Key issues in economic development

EDAS and SLAED Conference, Aberdeen, 1 December 2016

Andy Pike

Henry Daysh Professor of Regional Development Studies

andy.pike@ncl.ac.uk

Outline

• What’s it all for? New economic development priorities and paths

• Changing rationales for policy intervention

• Institutions and governance

• Deals and deal-making

• Austerity and the new municipal entrepreneurialism

• Economic development futures…

What’s it all for? New economic development priorities and paths

Spatial disparities in the UK in context, 1995-2012

Source: Cambridge Econometrics

Divergent growth amongst major UK cities, GVA per capita 1981-2013 (PUAs)

Source: Cambridge Econometrics

Divergent Growth amongst Major UK Cities, Employment, 1971-2013 (1971=100)(PUAs)

Source: Cambridge Econometrics

“…need to rebalance the economy across sectors and areas in order to spread wealth and prosperity around the country” (Theresa May, Speech to the Conservative Party Conference, 5 Oct 2016)

Evolving geographies and institutions…

The ‘hourglass’ labour market

Source: UKCES (2014) The Labour Market Story: An Overview, UKCES: Rotherham

Inclusive growth

Changing rationales for policy intervention

Conventional – correcting market failures

• Efficiency

• Equity

New and emergent rationales…

• Economic potential and revenue streams

• Low skills equilibrium

• Co-ordination failures

• Resilience

• ‘Industrial strategy’

• Demand complementarities

Demand and supply-side

Supply-sideProduction

PushAggregate supply

(Dis)connectingDemand-sideConsumption

PullAggregate demand

(Mis)matching

Institutions and governance

Multiple and competing goals ofdecentralisation

Source: Pike, A. (2010) Understanding and Measuring the Governance of Local Development Policy, OECD: Paris.

Forms of decentralisation

Centre

Region

Powers Resources

Reserved

Shared

Decentralised

Central control

Negotiated

Regional discretion

Average number of metropolitan governance bodies created or reformed in OECD countries per decade

Source: Kim, S-J., Schumann, A. and Ahrend, R. (Forthcoming) “What governance for metropolitan areas?” OECD Regional Development Working Papers, OECD: Paris.

Share of metropolitan governance bodies active in policy field

Source: Ahrend, R., Gamper, C. and Schumann, A. (2014) “The OECD metropolitan governance survey: a quantitative description of governance structures in large urban agglomerations” OECD Regional Development Working Papers, No. 2014/04, OECD: Paris.

Pendulum swings in economic development governance in England

Evolving economic development landscape in England

Source: NAO (2014)

Deals and deal-making

City Deals

Waves 1, 2 and 3…

Source: Deputy Prime Minister’s Office and Cabinet Office

Wave 1 Wave 2 Wave 3…

Greater Birmingham The Black Country Glasgow and Clyde ValleyBristol Region Bournemouth AberdeenGreater Manchester Brighton and Hove InvernessLeeds City Region Greater Cambridge Cardiff Capital Region

Liverpool City Region Coventry and Warwickshire StirlingNottingham City Region Hull and Humber Edinburgh?

Newcastle Region Greater Ipswich Tay Cities?Sheffield City Region Leicester and Leicestershire Swansea Bay City Region?

Milton KeynesGreater NorwichOxford and Central Oxfordshire

Thames Valley BerkshirePlymouthPreston and LancashireSouthampton and Portsmouth

SouthendStoke and StaffordshireSunderland and the North EastSwindon and WiltshireTees Valley

City Deal geographies, 2016

Source: O’Brien, P. and Pike, A. (2016) ‘Deal or no deal?’ Governing urban infrastructure funding and financing in the UK City Deals, Draft Paper, CURDS, Newcastle University

Population in City Deal ‘areas’, 2016

32128398; 51%

30622502; 49%

City Deal areas Rest of GBSource: O’Brien, P. and Pike, A. (2016) Deal or no deal? Governing urban infrastructure funding and financing in the UK City Deals, Draft

Paper, CURDS: Newcastle University.

Gross Value Added (GVA) of City Deal ‘areas’, 2016

675648; 45%

816815; 55%

City Deal areas Rest of GB

Source: O’Brien, P. and Pike, A. (2016) Deal or no deal? Governing urban infrastructure funding and financing in the UK City Deals, Draft Paper, CURDS: Newcastle University.

New funding per capita (£) in City Deals, 2016

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Source: O’Brien, P. and Pike, A. (2016) ‘Deal or no deal?’ Governing urban infrastructure funding and financing in the UK City Deals, Draft Paper, CURDS, Newcastle University

Governance models in the City Deals Governance Example

Elected Mayor Liverpool City; Bristol City

Combined Authority West Yorkshire (Leeds City Region)?

Elected ‘metro mayor’ and Combined Authority

Greater Manchester; Sheffield City Region?; Liverpool City Region; North East/North Tyne?; Tees Valley; Greater Birmingham and Solihull

Private sector-led Nottingham

Source: Authors’ research; Marlow, D. (2012) City Deals – Implications for Enhanced Devolution and Local Economic Growth, Policy Briefing, LGiU: London.

38 (Final) Devolution Deal Proposals, Sept 2015

Source: Local Government Chronicle

Funding, powers and responsibilities in Devolution Deals

• Local-centre conduit

• Local ‘empowerment’, central delegation

• Local-centre quid pro quo

• Vision and strategy-making

• Encouragement and promotion of innovation

• Project and programme integration and outcome focus

• Local governance reform device

‘Deals’ and ‘deal-making’ - positives

• Austerity backdrop, the fiscal squeeze and capacity constraints

• Asymmetric information

• Centre as supporter and appraiser

• Negotiating power resides centrally

• Lack of accountability, transparency and scrutiny

• Uneven outcomes of political haggles

• Slippage from announcement to implementation, innovation diluted

• Limited evaluation

‘Deals’ and ‘deal-making’ - negatives

Austerity and the new municipal entrepreneurialism

Source: National Audit Office (2014) Financial Sustainability of Local Authorities, NAO: London

Change in Local Authority spending power and Government funding, 2010/11-2015/16

Temporality Type Examples

Established,

‘Tried and tested’

Newer,

Innovative

Taxes and fees Special assessments; User fees and tolls; Other taxes

Grants Extensive range of grant programmes at multiple levels

Debt finance General obligation bonds; Revenue bonds; Conduit bonds

Tax incentives New market/historic/housing tax credits; Tax credit bonds; Property tax relief; Enterprise Zones

Developer fees Impact fees; Infrastructure levies

Platforms for institutional investors Pension infrastructure platforms; State infrastructure banks; Regional infrastructure companies; Real estate investment trusts

Value capture mechanisms Tax increment financing; Special assessment districts; Sales tax financing; Infrastructure financing districts; Community facilities districts; Accelerated development zones

Public private partnerships Private finance initiative; Build-(own)-operate-(transfer); Build-lease-transfer; Design-build-operate-transfer

Asset leverage and leasing mechanisms

Asset leasing; Institutional lease model; Local asset-backed vehicles

Revolving infrastructure funds Infrastructure trusts; “Earn Back” funds

Funding and financing practices

Changes in % of taxes raised locally, 1975 and 2012

Tax and Spending in UK Cities 2013/14 (£billion)

London Manchester Liverpool Newcastle Sheffield Glasgow Birmingham0

20

40

60

80

100

120

140

160

134.6

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Taxes generated

Source: Centre for Cities (2015) Mapping Britain’s Public Finances, London, Centre for Cities.

Economic development futures…

Growing Places Fund allocations per capita by LEP area, 2012

Source: Author’s calculations from CLG data

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Greater Manchester: from ‘cost centre’ to ‘net contributor’ to the national economy

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2008 2009 2010 2011 2012 2013 2014

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Total GM spend (incl. proportion of national spend) Total GM Tax income

Source: Greater Manchester Combined Authority and Greater Manchester LEP

Multi-actor and multi-level governance

Global — WTO, World Bank

Supranational — EU, NAFTA, ASEAN

National — Nation-states

Sub-national — Regions, City-regions

Sub-regional — Cities, Localities

Community, Neighbourhood

Acknowledgements

This research has been undertaken in collaboration with David Bailey (Aston University), Emil Evenhuis (Cambridge University), Ben Gardiner (Cambridge Econometrics), Louise Kempton, David Marlow, Ron Martin (Cambridge University), Anja McCarthy, Peter O’Brien, Andrés Rodríguez-Pose (LSE), Peter Sunley (Southampton University), John Tomaney (Bartlett School, UCL) and Peter Tyler (Cambridge University).

Structural Transformation, Adaptability and City Economic Evolutions