City Deal or no deal?
Excuse me for being ever so slightly underwhelmed, but to borrow a phrase doing the rounds on social networking sites: this is the fifth end of the world I’ve lived through.
Or to be more accurate, the City Deal is the latest in a long line of attempts to deliver a new settlement between central and local government based on devolving budgets and powers from Whitehall.
The Regional Growth Fund, Regional Development Fund, New Deal for Communities, and others, have come and gone over the years, but the impact these schemes have made on unemployment and deprivation has been sketchy to say the least.
The Department for Communities and Local Government has approved City Deals with eight of the largest English cities and city regions, including Greater Birmingham-Solihull. DCLG estimates that the programmes in total will create 175,000 jobs over 20 years and 37,000 apprenticeships. That’s an average 21,800 jobs per city, or 1,000 a year.
It is clearly a matter of opinion as to whether DCLG’s claim that “this is a significant contribution to our economy – one that will create real opportunities for real people across the country” stands up to scrutiny in practice.
Of course, there is some good news to flow from the hard-won agreement between the Greater Birmingham and Solihull Local Enterprise Partnership and the DCLG. But as those closest to the negotiations have readily admitted, this is but the first small step on a very long journey to improve the woeful economic performance of Birmingham and much of the West Midlands.
The value of the Greater Birmingham-Solihull City Deal, which promises 10,800 additional jobs by 2020 and the creation of an investment fund of up to £2 billion over a 25-year period, must be seen against Birmingham’s dire jobs and skills crisis.
There are already plans to create a net increase of 100,000 private sector jobs by 2020 in the LEP area, but research by the city council shows that some 144,000 new jobs are required in Birmingham alone by 2025 if the city is to start performing above the national average for economic output.
Three years ago, the regional development agency Advantage West Midlands estimated that the GVA gap between the region and the average for England was £10 billion. That figure is probably closer to £20 billion by now. Whatever the City Deal can offer in the short term isn’t going to make a great deal of difference to economic output.
Birmingham Chamber of Commerce chief executive Jerry Blackett chose his words carefully when he welcomed the City Deal, but laced his comments with broad hints that plenty of people at Westminster are still resistant to change and are likely to place barriers in the way of meaningful devolution.
The LEP will, presumably, have to demonstrate that it can make a success of the limited budgets and devolved powers it has been given in order to convince Ministers that a far more radical programme is warranted. We will never know whether Birmingham would have been fast tracked down the devolution road if the city had opted to be governed by a directly elected mayor.
Crucial discussions about the next phase of the City Deal will centre on public transport and the development of the M42 Economic Gateway where a critical mass of existing operators – Birmingham Airport, the NEC, Jaguar Land Rover – and the coming of the HS2 high speed rail line will create the conditions for more than 60,000 new jobs by 2041, according to the LEP.
But the M42 Corridor proposals will be a stern test of the Government’s commitment to allowing LEPs to run with their own economic regeneration schemes since they are bound to provoke widespread environmental protests about development in the green belt and Meriden Gap.
Mr Blackett said: “Civil servants have proved effective defenders of the status quo and the Government has struggled to encourage departments to work together to maximise what powers can be delivered to cities like Birmingham.
“The LEP can draw confidence from recent months and should stand firm on the next wave of ‘asks’. Not least, for example, the powers we expect to be seeking in the autumn over transport.
“We need to remind the government that the agenda for change is to achieve radical devolution. Today’s announcement is a good start but the job remains unfinished.”
The benefits outlined in the first phase of the City Deal include:
- The potential to create an investment ‘war chest’ of up to £20 billion based on levering in £15 million of private sector funding on top of £1.5 billion from the public sector over 25 years.
- £25 million to set up an Institute of Translational Medicine unlock growth potential in the NHS and create a portal to create a resource for SMEs and international pharmaceutical companies.
- A Single Settlement to cover all economic development funding. 10,800 additional direct jobs, building on the 40,000 created by the vanguard Enterprise Zone in Birmingham City Centre.
- 3,560 apprenticeship grants to be delivered by March 2013.
Other aspirations include a public-private sector agreement to develop a “world-class skills system which meets the needs of employers and fulfils the expectations of employees”, as well as the construction of 2,800 new homes through the use of public assets.
And in a separate green agenda to the City Deal, some 15,000 homes and 40 public buildings will be refurbished, delivering substantial savings in domestic energy. The homes of 1,500 people on pension or disability benefit and 2,250 people in fuel poverty will be retrofitted.
The City Deal prospectus identifies several funding streams:
- From the public sector: £75 million for the Green Deal; £13m for the Institute of Translational Medicine; £1m from the City Skills Fund; and local authority contributions to the skills agenda.
- From the private sector: £25m of contributions to the Skills Compact by 2015; revenue costs for the Institute of Translational Medicine.
Mr Blackett praised LEP chairman Andy Street and his deputy, Steve Hollis, for their determination to stick with what became “long and arduous negotiations” with the Government.
He said: “The target of getting 25 per cent of SMEs to sign-up to a Skills for Growth Compact by 2015 is ambitious but right.
“The focus on making better use of publicly-owned land to kick-start housing and mixed-use development is also welcome.
“It makes good sense to want to build a £25 million clinical trials facility in Birmingham, as this leverages the excellence in the University of Birmingham and UHB. The focus on a number of green and smart initiatives is also a welcome move.”
There was a similar message from Sir Albert Bore, the leader of Birmingham City Council, who described the City Deal as “a good first step”.
Sir Albert added: “The City Deal comes at a time when Birmingham and the wider LEP area is enjoying renewed confidence and has, for the first time, all of the building blocks for success in place.
“For this to be a truly successful and globally competitive city region we need to maximise our full potential in areas such as life sciences, where we already have a leading position internationally.
“There is much more to be done, but the City Deal is testament to the strength of the relationship between the public and private sectors and the local authorities involved in the LEP.”
