Interview: Osborne – “Whatever you’re doing in terms of devolution, double it. In terms of local taxation, double it.”

29 Nov

George Osborne urges Boris Johnson, Michael Gove and their colleagues to pursue devolution of powers to metro mayors with indefatigable determination:

“Whatever you’re doing in terms of devolution, double it. Whatever you’re doing in terms of local taxation, double it.”

Osborne recounts how as Chancellor of the Exchequer he launched the Northern Powerhouse, abandoned during Theresa May’s prime ministership but now revived by Johnson as the centrepiece of the present Government’s levelling up agenda.

He looks forward to the forthcoming White Paper about levelling up, on which Gove and Neil O’Brien are at work:

“I’m optimistic about the White Paper because of who’s drafting it, and I would only tell them, not that they need my advice, to trample over anyone who gets in the way.”

In Osborne’s view, the benefits of elected mayors should be spread to the English counties, regardless of any opposition from Conservative councillors:

“The Conservative Party is quite easily led if it’s given a strong direction.”

At the end of the interview, he dismisses as “nonsense” the idea that Johnson needs a new team of advisers, and insists that success lies within the Prime Minister’s grasp.

Osborne describes how, having spent his childhood in London – “I’d grown up I guess with that world view that nothing of any importance happened outside the M25” – he came round, after becoming MP for a northern seat, to the idea of decisive action to revive the cities of the North of England.

He urges the Government to be ambitious:

“I would say…to the current crop of Conservative ministers and to the Prime Minister…you never know how long you’ve got in office, and the wheel turns, and then suddenly you’re out.

“And I can tell you as someone who’s been out of office and out of politics for five years, you look back on the big things you feel you got right, and they’re often the things against which there was the most opposition, the hardest internal arguments in your party, but they’re also the most rewarding things.”

ConHome: “Let’s start with a broad-brush question. How do you think the Government’s doing?”

Osborne: “I think the Government has every opportunity to be a great success, and it has hit what all Governments hit, which is that kind of mid-term moment when people think, you know, is the focus there, is the direction there, are they going to deliver.

“It’s not unique to the Boris Johnson Government. Something quite similar happened to the Cameron Government in 2012, 2013.

“And, you know, we got our act together and won an election. And so it’s perfectly within the capability of Boris Johnson and his team to do the same. But they do need to act.”

ConHome: “How do you assess their chances of winning the next election?”

Osborne: “Well the odds are greatly in favour of the Conservatives winning, because the Labour Party has not yet done enough in my view to make itself electable.

“Though Keir Starmer is a very presentable Leader of the Opposition, he has not distanced himself from the Jeremy Corbyn era enough, apologised to the public for presenting Corbyn to the country as a serious candidate for Prime Minister.

“He has not done internal reform to reduce the influence of the trade unions.

“When I look back at my own career, I spent half my time in Government and half my time in Opposition. Opposition is in many ways harder than Government, because you don’t have the kind of natural agenda that a Government has.

“You certainly don’t have the full weight of the British state carrying you forward. The Leader of the Opposition – the Shadow Chancellor, which I was for five years – if they don’t do something that day, nothing’s going to happen.

“And if you look at the enormous efforts which Gordon Brown and Tony Blair went through in the 1990s – I was at the time a junior staff person in Downing Street and I saw at first hand their efforts to make the Labour Party electable.

“If you think of the huge efforts that David Cameron and myself and the people we worked with went through 15 years ago to make the Conservative Party electable, you just don’t see the hunger, the effort, the appetite in the Labour Party at the moment to do what is required to win back the trust of the British people.

“But the Conservative Party cannot just sit there and rely on their opponents failing to get their act together.

“And if the Labour Party were to get its act together, which is perfectly possible, there are still a couple of years to go until the election, yes, then the Conservative Party could be in real trouble.

“It doesn’t need to be, because it has all the instruments at its disposal to make itself eminently electable and to get itself re-elected.”

ConHome: “So let’s get on to the main subject of the interview, which is the Northern Powerhouse, devolution, elected mayors and all that.

“The Treasury is often viewed as an anti-localism, anti-devolution department. In Opposition, you yourself were a bit of a sceptic about localism.

“When did you become a convert to localism and mayors, and why?”

Osborne: “Yes, my own thinking on this did change over time. I remember early on thinking the Conservative Party had made a mistake in not initially opposing the creation of the Mayor of London.

“And then once we got into office, I think the definition of localism we had was a little bit limited. It was all about giving parish councils a bit more power over planning.

“There were some ideas, actually from the Liberal Democrats, that there had to be a referendum, because at that time there were lots of Liberal Democrat councillors in those cities.

“And so the whole agenda basically went nowhere for the first two or three years of the Government I was part of, and I guess around 2012, 2013, essentially the kind of emergency job on the economy was beginning to bear fruit and we were moving out of the financial crisis period, I became very focussed on what we could do with our opportunity of being in Government to tackle the really, really big economic problems the country faced, rather than the very immediate ones of the deficit and the recovery from the financial crisis.

“And I guess because I was a northern MP, you know, I’d grown up in London, educated in London, I’d grown up I guess with that world view that nothing of any importance happened outside the M25, and one of the luckiest and best things that happened to me in my political career was that I got selected for a seat in the North of England.

“It completely changed my perspective on the country, and it changed my perspective on how the rest of the country sees London.

“And for a long time I was one of only a couple of MPs for the Conservative Party who were even remotely close to Manchester. There was basically me and Graham Brady.

“And I’d already begun to get more involved as an Opposition MP in what we could do in Manchester as a party. I supported for example the BBC’s move to Salford.

“All this kind of thinking was evolving in my head, and we got to the middle period of the Government, 2013, and I thought why not take on the biggest domestic challenge of all, which is that the North of England has lagged behind the South – and the greatest political challenge, which was that people thought the Conservative Party had nothing to say about that.

“So it was both an economic and a political challenge, and I threw myself into it, and the Treasury is sceptical of devolution, for the simple reason that it always has to pay up when devolution fails, because people will not let local public services fail, let cities fail, and in the end the Treasury has to step it.

“But the Treasury is also an amazing department, full of incredibly talented and committed people, and if they’re given direction, they have the best chance of anyone in Government of delivering.

“And so with a selection of very talented civil servants, one in particular, John Kingman; my special adviser at the time, Neil O’Brien; with one of my Treasury ministers at the time, Jim O’Neill; we really focussed on would it be possible to reverse a century-old trend in British economic geography.

“High Speed Rail was already there, in fact an idea originally born of the Conservative Opposition, not the Labour Government, so High Speed Rail, High Speed Rail across the Pennines, and devolution and the creation of metro mayors, not just city mayors which had been the original idea in 2010.

“And so a much bigger economic geography than just Manchester city centre, they’ve got all of of Greater Manchester including places like Bolton, Bury and so on, and within Merseyside, South Yorkshire and so on, real devolution, allied with a big commitment to what I would call the social capital of the cities, the teaching hospitals, the universities, the science facilities, the cultural facilities, that would make these cities really attractive places to live and to commute to work in, so that it would also help the surrounding towns.

“And that became known as the Northern Powerhouse because the speech I gave launching it was in the Power Hall of the Manchester Museum of Science and Industry, and right from the start in the front row I had Labour councillors, the Leader of Manchester City Council, Richard Leese, who’s just retiring, the then Leader of Liverpool, and so on.

“So right from the start I thought it was never going to work if it’s not a bipartisan effort, and they’re never going to trust the Conservative Government, these big Labour urban fiefdoms, if they don’t see that there’s a Chancellor who’s prepared to share the credit with them.

“And I always thought the political gain, which was very much a secondary consideration, would flow from that. People would blame the Government when things go wrong, they would give the Government credit if things went right.

“If I have a regret it’s that I’d have either started earlier or had longer in office, to really cement it, because we made enormous progress in those subsequent three or four years, we got metro mayors created in all these places, which people had been trying for decades to set up.

“We got the plans in place for the railways, we created organisations like Transport for the North, so there was enormous progress.

“We then hit unfortunately the buffers of the Theresa May Government. She was not interested in it and basically ditched it.

“And then what excites me genuinely is that the Boris Johnson Government – which calls it levelling up, which is a good slogan – had doubled down on something I thought was very important.

“So all the political stars are aligned. Of course the really hard thing in government is then actually getting the job done.”

ConHome: “Was there ever any element of wanting to push the responsibility for public spending consolidation out and down to local authorities, many of them Labour?”

Osborne: “Well yes, at the time the country was spending too much, whether at national or at local level, so there were reductions in local authority budgets.

“But we gave them more freedom, we removed a lot of the ring fences that dictated how they spent money, something I think we should go much further with.

“If I had my time again, I would have doubled down on that.

“We explicitly said, for example, if they allowed more development in their area then they would keep the proceeds, the extra council tax receipts which would come from having more homes, the extra business rates which would come from having more businesses.

“Until then they didn’t see any benefit from that, so there was zero incentive to consent to planning or to encourage economic growth.

“One of my proudest achievements was that by the time we left office Manchester was the fastest growing city in Europe. And that was certainly not all down to me and I pay a lot of credit to people like the Labour Leader Richard Leese and people who worked for him and around him.

“I should particularly credit by the way Howard Bernstein, who was the Chief Executive of the Council, who was also brilliant.

“And that partnership really delivered Manchester. And we were starting to deliver in Liverpool, in Sheffield, in Leeds, in Newcastle and so on, and I think laid the groundwork for the Conservative revival in Tees Valley as well.

ConHome: “You outlined what you did in terms of allowing councils to keep more of business rates and so on. How far do you think the tax-raising powers should go, and what should the Government do?”

Osborne: “I think you could go quite a lot further. I think you could give local authorities, I wouldn’t do it at an individual council level, I think it has to be at a metro level or a big county level, but I don’t see why you couldn’t give them their own proper business-rate raising powers.

“So it’s a choice an area would make, you could either cut your local taxes to encourage business, or you could raise your taxes and spend on infrastructure.

“I think it’s worth looking at local income taxes as a supplement. I mean after all we have that arrangement in Scotland, I wouldn’t necessarily say you have to go that far in English devolution, but I was one of the architects as Chancellor of giving Scotland more tax-raising powers, and I think as a result, by the way, the SNP is being held much more to account for its own domestic performance, and they can’t keep saying we want more money from Westminster, because everyone goes hold on, you’ve got the power to raise taxes if you want to.

“So the public are not stupid. I think it’s really interesting that when the metro mayors have come up for re-election, the good ones have been re-elected – Andy Street in Birmingham, I was also very involved in creating a West Midlands Mayor.

“I’ll give you a local example where I don’t particularly agree with the approach the Government is taking, in London, where I was for several years editor of The Evening Standard.

“Sadiq Khan is saying Transport for London – we’re having a set-to about a Tube strike – he is the Mayor, he’s the Chairman of Transport for London, and he should have responsibility for running the transport system in London.

“And the freedom to run that system as he sees fit, to raise fares if he is prepared to. And what’s happened instead is the Government has stepped in and is trying to micromanage how he runs Transport for London.

“I would let him take responsibility, because then I think the public would say, ‘Are you doing it well?’

“At the moment you’re giving him a free pass of saying ‘Well, you know, the Government’s not giving me enough money.’

“I suspect it’s not a ministerial failing, it’s just the Whitehall system seeks to take control when it has the opportunity – it’s often the simpler solution to a problem, when, you know, Covid means the Tube’s gone bust.

“But the harder solution, but the better one, is to put the Mayor in charge.

“I think it’s a great shame that Transport for the North has been downgraded – I would upgrade it with more powers, make it more like Transport for London.

“I would give the metro mayors more responsibility. For example, we devolved the NHS in Manchester, which was a really bold thing to do.

“It’s the only place in England where that’s the case. It integrates social care. There’s no reason why the Conservatives should be afraid of this.

“Fundamentally, it should be in the Conservative DNA, if you go back to Edmund Burke etcetera, that they trust local communities.

“I remember at the time, when we started all this, there were some prominent members of the Cabinet who said, ‘We’re just handing power to the Labour Party in Birmingham and Teesside and so on – we’ll never ever have Conservatives elected there.’

“And I would reply, ‘We don’t have Conservatives there at the moment – it’s not as if we’re starting from a position of giving away power.’

“And the election of Conservative metro mayors in the West Midlands and in Teesside essentially proved that point. And I would also say there’s nothing really to be lost.

“The best news at the moment from my point of view is that Michael Gove and Neil O’Brien have been given the opportunity to demonstrate this, because I think they’re two of the smartest and most creative Conservative thinkers we’ve got at the moment.

“And I would just say – well they don’t need my advice, they’re both good friends of mine – just let them get on with it.

“Every time you’re confronted with something which is, you know, ‘Oooh, should we trim a little, this is a little bit too radical, the Treasury’s got a problem with this,’ I would go for the reverse.

“Whatever you’re doing in terms of devolution, double it. Whatever you’re doing in terms of local tax-raising powers, double it. Whatever you’re doing in terms of devolving the NHS, double or triple it.

“That is why we have ministers, and we have political leadership in government: to push the system where it doesn’t want to go. For the Conservatives, this is really the once in a generation opportunity to show the whole country it can deliver.

“And if you just limit yourself to a couple of town-centre funds, which by the way the Cameron Government had, the Blair Government had, they’re not new, that’s not what’s needed.

“What’s needed is proper economic theory about creating big economic clusters in the North, bringing the cities closer together, connecting them to the towns that surround them, connecting them with real transport links that work, and attracting business, which cannot be done by the public sector alone, which is another classic mistake.

“You’ve got to make business feel that these are the places to go to, to create jobs and invest, the wonders of the free market will then work, and in a way that no Government White Paper will ever predict, real activity will happen.

“I’m optimistic about the White Paper because of who’s drafting it, and I would only tell them, not that they need my advice, to trample over anyone who gets in the way.”

ConHome: “This question of doubling everything you’re doing, does that extend to more elected mayors outside cities, in counties with smaller populations?”

Osborne: “Yes, I think it would be great to have elected mayors. I was an MP in Cheshire for 16 years, and I remember the time when we were in Opposition, I was a junior MP, and there was a plan to create unitary authorities in Cheshire.

“Pretty much all the MPs in Cheshire, led by the redoubtable Gwyneth Dunwoody, the Labour MP, and Sir Nicholas Winterton, led the fight against it, and thankfully we were ignored by the Government and unitary authorities were created, and it’s a much more efficient and effective way to run Cheshire.

“No one likes local government reorganisation, and local MPs and councillors have got to resist because it’s your local power base, but on a country-wide scale you could easily have mayors for Cumbria or Cheshire or wherever it happens to be.

“And I think the point about a mayor is it provides a point of accountability, an individual who can’t really pass the buck and is held to blame or indeed applauded for what they do.”

ConHome: “A former Conservative Leader of a big county said, ‘When I was the Leader, I had to oppose having an elected mayor in our area, because of all my Cabinet colleagues – they would all have protested and given me a lot of political trouble if I had come out in favour.

“Now I’ve gone, I’m all in favour of an elected mayor. So that leads to a political question, which is how do you deal with a mass of Conservative Cabinet members, county councillors and district councillors who won’t want any change, at a time when the Government is moving towards an election and you really need their good will.

“You should arguably have done this much earlier. Can you do this politically in the next few years?”

Osborne: “Yes, absolutely. The Conservative Party is quite easily led if it’s given a strong direction. We did succeed in creating these metro mayors in large parts of the country where there were no Conservative councillors.

“Let’s take Manchester. I remember Trafford Council, it was Tory-run, and they were like, why would we want to give power to a metro mayor in the middle of Manchester.

“The truth was the council leader at the time, the Conservative council leader was very courageous and led his group in support.

“And I always thought the best way was never to try to impose these metro mayors – to use the carrot, not the stick – so I would pile up all the advantages that come from having a metro mayor, the additional money, the support for local transport – and that did work. The hardest area was West Yorkshire and Leeds, it was politically contested, but even that now has come into line as they’re seeing the benefits.

“So you can show them the treasure at the end and they will follow the trail.

“In any organisation, it’s quite hard to lead from behind. You have to have a view, and ultimately if people don’t like you, they’ll get rid of you.

“There’s no point just occupying those offices. I always felt [as Chancellor of the Exchequer] there was a ticking clock, I never knew when the axe would fall, and I would try to be as bold as possible.

“I would say the same to the current crop of Conservative ministers and to the Prime Minister, which is you never know how long you’ve got in office, and the wheel turns, and then suddenly you’re out.

“And I can tell you as someone who’s been out of office and out of politics for five years, you look back on the big things you feel you got right, and they’re often the things against which there was the most opposition, the hardest internal arguments in your party, but they’re also the most rewarding things.”

ConHome: “So far, hasn’t levelling up really been a bit of a mess? You’re right to say that Michael Gove is a great executive politician – Neil O’Brien a huge brain, did a column for us – they will instil some order and political shape to it.

“But so far, hasn’t it been a bit incoherent? And has it had the strategic grasp the Northern Powerhouse had, in terms of a very clear plan to link up the cities, make them bigger, establish an economic counterweight to London?

“Hasn’t levelling up by contrast been a bit of a shambles?”

Osborne: “Well I am a glass half full person. I would say it was moribund for several years after I left office, as an agenda, and obviously there were enormous distractions, Brexit and then more recently Covid.

“But I think Boris Johnson deserves full marks for picking this up as the big domestic agenda. That’s what a Prime Minister does. A Prime Minister says ‘My Government’s going to be defined by a few things’, and he has decided levelling up is one of them. So I strongly applaud him for that.

“I also applaud him for now having the right people in place to deliver it. I wish he had stuck with, and I think he will end up recommitting to, elements like the High Speed line in Yorkshire, the Eastern Leg, and the Trans-Pennine route, because those are long-term infrastructure projects which you don’t want to throw away and start again on some other project that’ll never get off the ground.

“So I’m quite optimistic about it all. What it needs is proper intellectual underpinning. If you think it’s all just about planting some civic flowerbeds in northern towns then the Tories will be out on their ear.

“It’s got to have proper, serious economic thinking about it, which Jim O’Neill, a world-class economist, provided me with on this, and others like Neil O’Brian and Rupert Harrison.

“There are around the world great city clusters. They are where the action is. The towns around them benefit as well, but a bit more slowly.

“And you have to do the things that make those cities work, so you have to make them exciting places that attract professional people, you need the buzz of universities and cultural institutions, you need excellent transport links between the cities and commuter links into the cities, and you need to empower the city leadership.

“If you’d said to me 30 or 40 years ago that Manchester would be the fastest growing city in Europe I would have thought it was an impossible ambition, because the Manchester area was on its knees.

“You have to think big, you have to be ambitious, and you have to realise that Government puts the kind of instruments in place, but then it’s the private sector and the business community, and not just the big corporates but every little small business, every entrepreneur that decides actually I’m not going to move out of Manchester, I’m going set my new web design business in Manchester rather than move to London. That is how progress is made.

“I think the Johnson Government can do it. It’s got the majority, they’ve made this its central domestic agenda, and if it sticks with it it can work.

“One of the things I find annoying, having been a political secretary in Downing Street in the distant past, is all this ‘Boris Johnson needs a new team in Downing Street. He needs grey hairs around him. He needs as Deputy Prime Minister a Willie Whitelaw-type character.’

“All of that is such nonsense. Actually in my view the Downing Street team is pretty talented at the moment, and they are a good team.

“And there are some real issues the Government’s got – it’s got a difficult economic backdrop, falling real incomes, it’s got to repair the relationship with Europe, which is absolutely critical to Britain’s economy, its immigration policy, its security policy.

“These are the big tasks alongside levelling up. But the idea it’s all going to be solved with some reshuffle of the kitchen cabinet or indeed the Cabinet is in my view nonsense.”

ConHome: “You’re really saying the problem with Boris Johnson isn’t his team, the problem with Boris Johnson is Boris Johnson.”

Osborne: “No I’m not actually, because I think Boris Johnson has the kind of charisma and leadership to deliver a lot of what he’s set out to do.

“But governments in the mid-term, they have to kind of refocus, and the glittering prize is there if they just reach out and grab it.”

Robert Largan: Cutting Council Tax would do more to level up than cutting Corporation Tax

18 Jan

Robert Largan is MP for High Peak and a Member of the Levelling Up Taskforce Committee. Onward’s report, Levelling Up the Tax System, is available at this link.

At the last election, in northern constituencies like mine, many people voted Conservative for the first time. They did so for three main reasons: to “get Brexit done”; to stop Jeremy Corbyn becoming Prime Minister; and because they wanted to see their area “levelled up”.

We’ve left the EU with a deal and Corbyn has been consigned to the dustbin of history. In 2024, voters will judge this Government on its successes and failures in levelling up.

So far, the debate on levelling up has focused on spending, particularly on infrastructure and understandably so. There is a desperate need to invest in infrastructure in places like the High Peak, whether that be our roads and railways or our schools and hospitals or even our digital infrastructure. But this spending is only part of the levelling up equation. We also need to look seriously at how our tax system works and whether the burden is spread fairly across the whole country.

That is why the Levelling Up Taskforce along with the think tank Onward have published a new report on Levelling up the tax system.

The report takes a new approach, analysing the impact of different taxes on different parts of the country. For example, taxes such as council tax and VAT fall the hardest on the most deprived regions, while average council tax per head in London is lower than anywhere else in England, despite house prices being much higher.

We often hear about how London generates £1 in every £5 of tax receipts. But this ignores the fact that London generates less tax than any other region as a share of their GDP, partly because it benefits from much higher levels of commuters than other places. If we’re serious about levelling up, we need to reassess this situation.

The report considers which tax changes might have the biggest impact on helping people in the most deprived parts of the country as we recover from a global pandemic.

Because there are lots more Band A properties in poorer regions, cutting Band A council tax by a ninth would save 54 per cent of households in the North East an average of £147 a year, 43 per cent of households in Yorkshire an average of 146 per year, and 41 per cent of households in the North West an average of 148 per year. This would put more money in people’s pockets quickly.

While another reduction in corporation tax would benefit London most, an increase to capital allowances for plant and machinery or industrial buildings would be of far greater benefit to the North, Midlands and Wales where there are far more manufacturing businesses. Such a change would lead to large savings for businesses in places like Cheshire, Derbyshire, the West Midlands, Teesside, East Yorkshire, Northern Lincolnshire and Cumbria where capital spending is highest.

I’m not seeking to write the Chancellor’s budget for him but I hope that this report can open up a new dimension in the levelling up debate and help inform how we make tax and spending decisions in future. At the very least, the regional impact of different tax measures should be a standard part of Treasury analysis.

We won’t be able to level up the whole country if the Government has one of its hands tied behind its back. The full fiscal firepower of the Treasury is needed if we are going to give real change for parts of the country that have been neglected by Westminster for far too long.

Esther McVey: We should honour our manifesto commitment to close the digital divide. Especially during this time of Covid.

3 Dec

Esther McVey is a former Work and Pensions Secretary, and is MP for Tatton.

The country has just entered what is essentially a third lockdown. Ninety-nine per cent of the population is now in the highly restrictive Tier Two or Three until early February, along with all the huge damage that will continue to bring to people’s mental health and livelihoods. So it is desperately important that everyone is able to connect online.

Covid has speeded up the digital revolution that would have evolved over a longer period of time. GP appointments, business meetings and education have rapidly moved to online, and millions of us have stayed in touch by using video services for the first time. It is becoming more and more essential for people to be able to get online with a reliable online connection for vital day-to-day services like banking and shopping. Yet many are being left behind.

According to research by the Good Things Foundation, nine million people who struggle to use the internet independently have been locked out of this digital economy and are being left behind. Nearly 200,000 children in the UK have almost no connectivity at home, and had no hope of getting an education whilst schools were shut, and 23 per cent of children from the poorest families do not have access to broadband at home.

This digital poverty is hitting society’s most vulnerable the hardest. Millions of people have become completely disconnected from 2020 society, and if we want to kickstart our economy, and start digging our way out of the enormous economic difficulties we’re in, we need every part of our country and economy able to make the most of these enormous opportunities online, rather than leaving millions of people on the other side of the digital divide without internet access or training.

The Conservative Party pledged during the last general election to bring world class gigabit-capable broadband to every home and business across the UK by 2025. Despite the widespread availability of the so-called “super fast” broadband, many parts of country are experiencing quite the opposite: unreliable connectivity and slow speeds, especially in rural areas.

Many of my constituents in Tatton and across Cheshire have been told that their properties do not qualify for commercial rollout of broadband. Across my constituency, broadband accessibility varies from street to street, and in Tatton, only six per cent of my constituents’ homes and businesses currently have access to full fibre broadband. This postcode lottery is only reinforcing the digital divide and exacerbating digital poverty.

So it was particularly concerning to me that the Chancellor’s Spending Review quietly ditched the commitment for 100 per cent gigabit capability by 2025 and slashed the financial support for it by three quarters from £5 billion to £1.2 billion. Whilst the new £4 billion “levelling up fund” is welcome, rolling out broadband would itself facilitate social mobility, so this seems a wasted opportunity.

So I am calling on the government to do two things, which I will be raising in the House of Commons today as part of the Blue Collar Conservative campaign on fixing the digital divide.

First, we must honour our manifesto commitments to the millions of people across this country who put their trust in our Party, and commit once again to delivering full fibre by 2025. NHS Test and Trace relies on dependable broadband, as do the 1.62 million people (and rising) unemployed who have to use the Universal Credit benefit system, and my constituents’ quality of life is dependent on this internet access.

Second, if we’re going to lock people down again for the next two months, and ask people to work from home and isolate from family and friends, they must get the tools and the training so that they can stay both socially and economically active. We have suggested investment in a new “digital catch up scheme” which is ready to be implemented immediately and could allow everyone, whatever their background, the opportunity to make the most of their potential whilst life has to be spent online.

We were elected last year to “level up” opportunity throughout the country. Blue Collar Conservatives all over the Britain know that there’s as much genius and talent in the north as anywhere else, and our Party’s task is to ensure everyone has the opportunity to break free and make the most of those talents, and not be held back by their background, and not have to move south to fulfil their ambitions.

The levelling up agenda depends upon nation-wide digital inclusivity. If we give up on this manifesto commitment, fail to invest in our digital infrastructure, and refuse to take the urgent action necessary to level up and fix the digital divide, we will be trying to deliver the levelling up agenda with one hand held behind our back.

The Department for Digital, Housing, Communities and Local Government itself said that digital equality “can help mitigate some of the deep social inequalities derived from low incomes, poor health, limited skills or disabilities”.

These repeated lockdowns in 2020 will leave a lasting legacy. But as painful as the year has been, we have seen an unprecedented mass movement online, which has brought with it many innovations which will shape our lives and the way we work forever.

So it is more important than ever that we turn our attention to the number one infrastructure project as we move forward: digital connectivity and digital inclusivity. We must redouble our efforts to roll out full fibre broadband, whilst at the same time fixing the digital divide. Not doing so would betray the very communities this government was elected to deliver for.

Neil O’Brien: The next algorithm disaster – coming to a Conservative constituency near you. This time, it’s housing growth.

24 Aug

Neil O’Brien is MP for Harborough.

Algorithms have been in the news, not for good reasons. One lesson from the A-levels row is that principles which seem reasonable can lead to outcomes you don’t expect. Another algorithm’s coming down the tracks: the new formula for how many houses must be built in different places. There are few with higher stakes.

I wrote about the housing White Paper in my last column: it proposes not just to change the methodology for assessing housing need, but also to make a standard methodology compulsory for the first time. In other words, if we don’t like the results of the new algorithm, we’ll have blocked off the emergency exits.

The new algorithm is set out here. It’s not particularly easy to read. For example, one of many factors is set out in bullet point 30:

Adjustment Factor = [( Local affordability factor t = 0 – 4 4) x 0.25) + (Local affordability ratio t = 0 – Local affordability ratio t = 10) x 0.25] +1 Where t = 0 is current yearr and t = -10 is 10 years back.

Clear enough for you?

I thought it might be a while before we saw what the new algorithm would produce in practice. But Lichfields, the planning consultancy, has translated the algorithm into what it would mean for local authorities.

The numbers that the formula spits out can be compared to the number of homes actually being delivered over recent years, or to the numbers in the current (optional) national formula. Whichever way you look at it, it’s controversial.

I’ve long argued we should concentrate more development in inner urban areas, for various reasons I’ll come back to below.  But this algorithm doesn’t do that – at least not outside London.  In the capital, the algorithm would indeed increase numbers substantially.

But in the rest of England the formula takes the numbers down in labour-run urban areas, while taking them dramatically up in shire and suburban areas which tend to be conservative controlled.

Overall, the algorithm proposes a south-centric model of growth for Britain (with some growth in the midlands).

If we compare the algorithm to recent delivery, the South East has been delivering just over 39,000 homes a year, and will be expected to increase that to just over 61,000, a 57 per cent increase. The East of England would see a 43 per cent increase, the East Midlands a 33 per cent increase, the West Midlands a 25 per cent increase and the South West a 24 per cent increase.

For the North East, North West and Yorkshire, the numbers the algorithm proposes are lower overall than the numbers delivered over recent years. But as with A-levels, the devil’s in the detail.

The really controversial changes are within regions, where the algorithm suggests jacking up numbers for shires, while taking them down in urban areas. Comparing the existing national formula to the proposal, we can see this for most large cities.

The number for Birmingham comes down 15 per cent, while the rest of the West Midlands goes up 52 per cent.

Numbers for Leicester go down 35 per cent. The rest of Leicestershire goes up 105 per cent.

Nottingham goes down 22 per cent, the rest of Nottinghamshire goes up 48 per cent.

Southampton goes down 17 per cent, Portsmouth down 15 per cent and Basingstoke down 23 per cent, but the rest of Hampshire would go up 39 per cent.

Wealthy Bristol would see some growth (5 per cent) but much lower than the rest of Gloucester, Somerset and Wiltshire (47 per cent).

It’s the same story up north. Leeds down 14 per cent, Sheffield down 19 per cent, and Bradford down 29 per cent. But the East Riding up 34 per cent, North Yorkshire up 80 per cent, and North East Lincolnshire up 123 per cent.

In the north west the core cities of Manchester (-37 per cent) and Liverpool (-26 per cent) see huge falls, while the areas around them shoot up. In Greater Manchester, for example, the growth is shifted to the blue suburbs and shires. Outer parts go up: Wigan up 10 per cent, Bury, up 12 per cent, and Rochdale up 97 per cent. And areas to the south and north of the conurbation up much further: Cheshire up 108 per cent, while Blackburn, Hyndburn, Burnley and the Ribble Valley together go up 149 per cent.

But it isn’t just that the numbers in the new formula are lower than the old formula for urban areas. In many cases the new formula suggests a lower number than their recent rate of delivery. This is true of Sheffield (12 per cent below actual delivery), Leeds (16 per cent), Bradford (23 per cent), the entire North East (28 per cent), Nottingham (30 per cent), Manchester, (31 per cent), Leicester, (32 per cent) and Liverpool (59 per cent). The new formula seems to assume we are going to level down our cities, not level up.

It’s true that there’s another step between the Housing Need Assessment which this algorithm produces and the final housing target, which can be reduced a bit to account for delivery constraints like greenbelt.

But if we go with this algorithm unamended, outside London most Conservative MPs will be seeing large increases in the housing targets for their constituencies, while many Labour MPs see their local targets reduced. Is this what we want?

Leaving aside the politics, I think not. Compared to the rest of Europe, the UK has much less dense cities.

Places like Dundee, Glasgow, Liverpool, Sunderland, Birkenhead, Hull and Newcastle all had smaller populations in 2017 than 1981, while places like Birmingham and Manchester weren’t much bigger. Our cities have untapped potential, many went through a period of shrinkage and have space, and there are health and environmental reasons to prefer urban growth too.

In dense urban areas, people are more likely to walk or cycle – and in the UK, people in cities walk twice as far as those in villages each year. This reduces public transport costs and improves health.

Denser cities can sustain better public transport and so cut car congestion and time spent travelling. As well as reducing pollution from transport, denser cities reduce energy use and pollution because flats and terraced homes are much more energy efficient.

I’m not sure the draft algorithm is even doing what Ministers wanted it to. The document in which it is set out says that “the Government has heard powerful representations that the current formula underestimates demand for housing in the growing cities in the Northern Powerhouse by being based on historic trends.”

But the algorithm seems to do the exact opposite.

There may be technical reasons why things aren’t working out: there’s lots of ways to measure affordability… differences between residence-based and workplace-based income measures… there were certain caps in the old model, population projections have changed and so on.

However, the bigger issue is this.

There’s no “objective” way of calculating how many homes are “needed” in an area. While there are ways of carving up the numbers that are seen as more or less fair, ultimately a vision is required.

Projections of population growth are circular: the projected population growth for the farmland between Bletchley and Stony Stratford would’ve been pretty low before we built Milton Keynes there.

Likewise the forecast for the derelict Docklands of the early 1980s. While there are real economic constraints, the future need not resemble the past.

Though it took a huge effort, Germany raised East Germans from 40 per cent to just 14 per cent per cent below the national average income since reunification. That’s levelling up.

Do we want to continue to concentrate growth in the South East? Do we want European-style denser cities, or for them to sprawl out a bit more? An algorithm can help deliver a vision: but it’s not the same as one.

Neil O’Brien: No, more economic prosperity doesn’t depend on more social liberalism

13 Jul

Neil O’Brien is MP for Harborough.

Danny Finkelstein took issue with Boris Johnson’s idea of “levelling up” in the Times the other day. He reviewed the work of Richard Florida, a thinker dubbed the “patron saint of avocado toast” for highlighting the role of bohemian urbanites in driving economic regeneration.

Danny concludes from his work that, “Social liberalism and economic prosperity go together.” He argues that: “in order to match the success and power of metropolitan areas, non-metropolitan places need to become more… metropolitan.  The problem with the metropolitan “elite” isn’t that there is too much of it. It’s that there aren’t enough members of it, drawn from a wide enough background and living in enough places.”

I hesitate to disagree with one of the smartest columnists on the planet. But economic growth and social liberalism don’t always go together.

What about the Victorians, combining breakneck growth with a religious revival and tightened public morals? What about Japan during their postwar decades of blistering growth and conservative “salaryman” culture? Over the last 70 years, Britain has become more socially liberal as our growth rate has slowed.

Even in Britain today, it’s highly questionable. London is the richest and fastest growing part of the UK.  But where is opposition to homosexuality and pre-marital sex strongest? London. Where is support for censoring offensive speech highest? London.  The capital mixes liberal metropolitan graduates with religious immigrants. Its success is shaped by both.

Danny’s other argument has more important implications. Is it really the case other places must emulate London to succeed? Like other capital cities across Europe, London has grown faster than the rest of the country since the 1980s. The shift to an economy based on “office jobs” over has favoured the centres of larger cities.

But we shouldn’t get too carried away by the idea that hipster-powered megacities are sweeping all before them. For starters, there are successes elsewhere. Cheshire has high tech in a rural setting, with productivity and wages above the national average.  Milton Keynes likewise, because it’s easy to build there. Productivity in Preston has grown faster than average because it’s a transport hub with advanced manufacturing.

On the surface, large cities outside London have done well.  Since 1997, our 16 largest cities grew their GDP faster than their surrounding areas: Leeds grew faster than West Yorkshire, Manchester faster than Greater Manchester, and so on.

But on average, those cities saw also slower growth in income per head than their surrounding areas. In other words, people became more likely to work in city centres, but that growth was fuelled by people commuting in from smaller places around them. Their growth has been powered more by smalltown commuters than flat-cap wearing uber-boheminans.

It’s right that there are cities outside London that have things in common with it, and might benefit from similar investments. Lawyers in London will soon get Crossrail. So why have lawyers in Leeds waited 20 years for a tram?

But too often Richard Florida’s work leads politicians to focus on shiny cultural facilities. A cool art gallery in West Brom.  A national museum of pop music in Sheffield. It’s not just that these projects flop and close. It’s that they distract from two bigger issues.

First, most people aren’t graduates – so we need a plan to raise their productivity and wages too.

Second, places outside urban centres are perfectly capable of attracting high-skill, high income people – with the right policies.

Britain’s economy is unusually unbalanced compared to other countries.  Pre-tax incomes in Greater London are nearly 60 per cent higher than the national average, but more than 20 per cent below average in Yorkshire, the North East, Wales and Northern Ireland.  These imbalances mean our economy is overheating in some places and freezing cold in others, slowing growth overall. There are no major economies that are richer per head than Britain which have a more unbalanced economy.

But these imbalances don’t represent pure free market outcomes. It’s true that low-skill, low wages places can get stuck in a vicious circle. True that some places on the periphery have very deep problems. Nonetheless, the British state doesn’t do much to stop that – in fact it does a lot to unbalance growth.

Consider how we spend money. Capital spending on transport infrastructure in London is nearly three times the national average. Research funding per head is nearly twice the national average. Nearly half the core R&D budget is spent in Oxford, Cambridge and London. Spending on housing and culture per head in London is five times the national average. We’re “levelling up” the richest places.

We’ve rehearsed these problems for years, but not fixed them. Instead of chasing flat white drinkers, we need to find a cool £4 billion a year to level up R&D spending in other places to the levels London enjoys. Fancy coffee can come later.

Consider our tax system. Overall, the tax rate on business in the UK is about average.  But we combine the lowest headline rate in the G20 with the lowest capital allowances. The combined effect of this is a huge bias against capital intensive sectors, particularly manufacturing.

That in turn has a regional impact, hurting places more dependent on making things: manufacturing accounted for only five per cent of London’s productivity growth since 1997, but nearly 50 per cent in the north west. A hostile tax system is one reason Britain has deindustrialised more than any other G20 country since 1990, and why manufacturing’s share of the economy is half that in Germany or Japan.

Manufacturing should be a key part of levelling up outside cities: it needs space, not city centre locations. In English regions outside London, wages in manufacturing are about nine per cent higher than in services, and manufacturing productivity grows faster than the economy as a whole.  But Britain’s excessive focus on professional services makes it harder to grow high-wage employment in non city-centre locations.

Consider where we put our key institutions. In Germany the political capital was Bonn, and is now Berlin. The financial capital is Frankfurt. The Supreme Court is in Karlsruhe. The richest place is Wolfsburg, home of Volkswagen. There are major corporate HQs spread across the country. TV production is dispersed because central government is banned from running it.

In Britain, all these things happen in just one city. We’ve talked about this for years, but made little progress.  In recent years, we managed to move one chunk of Channel 4 to Leeds, and a bit of the BBC to Manchester. But that’s about it. Whitehall only wants to move low-end jobs.

The debate on levelling up is frustrating, because we know some things work, but we don’t do them. “Regional Selective Assistance” boosted investment in poor places with tax breaks and subsidies.  Thanks to evidence from natural experiments, we know it boosted growth. Yet it was allowed to wither.

I don’t want us to be just another government promising the world, then not delivering. Politically, it’s vital we deliver. Lots of people who haven’t voted Conservative before put their trust in us last year. It’s telling that the centre point of the seats we won is just outside Sheffield.

We won on a manifesto combining centrist economics, (50,000 more nurses) mild social conservatism, (ending auto early release) and national self-confidence (Getting Brexit Done).  Levelling up is central to all this. We promised voters steak and chips.  We could serve up avocado toast instead, but we shouldn’t be surprised if the voters don’t thank us.