Time for our Metropolitan Revolution?

It is not difficult to show the extent to which London dominates British life, from our economy to cultural and political life. Many, perhaps, assume that having such a dominant city in a small country is natural and unavoidable. Few seem aware quite how centralised our government is compared to other developed countries. With all decisions, spending and tax flowing through and controlled by Whitehall, it is hardly surprising that companies and talented individuals flock to the capital. The global norm is very different, and cities and their regions often have direct control over local services, infrastructure investment and so on – with tax-raising powers to match.

In the US, a revolution is brewing, at least according to the Brookings Institution’s Bruce Katz. He argues that with Federal and State Government mired in endless partisan wrangling, it is up to the cities to drive the innovations and new sectors that the country ultimately needs. After all, they are the real engines of the economy – and city governments know much more about the strengths and needs of a local area, and the innovations required.

He gives examples of cities from Portland to New York to Denver, dealing with issues from regeneration and encouraging tech businesses to growing airports and integrating immigrants, all without much involvement from central government.

It is hard to replicate this in Britain, at least under current arrangements. In London, the most independent of UK cities, just 7% of the taxes raised are retained by the GLA and the Boroughs, compared to 50% in New York; for all his high profile, Boris Johnson is almost powerless compared to his peers in other world cities. But before the Second World War British cities had similar levels of autonomy and produced some remarkable results. The most obvious and celebrated was Late Victorian Birmingham, under Joseph Chamberlain, which was recognised at the time as ‘the best governed city in the world’ – just as much for the quality of its officials as its leadership. It created public institutions, municipal gas and water supplies and new boulevards such as Corporation Street.

Today, we are starting to see signs that decades of centralisation are beginning to be reversed. Whitehall has agreed ‘City Deals’ with a number of large conurbations which give them more freedom over policies – and introduced incentives, in terms of funding, if they improve economic performance in the area.  Greater Manchester has been at the forefront of this – perhaps because those councils have a longer history of working together. The ‘earn back’ scheme allows them to invest in public transport infrastructure (such as the metrolink) and keep some of the proceeds, rather than having everything flow back to Central Government.

London, too, is calling for more devolved powers. The London Finance Commission, chaired by LSE professor Tony Travers, argued for a deal which would see the capital retain future increases in property taxation with an agreement that it continued to pay Westminster today’s tax contribution in real terms. The Core Cities – Birmingham, Manchester, Leeds, Bristol, Newcastle, Nottingham, Liverpool and Sheffield – have joined together to call for a similar deal . The problem, as always, is that these cities cover only a fraction of the conurbation. The City of Manchester, for example, covers only around 500,000 people out of a conurbation of well over two million.

So what does this all mean for property? Well, most of the areas that are being talked about – transport infrastructure, for example – have huge effects on values. And perhaps more importantly, changing business rates so that council’s keep at least some of any increases would make them more keen to attract new companies or expand existing ones – or at least put in place policies that encourage this – which will clearly have a massive implication for leasing markets. Localisation would give them incentives to encourage the growth of the local commercial property market.

While the direction of travel is clear, it will be a long time before we see cities have the independence they have in most other countries. But it is true that the centralisation of political power in London over the past few decades has been accompanied by the growth of economic power. It is also true that when Birmingham and Manchester led both the business and political agenda, back in the 19th century, they had almost complete independence from the centre. While London’s achievements are to be welcomed and encouraged, a prosperous United Kingdom needs more than one successful city. Indeed, globally, many researchers argue that it is the second-tier cities that have the best prospects. Maybe we need our own metropolitan revolution if our ‘Big Six’ are to realise their true potential.

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