Why we should let cities and regions forge their own futures


In my job as Shadow Business Secretary, I have travelled to some of the fastest-growing regions of the world to build trade links and learn policy lessons. One thing in particular has become evident to me on my travels: cities and regions are leading the way in driving growth and raising living standards. 

Lagos, with its film studios and chemical firms, has become the business and cultural hub of West Africa. Shanghai, like some huge vacuum cleaner, sucks international investment into China. Tel Aviv's IT firms are churning out computer programs used in businesses the world over.

Over Easter I was in the United States where Martin O'Malley, the former Mayor of Baltimore and current Governor of Maryland, has led the way taking his state to the top of the league tables in research and development. All three areas have known their fair share of adversity, particularly during the 1970s and 1980s (just like my home town of London), but have been beating back their problems by finding smart new ways of paying their way in the world.

Around the world, cities in particular are on the march. As Edward Glaeser at Harvard University argues: "Despite the technological breakthroughs that have caused the death of distance, it turns out that the world isn't flat; it's paved. The city has triumphed." Cities, he writes, "have survived the tumultuous end of the industrial age and are now wealthier, healthier and more alluring than ever."

Two factors explain cities' effectiveness.

Specialism and growth

The first is specialism. It is often said that globalisation leads to homogenisation. That is wrong. Consider Tech City in London. It is a product of its unique surroundings: the links to global markets forged by talent attracted from abroad to London, a good broadband infrastructure by dint of its proximity to the world financial services centre - the City of London - and a culture of creativity and innovation borne of London's distinctive make-up and lifestyle.

Though we should not obsess with Tech City (as some do) and other cities like Nottingham are developing their own versions, Tech City is proof that place matters. It shows us that while people in all corners of the world may be working their way to Western living standards, how they create their prosperity is anything but homogeneous. Specialisation - focusing on where you have a competitive edge and comparative advantage rather than generalisation -  pays dividends in the international economy. As the flow of imports and exports accelerates, countries and regions can concentrate their efforts on producing the services and goods that they are best at, then trade them for the other things that they need.

Such specialisms arise from distinctive combinations of geography, demography, institutions and policy. According to Professor Richard Florida, the Toronto University urban studies theorist who coined the phrase "the creative class", these strengths flourish where there are self-reinforcing networks of knowledge, suppliers and support, where people of different backgrounds and disciplines come into contact and discover new ways of doing things. That is why cities are the growth machines of the 21st century: they harness specific local strengths and turn them into clusters of expertise and innovation.

These machines work best when they run themselves, which is why we asked Andrew Adonis to carry out an independent review into how to push power down, decentralise and promote better balanced growth across all regions and cities of the UK.  One-size-fits-all policies, devised within remote departmental silos, are simply incapable of nurturing specific local strengths. Cities need cross-cutting government close to the relevant issues. Chicago under Rahm Emanuel is an example of the virtuous cycle in action. Emanuel has used the office of mayor to pinpoint local strengths and the barriers to their fulfilment, then systematically bulldozed the obstacles. Having locked on to his city's potential as a high-tech hub for industries across the Midwest, he has channelled resources into providing free office space, mentoring and a world-leading incubator for high-tech start-ups. He has toured the top American computer science and engineering colleges to recruit talented graduates to come to Chicago. And he has made his municipality the first in the United States to put computer science at the core of the school curriculum. We need to learn from this.

Another notable example is Eindhoven in the Netherlands, which bounced back from a long decline in the 1980s and 1990s thanks to a "Horizon" programme designed to reboot its unique innovation strengths - by setting up a high-tech campus to attract like-minded firms, for example. Today the city, which comprises only 4 per cent of the national population, generates 37 per cent of Dutch patents.  Bruce Katz and Jennifer Bradley, the authors of The Metropolitan Revolution, a key text on the urban revival, explicitly attribute the success of Horizon to the flexibility and autonomy that the federal structure of the Dutch state affords local elected bodies in places such as Eindhoven.

Democracy and trust

This points to the second crucial factor in cities' success: democracy.  Governments succeed when they win voters' trust and transcend the partisan bickering which characterises too much of the debate at Westminster. City-level administrations are especially good at doing both of these things. They often command people's trust because, in the words of Michael Bloomberg, the former mayor of New York: "We're the level of government closest to the majority of the world's people. While nations talk, but too often drag their heels, cities act." Echoing these sentiments, Benjamin Barber, an American political theorist, writes that cities "can engage citizens locally and directly in deliberation and governance" because they constitute "a pluralistic but dense civic domain where participatory citizenship can dynamically complement representative institutions."  It should therefore come as no surprise that, according poll taken by Ipsos MORI in January last year, 11 per cent  of British people trust decisions made in Whitehall, but 79 per cent trust those made at an urban or regional level. So, at a time when we emerge from yet another set of local and European election results illustrating people's distrust and anger at the system, there is not only a strong economic incentive to push power down but a strongly political one too.

It is often the immediate, practical challenges of running a city that require politicians to work across political boundaries in order to get things done. Consider Lord Heseltine, the Conservative whose collaboration with Liverpool's Labour council over the years led to him being awarded the Freedom of the City by the Labour administration there in 2012. Or consider the work of the cross-party London Councils body, which has rolled out its successful apprenticeship scheme across Labour- and Conservative-run boroughs of the capital. As Bloomberg puts it, "mayors around the world tend to be pragmatists and problem-solvers, not partisans." This has to be right and runs with the grain of public sentiment - people are less tribal, do not identify with political parties as strongly as they once did.

Winds of change

This two-part argument - highlighting the economic and democratic dynamism of cities put in charge of their own destinies - could hardly be more relevant to the United Kingdom. The country is too centralised. 70 per cent of spending is done by central government, compared with an OECD average of 48 per cent. All but one of our largest eight regional cities have a GDP per capita below the national average, a sure sign that we are missing out on the full benefits of the new urban age. According to an Ipsos MORI poll taken last June, 23 per cent of Britons say they trust parliament (although 51 per cent say they trust their local MP). The United Kingdom is crying out for decentralisation which is why we will put forward the most radical set of plans to devolve power to English cities and regions in a generation at next year's General Election.

As with any big change, that will bring difficulties and require adjustments on all sides. Responsibilities must be devolved along with rights. Competition between cities is good, but it needs to be a race to the top, not the bottom. Decentralisation will never be uniform, because different regions and cities will want to develop in their own way, at their own pace, and according to local conditions. So government needs to be versatile in its dealings with sub-national authorities to smooth the transition to local control.

For all the challenges, the benefits of decentralisation - particularly to cities and city-regions - are too great to ignore. Over the past few years British public policy has started to shift in this direction: first tentatively, then more confidently. The success of devolution to London has encouraged other cities to move in the same direction. Liverpool, Bristol and Leicester now all have mayors. Other cities are likely to follow in the coming years. And city economic regions are becoming more integrated, too, with Manchester's combined authority leading the way. West Yorkshire, Sheffield and Liverpool all created their own combined authorities on 1 April (the North East urban region is expected to do so later this year.) As a next step, some cities may choose to go down the route of powerful, American-style "metro mayors" covering an entire city region - an option that the RSA's important City Growth Commission has been examining recently. In the words of Julian Lewis of Leeds Council: "We have seen that London started a process of devolution 14 years ago. We have seen the tremendous growth that has happened there. We want to be part of that programme."

As cities become more confident and autonomous, evidence of their innovativeness is proliferating. Labour's Local Government Taskforce, which will publish its final report in the coming weeks, brought together myriad examples of urban authorities pioneering new ways of solving old problems. Liverpool city-region's Skills for Growth scheme is just one. A group of councils in the city's economic area has set up a Labour Market Information Centre to map businesses' current and future workforce needs. This informs the councils' skills provisions covering crucial growth sectors, such as advanced manufacturing, the SuperPort and tourism.

Towards devo-default in England

The next steps for decentralisation are already emerging. In April Ed Miliband announced that the next Labour government will hand control of at least £20 billion of funding from Whitehall to city and county regions, in line with the recommendations made by Lord Heseltine in his seminal report No Stone Unturned. This contrasts starkly with the coalition government, which has largely ignored them.

The Catapult centres devised by the last Labour government are going from strength to strength, which is why in March I announced that we want to give them a larger role in providing apprenticeships. And - to be fair - although the coalition has fallen far short of its decentralising rhetoric (by brushing aside the Heseltine report, for example), its City Deals rightly build on the new ground opened up by the Total Place scheme launched by John Denham as Communities Secretary.

None of this is to say that national government can simply abdicate its responsibilities. In fact, rising cities demand entirely new feats of Whitehall. The work of devolution to cities and LEPs is itself a great logistical challenge. The centre also has a role in creating national transport and aviation strategies that link our regional cities together and with key international locations - a measure on which the United Kingdom lags far behind its European competitors. It can also help cities by channelling private investment in their direction, like Germany's state-owned KFW-Kommunalbank, which levers capital into urban transport and economic development projects. And it can use procurement policies to boost industrial capacity. More broadly, it can provide a clear and consultative policy-making environment in which urban leaders can lay and execute long-term strategies.

A simple principle emerges from all of these observations. For much of the past 50 years, governments of left and right have pursued a policy which we might call "centre-default". This is to say that they have kept power in Whitehall, only devolving it when presented with particularly compelling reasons to do so. The logic of recent trends (and empirical evidence supporting city and regional leadership) is that the new approach should be "devo-default" - a shift of the burden of evidence from decentralisation to centralisation. Our assumption should be: wherever there is a case to devolve power, you should require a very good reason to say no. This approach would also be consistent with our advocacy of subsidiarity at a European level too.

The power of place

In the United Kingdom today we face several big questions. How do we ensure that a growing economy raises living standards for ordinary people struggling with the cost of living? How to rebalance an unbalanced economy? How to reengage people with the political process? How to reduce endemic inequality? How to pay our way in a fast-changing world? Devolution to our cities and city regions is a big part of the answers to all of these. It helps to rebalance the economy, bring government closer to people, curb inequality (as the economist Christian Lessmann has shown) and boost international competitiveness.

What is more, the UK is uncommonly well-placed to benefit from these advantages. We are a particularly metropolitan country - according to the World Resources Institute some 90 per cent of Britons live in urban areas, compared with some 83 per cent of Americans and 76 per cent of Germans. We have a strong tradition of municipal leadership and specialisation to draw on - great Victorian city leaders like Joseph Chamberlain in Birmingham made the United Kingdom the workshop of the world in the 19th century, with each major metropolis concentrating on specific industries. By international comparison our cities are also unusually good at integrating diverse populations, thanks to which they have well-established links to some of the fastest-growing regions in the world. And the strength of our university sector means that most have a globally competitive knowledge base to build out of.

It is time, then, for British cities and city-regions to take their destinies into their own hands. It is heartening that so many are doing so already, and that there is so much political energy behind them. For too long, they have lacked the powers to specialise, innovate, engage with their citizens and build links with the rest of the world that their counterparts abroad have enjoyed. I am confident that in the future the leaders of Manchester and Chicago will meet on equal terms; so too those of Southampton and Shenzhen, or Glasgow and Sydney, or Milton Keynes and Munich. The new era of the city is benefiting people across the world. We would be mad to miss out on it.