Cloning London won’t create a ‘Northern Powerhouse’. Here’s what will

Joe Wright, 20 May 2015

The Northern Powerhouse strategy could be a very positive legacy of this Conservative government, particularly for the Chancellor – if they can get it right. At its core is devolution of powers to northern cities and connecting them up to create a power which can compete internationally. The first part rights a thirty year wrong. Centralisation began in the 1980s as a means for Mrs Thatcher to force through her policy programme. She believed the only way to curtail traditional power structures – trade unions and local councils – was through centralisation.

Tom Clougherty of the Adam Smith Institute described it as first ‘liberation of the economy from the unions and the post-war socialist consensus’, followed by an ‘altogether more malign…massive centralisation of power in Whitehall, the destruction of local government, and the rapid proliferation of quangos, regulations, and targets…our everyday lives are now dictated by central government to an extent that would be unthinkable in most other countries’.

Redistribution of these powers stands alone as significant. Successive governments attempts to devolve power have been met traditionally with substantial cynicism. Regional Assemblies were rejected in 2004, as were city mayors in 2012 by Birmingham, Manchester and Leeds among many others; the offer of more funding and powers has since attracted council leaders to the cause. Devolution might even restore a little more democratic engagement once people can see a direct connection between voting and local change.

The second part of this strategy aims to replicate the South’s model by ‘corralling’ the North’s 15 million people into a collective force. The Chancellor has chosen Greater Manchester as a northern capital, much to the annoyance of Yorkshire and Liverpool. It will also elect its own Boris Johnson in 2017 to champion its cause internationally.

But is the same economic model right for the North? Would the region, or the UK, benefit from another metropolitan revolution – a northern ‘Flat White Economy’?

Rebalancing was meant to be applied as much between sectors as it was between regions. This strategy does not tailor itself to the North’s strengths – manufacturing, science, technology and services. And putting aside the traditional rivalries between the cities, combining isn’t necessarily a model which suites the majority. Indeed, there is considerable worry that rapid expansion in larger cities will mark the end of smaller ones.

More creative thinking is required than replicating what has worked for the south. There is ample opportunity in new energy innovations such as Small Modular Rectors, for example, which can bolster economic growth and help diversify Britain’s economy.

Kick starting innovations in new technology is important. The coalition flirted with the idea but remained overly cautious, constrained by the accepted narrative that government ‘picking winners’ was a fool’s game (challenged by Civitas here). George Osborne was an enthusiastic supporter of grapheme, funding two new institutes in Manchester to get the material to market. It is more of this kind of support – along with devolution – which the UK as a whole needs.

A better strategy would be to ensure the local funding is there for business, as well as international investment. As exemplified in the British Business Bank, government is yet to embrace a more localised attitude finance. If not a series of regional banks then at least a Northern British Bank would ensure finance was tailored to business needs.

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