City devolution will drive nationwide growth

Devolution of powers and associated accountability are the cornerstones of a package of proposed policy measures designed to increase the UK’s growth rate by unleashing the economic potential of our 15 largest metro areas.

The year I have spent with the City Growth Commission has confirmed my view that our system of governance in the UK stands in the way of civic leaders (government and business) developing plans that exploit their cities’ competitive advantage to create local prosperity.

Cities are vitally important engines of economic growth. But almost all our larger cities, other than London, underperform the UK average in terms of employment and GVA growth. Greater Manchester, one of our most successful regional cities, has a fiscal deficit of around £5bn, so we might assume the same applies to other large conurbations.

Powering up regional cities could drive UK GDP. If the economic performance of the 15 largest metro areas in the UK were increased to the UK average, UK GDP would increase by over £79bn and annual growth rate by 0.2% by 2030. Perhaps this is why political leaders have begun to advocate greater city devolution (together with the Scottish devolution debate).

The coalition has taken welcome steps to give more power to city-regions through the City Deals and Growth Deals, but the commission concludes these policies are too tentative and in order to accelerate growth, further devolution of powers is needed. The chancellor has started to shift his stance, inviting “serious” conversations with cities in the run up to the Autumn Statement about what powers they might take on.

Whitehall needs to let go in order to unleash local growth engines. The commission advocates negotiation between metros and Whitehall to devolve the power to plan and execute locally, without the need for civil servants to second guess. A successful negotiation would of course put the onus on metros to make the case that they have the strategic planning and execution capability to deliver improved growth.

A good example is funding for skills. At present, adult skills programmes are largely planned and funded from Whitehall. The commission argues that a place-based approach would better enable funding to be spent in areas where skills are forecast to be in short supply, such as construction.

This would be of great benefit to the property industry. Faster growing cities would increase demand for property across all sectors and drive development. If metro areas benefit directly through local tax revenues from the growth they deliver (as opposed to the current disconnect) then I could see an alignment of interest that could spark a new spirit of civic leadership and enterprise, which could benefit our industry and our occupiers.

So I commend the proposals of the commission. Scottish devolution has stimulated a wider devolution debate in the UK. The time has never been better to work for a new constitutional settlement that recognises the untapped potential of our largest metro areas.

Peter Vernon is chief executive of Grosvenor Britain & Ireland.