Magazine article Public Finance

Making Space for Place

Magazine article Public Finance

Making Space for Place

Article excerpt

Economic policy Isn't the special preserve of organisations such as the Treasury and the Bank of England. Indeed, more and more players are now shining a spotlight on the economic role of local councils. Why?

The argument starts with objectives. The top economic aim of successive governments has been to boost growth, productivity and competitiveness. But they have also wanted prosperity to benefit the whole country, not just privileged bits. The Treasury has a target to close the productivity gap between London and the English regions, putting that on a level with price stability and sound public finances.

So far, that objective has had limited traction. London is a great global city. It is booming and long may it prosper. But the capital is so big its economy worth a fifth of gross domestic product - that its prosperity has flattered the national data.

After the longest period of growth the country has seen, the rest of England isn't doing as well as it should. On some measures, the regions have fallen behind: in 2002, the Northeast's output per hour was 81% of London's; by 2004, it was 79%.

This isn't just about comparisons between London and the rest of England. Of the largest English cities apart from the capital, Bristol scores best in the European league table but in thirty-fourth place. Most of our cities - a century ago the powerhouses of the industrialised world - now languish at the bottom of the table.

In terms of output per head, places such as Manchester and Birmingham are beaten not only by Frankfurt and Munich, but by Bordeaux and Verona. England's economy is unusual in being a capital city one-trick-pony.

But there is in the UK - or rather, since Scottish and Welsh devolution, in England - a drastic gap between the way policy is made and the way the economy works.

Start with the economy. There is, of course, a national economy. Many companies have a national footprint. Some workers are completely mobile. A uniform set of national policies suits them. But the vast majority of agents and transactions aren't like that.

Seventy-eight per cent of journeys to work take less than 40 minutes. Seventy per cent of house moves are over less than 20 miles. New research carried out for the Local Government Association shows in detail that the English economy is the aggregate of many small-scale local economies.

The research mapped areas where three-guarters of workers live in the area they work in, or where threeguarters of local demand for a good or service can be met by firms in the area. It looked at labour and housing markets, and markets for six main categories of goods and services.

It shows that for most of those key aspects, England works on an economic geography that has about 50 or 60 areas (for some services, there are about 20). …

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