Greg Clark – 2012 Speech on City Deals

Below is the text of the speech made by the Financial Secretary to the Treasury, Greg Clark, on 29th October 2012 in London at the City Deals Wave Two Launch.

I would first like to thank the Centre for Cities for hosting today’s event.  I can think of no better organisation to help us announce the Government’s plan for unlocking the economic potential of UK cities. Like me, the Centre for Cities is committed to decentralisation, ensuring that cities are given the opportunity to develop bespoke solutions to local economic issues. As the Centre’s Chief Executive, Alexandra Jones, has said previously, the introduction of City Deals represents “the biggest shift in central and local government relations for decades.”

Today the Government is launching the second wave of City Deals. Building on the success of Wave One we are inviting a further twenty cities to bid for a City Deal. But before I go into the detail of today’s announcement I’d like to reflect on the success of Wave One, the principles behind Wave Two and the process I am launching today.

It would be fair to say that people were at first sceptical about City Deals. In fact, the motto of the Royal Society, in whose magnificent hall we stand today, ‘Nullius in verba’, which roughly translates as ‘take nobody’s word for it’, pretty much summed up people’s reaction when we launched Wave One ten months ago. And yet now Wave One has exceeded all expectations.

I think the figures speak for themselves. The deals agreed earlier this year will create up to 175,000 jobs and 37,000 new apprenticeships.  But what has been achieved is about more than simply numbers. It is about no less than a transformed relationship between national and local government, in which cities, not just Whitehall, have the right of incentive over new policy.

I am delighted these deals have been agreed and I am committed to ensuring they are implemented with vigour.

Why City Deals?

To prosper, and for people to realise their ambitions, we need to grow. We need the right macroeconomic environment – a sound economy with low interest rates – and the right microeconomic conditions – competitive taxes, labour laws that are flexible and workforces that have the right skills.

But, or course, growth doesn’t take place in the abstract , at a national level. It happens in particular places, where new businesses locate and take on people, or existing businesses expand and increase their sales. Our cities have a particularly important place in this. In fact, I believe that the drive for growth – for Britain’s economic future – needs to be most energetic in our cities.

There’s a good reason for that. As the Harvard economist, Ed Glaeser, has recently argued “cities are our greatest invention”. They lower transport costs, help us share knowledge and spark innovation. As the world becomes ever more complex, the role of cities in bringing people together and facilitating collaboration will become increasingly important. Cities are the building blocks of the global economy.

Cities are where things happen. 74% of Britain’s population lives in a city or its surrounding area. And they account for 78% of all jobs. Take the 20 urban areas assembled here today for the second wave of City Deals. Their assets include 2 of the top 10 universities in the world, one of the largest concentrations of oil and gas and process and marine engineering industries in Europe, and the heart of Europe’s automotive industry, including its most productive plant. In short, the cities represented here today can count on global assets and huge growth potential.

And yet too many of our cities haven’t done as well as those in other countries. Even in the supposed boom decade leading up to 2008, the number of private sector jobs in Nottingham and Birmingham actually fell.

In England, Bristol is the only one of the eight largest cities outside London that has a GDP per head above the national average – while in Germany, every single one of the eight biggest cities outside Berlin has better than average GDP per head. In other words, German cities are the engines of national growth, generating wealth and prosperity, pulling the rest of the country behind them. Most of England’s big cities have not been doing the same – yet.

So that is why this Government introduced City Deals.  For our economy to operate at its potential our cities must achieve their potential.

So now to extend them

If the Government had decided to stop, having done deals with only the biggest cities, then I believe we would be failing in our task of putting urban policy at the heart of our economic growth agenda. Instead, we are pushing forward by opening up discussions on a second wave of City Deals, potentially benefiting more than 7million people, and signalling this Government’s desire to promote growth across the country.

First the next biggest urban areas:

• The Black Country
• Bournemouth and Poole
• Brighton and Hove
• Coventry and Warwickshire
• Hull and The Humber
• Leicester and Leicestershire
• Plymouth
• Preston and Lancashire
• Reading
• Southampton and Portsmouth
• Southend
• Stoke and Staffordshire
• Sunderland and the North East
• The Tees Valley

Just think of their strengths. Plymouth; home to the largest naval base in Western Europe and one of the largest marine and maritime clusters in England. Sunderland; home to Nissan’s super-productive car plant. Coventry; home to Jaguar’s corporate and research headquarters. The Tees Valley; the UK’s fourth largest port, with strengths in petrochemicals, steel and process industries.

We are also extending city deals to fast growing cities. The Centre for Cities, in its Private Sector Cities report in 2010, said some of England’s cities “have been creating thousands of new jobs in the private sector, but need to be expanded further to help businesses and workers take advantage of the opportunities being generated.”

So, in addition to our biggest cities, we are extending an invitation to some of our fastest growing cities.

• Cambridge
• Milton Keynes
• Norwich
• Ipswich
• Oxford
• Swindon and Wiltshire

Wave Two won’t be identical to Wave One. Each city and their Local Enterprise Partnership will be invited to put forward a proposal that addresses a significant local economic issue requiring a transformative response. The big challenge here will be identifying and prioritising a specific local challenge that needs to be addressed and coming up with a tailored plan to deal with it. Every place is different. Unique, in fact. So come forward to us with a proposal that reflects that uniqueness – that takes a new direction at solving a problem that is holding back your area.

We also want to ensure that cities have a suite of powers that give them the flexibility to respond to local challenges as they arise. Bespoke arrangements will, therefore, be complemented by a ‘core package’, consisting of measures that will devolve significant powers and functions to all cities that go on to negotiate a deal with Government. This will capitalise on the progress we have made so far, demonstrating our commitment to the devolution of powers from central to local government, if local areas are willing to offer significant reform in return.

Another difference is that there is now a competitive element. We are inviting 20 cities to put forward an initial proposal. We will use this to assess your appetite to do a deal; and that you are thinking boldly about how you might unlock growth in your city.

We are therefore having a three month period to determine which cities are ready to proceed. Selected cities will then go forward to work with us to develop and negotiate proposals over the following months.

Cities will need to make a case for new investment and powers, with a clear evidence base and a strong economic rationale. You will need to show how new flexibilities will benefit local people. And you will need to demonstrate how you would manage budgets, and hold yourselves accountable to residents. Every deal is a two-way trade. We expect you to be ambitious in your asks of Government, but you should expect the Government to be equally demanding in return. There must be significant benefits and credible commitments for both parties.

You will, of course, shortly receive detailed guidance on the process but the priorities for me are:

One.  Governance. I have already covered this, but you must demonstrate strong and collaborative governance across your economic area. We have already encouraged local leaders to think and work together in ways that reflect their true economic geography. We want to see this approach continuing so that the decisions necessary for the growth of the area as a whole can be taken quickly and effectively.

Two.  Doing more with less. The Government is looking for proposals that can create new jobs and growth and that will drive better outcomes with the same, or fewer resources. If you can demonstrate to us that you can achieve better outcomes with the same or fewer resources why would we not say yes?

Three.  Your ability to harness significantly greater private sector input, expertise and resources.  Where urban policy does not involve the private sector it is much more likely to fail.  So ensure that your LEPs are at the heart of your proposals, make sure you test your ideas with local business leaders and above all demonstrate to us how your proposals can unlock private sector investment. We know that the public sector resources are limited so we need to make sure those that we do invest get as much leverage as possible.

Four.  I want you to be under no illusions, this will be a tough negotiation with difficult decisions required along the way.  We therefore need to know that you are as committed as we are. Your ability to demonstrate your readiness to put resources into delivering the deal and your willingness to take on risk is crucial to you moving forward.

Five. Propositions should address a clearly defined economic problem. My advice would be to not come back to us with a shopping list of projects that you have dusted off the shelf.  Instead, take the time to have another look at your evidence, focus in on a particular economic problem and start to think about what you, by working across your functional economic area and with specific empowerment from central government could achieve. Your proposed solutions should be of significant scale and cannot be achieved through existing mechanisms.  They should also demonstrate how they will support the government’s objectives of reducing regulation, create well functioning markets and promote an enabling environment for business and boost private sector growth and investment.

A hundred years ago there was no question that the future of every one of our great cities was driven by the initiative of the leaders and people of those cities. Yet during the last century, year by year, the power has ebbed away from the City Hall to Whitehall.

I am determined that this Government will turn that tide and once again restore initiative, power and – through that- prosperity to our cities, and through them, to our country.