Well, how about that? No sooner do I write a nice positive article last Thursday about training group Xpertise than it attracts a take-over bid and the shares gain 85%!

Since when, with a long weekend away from the thrills and spills of the small company world, I have been turning my attention to a report called ‘Cities Unlimited — Making Urban Regeneration Work’.

Any such report that meets with universal condemnation by politicians from all sides has clearly got something right and this one has been branded as a ‘complete load of rubbish’ by David Cameron, ‘vindictive and anti-northern’, by Redcar MP Vera Braid and ‘insulting and ignorant,’ by John Prescott.

Here in my home city it has not gone down too well either because one of its conclusions is that the population of Oxford should be increased to the tune of one million folk in cloth caps going about muttering ‘Ee Ba Gum’ and ’Ha’Way the Lads.’

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The Report has re-opened the north south divide and embarrassed the Conservative party which originally established its author, an academic think tank called the Policy Exchange. But having read it from cover to cover — which I dare say is more than can be said for many of its critics — it maddens me that politicians have so swiftly dismissed its well-founded conclusions.

Economics does not always provide answers that politicians find very palatable. Over the years we have seen a series of barmy and ultimately self-defeating economic interventions such as EU farm subsidies and mortgage tax relief.

A present day example is the UK’s Housing Market Renewal Programme. This brainchild of John Prescott means to spend hundreds of millions of taxpayers’ money knocking down thousands of perfectly good houses and building new ones in their stead.

Applying economics rather than local politics to the problem, ‘Cities Unlimited’ suggests that any empty home should be bought by the government and then sold to the neighbour on the understanding that he will then make the necessary alterations to merge the two houses into one. This improves the overall housing stock, reduces its quantity in an area of decline without simply destroying something of value, and stymies speculators who buy run-down properties on the cheap and then wait for the government to buy them at full market value.

Another innovative application of economics is proposed to win over ‘not in my backyard’ objectors to new housing development. The report suggests that the residents of Guildford — for example — could be induced to vote for extra homes in the area if some of increased value arising from the grant of planning permission was paid to them.

Another hard-headed recommendation is for more land in the south-east to be re-allocated from industrial and commercial to residential use. Here the report cites Richmond as a local authority that prides itself on its resistance to further residential development despite the fact that it has one of the lowest unemployment rates anywhere and that ‘48% of local jobs are taken by incoming commuters resulting in problems of traffic intrusion and congestion.’

So in pursuit of their own idea of what constitutes a ‘balanced community’ Richmond’s local government officers wilfully ignore pricing signals and permit twenty-five hectares of land to be used for warehousing that could otherwise command a much higher value for housing.

The other side of this coin is that industrial employment in the south east is effectively receiving a huge subsidy because employers are not required to pay anything like the market value of the land that they are using.

These are some of the details within a report that has two main thrusts. The first is that spending decisions on local regeneration projects should be made by local government and not by Whitehall.

And the second and much more controversial element is that the Government should sanction a large shift of the population towards the south east, Oxford and Cambridge, the latter on the basis that ‘the strongest foundation for cities with global reach is that they are based on exceptional skill levels that cannot easily be replicated elsewhere’. Boston, which has thrived thanks to its proximity to Harvard and the Massachusetts Institute of Technology, is given as an example.

This has gone down like a lead balloon in northern cities but the economic reasoning of ‘Cities Unlimited’ is hard to fault. Politicians should start by accepting that the rise and fall of regions is inevitable.

Boom... then bust

At the start of the 19th century Liverpool and Manchester were around the size of Oxford and Cambridge today. Over the course of the century they grew five-fold thanks to their proximity to coal and to imports of cotton coming in through the port of Liverpool, and I don’t suppose that the government of the day thought it necessary to ‘regenerate’ the areas that the itinerant labourers had left behind.

Seaborne trade boomed so coastal locations were an advantage and between 1850 and 1950 Sunderland was the largest shipbuilding town in the world. As the Report points out places such as Corby and Daventry would have made little sense as employment centres in the nineteenth century, but today they do.

Patterns of trade have altered. Proximity to the road and rail network is now much more important than access to the sea. Futhermore, thanks to information technology manufacturing does not generate as many jobs for an area as it used to.

Although the Nissan plant in Sunderland is held up as an example of what can be achieved in terms of local economic regeneration, Nissan’s design studios are in London, its Technical Centre Europe is in Bedfordshire and some of its finance operations are in Budapest. There is a natural migration of types of work to places where it can best be done, and it is foolish to attempt to stand in the way.

The whole make-up of the UK’s economic output has changed. Manufacturing and farming have been in decline for years, while London’s growth has been powered by the City and other service industries such as media.

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Evidently workers in service industries like to be close to each other. Despite the possibilities for home working, advertising executives, bankers, brokers and TV producers still travel to the City and Soho each day to rub up against each other.

The Report argues that the optimal size of cities has increased, and can continue to do so until congestion becomes overwhelming. Despite complaints from London’s travelling public it is clear from the demand for housing in London that this barrier has not yet been reached, and so rather than trying to disperse these jobs around the country, as happened with the BBC’s move to Manchester, would it not be better to accept the message of the market and facilitate the expansion of London?

All politicians are hamstrung by their reluctance to say anything that could be construed as ‘anti-northern’. And they are indignant at suggestions that billions of pounds of public money have been wasted on regeneration projects.

The rebuilt road to Wigan Pier

The report quotes Labour Minister Ian McCartney. ‘This Government and the Council have rebuilt Wigan brick by brick over the past decade,’ he said. ‘We certainly don’t need people based three hundred miles away running down the town in this fashion.’

And yet a resident of Wigan responded that ‘a lot of the younger generation in Wigan have no hope for the future’, while another invited McCartney to visit Hindley’s Market Street, ‘with its charming charismatic graffiti, daubed and derelict high street buildings’, and to ‘take a good hard honest look, and on reflection he may then understand why Wigan as a whole cannot climb out of the doldrums and attract economic growth.’

The Report correctly says that it is not enough to simply say that economic regeneration projects have made a difference. As it points out ‘it is almost impossible to spend billions and billions, year in and year out, and achieve nothing at all.’

And yet the economic evidence, measured in such terms as gross value added and employment, shows that the gap between the performance of those towns and cities that have received such assistance and those that haven’t has widened rather than narrowed.

People have voted with their feet and the population of the regeneration cities has continued to fall over the last decade. ‘Regeneration’, implying a rebirth of a growing and thriving society, is quite the wrong word. All that has been achieved is some slowing of an inevitable decline, by using a great deal of tax payers’ money that could probably have been better spent in more imaginative ways.

Rather than the inevitable knee-jerk reaction based on our economic legacy and the old fashioned north-south divide, politicians of all parties should think carefully about how this country’s economic geography can best be aligned with the challenges that lie ahead.

Our links with Europe, our strength in financial and other services, and our established transport network all favour the south-east. Rather than trying to stand in the way of progress politicians should try to promote it.

As an example of what they should do ‘Cities Unlimited’ argues that people from all over the country and not just Londoners should be able to apply for social housing in the capital. This is a recommendation that starkly illustrates the difficulty of combining economic common sense with the need to win electoral votes. But eventually the forces of economic reality will win out. Until then politicians will spend billions of our money attempting to achieve the impossible.

Regards,

Tom Bulford
for The Penny Sleuth

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