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What do we want from the Budget?

In last year's Budget the Chancellor placed a large wager on our cities being able to deliver the growth he needs. His commitment to local growth was framed within a package of support for cities and city-regions and had an explicit purpose; to “increase the productivity of the five biggest city regions outside of London so that they matched UK average productivity", in turn leading to an apparent growth in UK GDP of £31 billion a year.

We should be careful not to bet the house purely on our cities. This is especially true in the light of an EU Referendum which saw our towns vote to Leave whilst cities voted to Remain. Economic models which fail to compute the social implications of such an approach should expect to continue to marginalise and anger the excluded. By the excluded, we of course mean the people of our towns. It’s a trend which we see regularly in our work, with our towns routinely described as left-behind or backward; its residents implicitly framed as ignorant or part of the problem.

At the Centre For Towns, we believe Mr Hammond’s wager on cities merely continues a long pattern of huge investment in the apparent infallibility of our cities as engines of economic growth. In 2005, Tony Blair said “opportunities go to those swift to adapt, slow to complain, open, willing and able to change.” He was talking about the better-educated; new white-collar jobs in financial services; in other words, jobs in the cities and not in the presumably “complaining, closed, unwilling to adapt” towns. The Chancellor himself, in last year’s Autumn Budget said “[we] face a choice; either embrace the future or reject change and turn inwards to the failed dogmas of the past”. He then went on, amongst other things, to throw almost £2 billion at cities. It’s clear to us which places are “embracing the future”; it’s not towns apparently.

And this week, our city mayors embellished this further. Andy Burnham, Mayor of the Greater Manchester city-region said, “We’re of the view the engine of the global economy is the city and city region.” The Chancellor agrees with Mr Burnham. As have successive governments. It’s a wager on a model of economic growth which, at best, expects benefits to trickle down from cities to the towns around them. Forgetting that hundreds of towns don’t fall within commuting distance of a city, and even if they do it places extraordinary pressure on cities to carry all of the burden for economic growth.

So, as we await the Chancellor’s statement our first request is to…..

1. Balance the commitment to cities with a commitment to towns

The Chancellor has name-checked cities and city-regions on dozens of occasions in his Budget statements whilst spending no time at all speaking about the challenges faced by towns. We ask for a balanced approach from the government. Many of Mr Hammond’s backbench colleagues represent the kinds of towns which we at the Centre advocate for. Towns like Mansfield and Walsall. They expect, like we do, that his Budget reflects upon the stark disparities in regional and sub-regional productivity. Not forgetting that, as Paul Johnson of the IFS has pointed out, “we have had ten years of poor productivity, so it would seem rather optimistic to assume it will jump back up.” Two decades of city-led economic growth hasn’t thus far proved all that successful in productivity terms. However, the truth is that we don’t know anywhere near enough about sub-regional disparities. Which brings us to our second request of the Chancellor, which is to…..

2. Provide better sub-regional and sub-local authority data on economic activity and productivity

The Chancellor should have at his disposal the broadest and deepest set of resources with which to understand the nature of sub-regional productivity. At present the data he has on such matters is geographically crude and almost certainly unsuited to providing him with the tools he needs to understand the socio-economic challenges our towns face, and how this plays a role in flattening productivity. We at the Centre For Towns are more than happy to work with the government to improve this situation and we ask that he at least announce an ambition to collect such data in future, and for it to be published. Only then can we all measure the economic contribution of all of our towns, villages and cities. Which leads us to our next recommendation…….

3. Provide a suite of measures which encompass the lived experience rather than simply using GDP or other national level measures of economic performance

In a perceptive piece this week, Hetan Shah, Executive Director of the Royal Statistical Society, noted that “[S]tatisticians have focused too much on headline average figures, but these disguise a lot of reality. Rich new data sources can provide disaggregated data that reflect people’s lived reality. What is happening in my region or locality, not on some national average?” .

At the Centre For Towns we couldn’t agree more with Hetan. The use of GDP has been the subject of criticism for some time, and we note the work of Professor Diane Coyle in making recommendations for how we could do this better. Even if the Chancellor is unable to use this Statement to do so, we would ask that better measurement of economic activity is made an absolute priority. We know work is being carried out on this, and want such work to be invested in further, and for towns to be included.

Last year the Chancellor announced a series of changes to the administration of Business Rates. Our high street retailers continue to press for further help. At the Centre For Towns we know that high streets are a vital community asset in small and medium sized towns which have faced a plethora of challenges in recent years. At its core a high street reflects the spending power of the people who shop on it. At the Centre For Towns we have shown how our towns have aged rapidly in recent decades; trends which will continue well into the middle of the century. This process continues to strip the spending power of towns, meaning we must focus on the economic vitality of towns if we are to have long-term solutions to the challenges our high streets face. However…..

4. The Chancellor can and should level the playing field for high streets by addressing the taxation of out-of-town retail parks and online businesses

Out-of-town retailers and distribution centres continue to benefit from disparities in property tax liabilities compared to high street retailers. Last year, for example, Amazon paid £33m in business rates because it operates from single out-of-town distribution centre’s whereas House of Fraser’s bill for its 59 high street stores was itself over £30 million. How can it be right that those two businesses pay the same amount? The Chancellor has the power to intervene and should do so.

5. We need to address skills and employment deficits in towns which have suffered economic decline

In 2017, the Apprenticeship Levy came into effect, promising to provide three million apprenticeship starts before 2020. The implementation of the scheme has been somewhat patchy, with businesses complaining about the level of funding available and the training schemes provided. We want to see the Chancellor implement reforms of the Levy which mean sectoral skills gaps are filled and the geographical spread of apprenticeships engage with skills deficits in our towns. There are still many towns in coastal and former industrial areas areas with far too many unskilled young people and local economies which fail to provide them with the tools to adapt. Real apprenticeship training requires a holistic approach to investment, including the training and retention of young people in towns which have suffered economic decline.

This week the Mayor of Greater Manchester Andy Burnham admitted he does not have the powers to make any meaningful impact on transport issues around Manchester. This is another stark reminder of what we at the Centre For Towns believe is a fundamentally unequal distribution power and resources. Far too much power is held within a square mile in Westminster, and we want the Chancellor to use this statement to…..

6. Hand back the powers over transport and infrastructure to our towns

Far too many of our transport and infrastructure decisions are carved out in London, meaning there are still gross inequities in the distribution of resources between the regions. We want our towns (and cities) to take back control of those decisions and to be trusted to deliver for themselves. This is as true for a town outside the remit of a city-region as it is for towns within those city-regions. Better decisions can be made by local people and we ask the Chancellor and government to accelerate and broaden the scope of devolution to include all places, and not just those which fall within the boundary of a city-region.

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