Indeed, the local government funding system makes this link explicit. By devolving powers to cities , rather than to all areas, current policy could undermine the ability of some places to support deprived communities and cope with the demand-led pressures of a rapidly ageing population.

14. Many places have a record of supporting growth… • In Essex alone we have: • Supported 140 SMEs through our Skills for Growth programme this year. These businesses project that the programme will open up £8.6million in new business. • Over 2,600 apprenticeships supported with Essex business – delivering an economic impact of £355m over four years. • Secured an economic legacy from the 2012 Olympics Games, delivering supply chain opportunities to Essex firms and establishing physical infrastructure in South Essex and around Essex’s Olympic venues. • Safeguarded hundreds of jobs each year through our work to help local businesses trade internationally, explore overseas markets and secure inward investment • Focused highways investment on the routes that matter most to local businesses – ensure more than 90% of our priority route network is defect free.

15. …but have struggled to unlock opportunities with HMG • Essex’s ‘Deal for Growth ‘ • As part of its Whole Place Community Budget Pilot, public and private sector partners across Essex, and with the support of the South East LEP, attempted to strike a deal with HM Government that would enable local partners to: • create a £1bn revolving infrastructure fund; • redesign local skills services through the devolution of funding and powers (making provision employer driven and developing a payment by results model for providers); and • reinvest the proceeds of growth, including localised NNDR growth across Essex, with 100% retention of NNDR growth in key locations. • If the Government had engaged with this proposed Deal, local partners estimate that the Deal would have unlocked an additional 60,000 jobs and 25,500 new homes in Essex, Southend and Thurrock. • Northamptonshire’s 10 point plan • NCC worked closely with its LEP to devise an extensive plan for fiscal devolution with a ‘growth offer’ and asks from Government including: • a ‘Single Capital Pot’ to align with existing governance and accountable body activities; • 75% of the uplift in tax receipts generated business support fund to be retained locally for reinvestment; and • better investment of devolved funding on skills through the Northamptonshire Skills Board. • The partnership estimates that devolution of the necessary powers, freedoms and centrally retained funding could result in 70,000 new jobs over the next 15 years and the potential for 80,000 more homes. With Government support, the plan could see Northamptonshire contribute more than £20bn to the UK economy by 2020. • Localised Youth Contracts in Buckinghamshire • Buckinghamshire County Council has petitioned HM Government to increase local involvement in Youth Contract provision. It argued that this would better support for young people and those not in education employment and training. • In Buckinghamshire – and in other areas – many are excluded from the national programme, whilst half the fund (£50m) is allocated to the Core Cities & City Regions. • Buckinghamshire partners argued for powers that would allow them to: • establish apprenticeship hubs; • develop incentive schemes for small businesses to take on apprentices, and • increase local influence over how Skills Funding Agency resources to increase the supply of much needed intermediate technical skills training.

16. How can non-metropolitan England compete? Focusing on the long-term Developing new models of accountability Making the case to Government • a strong voice to speak for all places – not just the core cities. • effective engagement with the Cabinet Sub-Committee on local growth. • securing improved outcomes - demonstrating the case in practice rather than through lobbying alone. • developing local growth plans/strategies for the long-term. • advancing these plans through engagement with sub-national structures whatever form these take (e.g. LEPs, RDAs). • Arguing the case for place-based growth over (at least) the next two parliaments. • accepting changes in local governance to give Ministers confidence. • pursuing alternative governance models, and developing new models that can work in different types of place.

17. This report has been prepared by Essex County Council’s Strategy function If you have any questions on this report please contact Alastair Gordon By email at: alastair.gordon@essex.gov.uk Or by telephone on: 0333 0136 125 Or by post at: Essex County Council, Strategy function PO Box 11, County Hall, Chelmsford, Essex CM1 1QH