It's time to improve England's system of governance

By:
20 Mar 17

There is a widely-held view that we shouldn’t talk about the structures and institutions of the so-called northern powerhouse.

This view is promoted primarily by those who currently hold the reins: city leaders and chief executives, big businesses, government ministers and civil servants.

But there is increasing evidence that the northern economy can only flourish when it has the institutional capacity to drive its own industrial strategy: England’s weak sub-national institutions lie at the heart of our severe regional imbalances.

The evidence is best exemplified in the work of Phil McCann, now at the University of Sheffield.

To summarise the incredibly detailed analysis laid out in his most recent book. It makes three key points:

1. The UK’s weak long-term productivity is principally a result of the differential effects of globalisation on different parts of the country. There has been a very poor transition of economies outside London from their industrial pasts while the benefits of globalisation have remained confined to London and its hinterland. For too long the former problem has been masked by the latter success. As a result, "the UK economy is not only diverging but it is now disconnecting, decoupling and dislocating into two or possibly three quite separate economies". London has become insulated and isolated from the wider economy, something likely to be exacerbated by the UK’s departure from the EU, while policy and practice has wrongly assumed that the success of the capital city brings aggregate benefits to the rest of the economy.

2. Explanations for poor productivity performance outside London have tended to be weak. There is little evidence of problems being associated with cities being undersized; educational differences are too small to explain the size of the productivity gap; and if there is a brain-drain then it is "tiny and also remarkably stable … Human capital and spatial sorting explanations provide few clues as to the UK’s interregional experiences" as is the case with knowledge spillovers, financial and fiscal linkages too. McCann argues that most of the common diagnoses put forward concerning the North–South divide are actually the symptoms rather than causes of the problem.

3. Perhaps most crucially for the North, the fundamental problem facing the UK economy is that with high levels of regional differentiation and inequality caused by the differential effects of global shocks, there is insufficient regional autonomy in order to mobilise the appropriate local players, institutions, knowledge and capital in order to develop effective responses.

The core argument is that British regional policy and industrial strategy has stumbled on account of its failure to address issues of subnational governance and its poor awareness of the economic geography of the nation.

This argument is all the more compelling when we consider that the two ‘economies’ of the UK which have demonstrated the greatest relative success are London and Scotland where higher levels of subnational autonomy have enabled them to maximise their local economic advantages in relation to financial and professional services in the City of London and as regards oil and gas in Scotland. Important as they are LEPS – even in the most promising city regions – are simply too small to punch their weight in the global economy.

In another crucial insight from McCann’s data analysis, he reveals that the UK has a ‘regional’ more than an ‘urban’ problem and identifying the appropriate scale for tackling our economic imbalances is key for building institutional capacity.

IPPR North has long argued that the £300bn northern economy – twice that of Scotland – with 15m people and 1m businesses is well-placed to compete with the most successful and similar-sized nations and states, it has a geography that can transcend the most obvious parochial and political rivalries, and crucially it provides a viable platform for fiscal devolution at scale.

It simply needs stronger leadership and a Great North Plan. So what then of the institutions that might be needed?

Our proposal is for a Council of the North. Made up of the same 19 constituent members of the current Transport for the North board and with similar voting mechanisms it avoids the need for a ‘new layer of politicians’. It should also have a very clear and narrow remit to develop and implement a Northern industrial strategy acting as a go-between between government, combined authorities and other more functional agencies such as Transport for the North.

But any serious governance requires democratic legitimacy, particularly if it wants to have any role in relation to public finances. Again, transcending political challenges and looking to 21st century models of democratic innovation, we propose a Northern Citizens Assembly, its members chosen by lot, to hold the Council of the North to account and give it some broad direction.

The precise form either of these new institutions might take is worthy of much further debate but, unpopular as it may be, the time has come for England to face up to its governance problems. If we fail to do so all hopes for our new industrial strategy will fall flat.

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