Making the case for agglomeration.

Tom Forth, August 2018

I have a longer version of this blog post, but after nearly three months I can’t quite finish it. Normally that’s a sign that I don’t really understand what I’m saying. Sometimes it’s a sign that I don’t really believe what I’m saying.

So this is a short version. It’s what I both understand and believe. Tell me what you think

Here we go,

I think that agglomeration benefits are real. That means that I basically think that cities become more productive as they get bigger. Paris is more productive than Lyon and Lyon is more productive than Toulon. Stockholm is more productive than Gothenburg and Gothenburg is more productive than Malmo.
I don’t think that agglomeration benefits work in the UK. London is more productive than everywhere else, but our big cities such as Manchester and Birmingham and Liverpool and Glasgow trail smaller places like Edinburgh, Bristol, Oxford, and York.
I think that it would be good for most British people if the UK government focused on making the UK’s big cities more productive. I think that the UK government could have made them more productive over the past 30 years by investing differently and could still make them more productive by making better investment decisions in the coming 12 years.
Since our big cities add up to about 20% of our population, and they underperform their European equivalents by about 30% of, doing this would give the UK about a 6% boost to GDP over the next 25 years. This would more or less balance out the damage that Brexit is predicted to do to our economy.
We have not tried to boost the economies of our big cities in ways which would have worked in the past. If we try now, it will be the first time. But there is opposition, as there was in the past.
I understand much of the communitarian left’s opposition to agglomeration investment. Their argument is that Leeds, Manchester, and Birmingham already get too much of the investment in their areas and that we should help the towns near to them more.

I disagree for two reasons. Firstly, because of point 1. I believe that agglomeration benefits are real and thus that dispersed growth will mean less growth. Less growth means either higher taxes, which Britons continually vote against, or more austerity, which I would rather avoid. So I oppose dispersed investment, often called jam-spreading, because I think it would require more austerity.

Secondly, I disagree because I think that commuter towns like Guildford, Ilkley, Yarm, Hebden Bridge, and Sutton Coldfield are successful places that people want to live in, despite being commuter towns. There is an argument that Dewsbury, Castleford, Oldham, or Rochdale would not want to be, or could never be, like those places. I disagree.
I understand much of the conservative right’s opposition to agglomeration investment. Their argument is that the state shouldn’t pick winners, and that the whole of the UK should benefit. You’ll hear this in statements from Theresa May promoting “bringing together the great cities, towns and rural communities of the north of England to build a Northern Powerhouse” or her Northern Powerhouse Minister saying “Northern Powerhouse 2.0 has to be about more than our great cities, it has to be a whole-North approach”. There is significant local opposition to policies such as Metro Mayors that strengthen cities for similar reasons, often voiced as fears about leaving rural communities behind as cities pull ahead.

I disagree for two reasons. Firstly, because the state has been very successfully picking winners all my life. It picked Oxford, Cambridge, and Edinburgh as winners to great success. And of course no bigger winner has been picked than London, the recipient of huge government investment and now an extremely successful city repaying that investment many times multiplied. I reject the common argument that because it is the UK’s capital it deserves such special treatment. I do not think we should make ourselves considerably poorer just so London can continue its centuries-long battle with Paris as Europe’s top city.

Secondly, I disagree because the evidence is pretty clear that jam-spreading won’t work. I explained that in point 6.

At the moment I think that agglomeration fans like me are slightly on top. The UK government continues to invest very heavily in London as always. Additionally, the Northern Powerhouse strategy has so far clearly focused on Manchester, and the Midlands Engine strategy has focused on Birmingham.

But we are a very long way from having achieved enough in Manchester, Birmingham, or any of the UK’s other big cities that we can afford to reduce the focus. Almost none of the extra investment that Manchester and Birmingham have secured has happened yet. Neither city is on the path to catching up with their European neighbours. Other big cities such as Leeds, Sheffield, and Liverpool have seen no obvious benefit from industrial strategy yet.

It feels to me like the tide is shifting. The arguments that people like me make are heard less often. For every Minister making pro-agglomeration promises, such as to make “Manchester and Birmingham as R&D-intensive as the East of England”, there are more Ministers talking about spreading growth everywhere and not picking winners. Labour are talking about picking winners, but they seem to want everywhere to win too. I've already explained that that won't work.

Many people in towns and suburbs who put aside their own local short-term interests for bigger prizes in their nearest city have seen no benefit and are running out of patience.

I think that abandoning focus and spreading investment more evenly would be bad for the UK. I think it will make most of us poorer than we could be, and that means worse services, higher taxes, or both.

So here’s how we stop it,

Keep supporting Metro Mayors. These have been a huge success.
Connect town to cities better. If people in Dewsbury, Castleford, and Pontefract want to commute to Leeds for work and people in Rochdale, Oldham, and Wigan want to commute to Manchester for work, the UK government should be willing to spend large amounts of money to help them. This government’s continuing cancellations of important investments in North England, and its willingness to misrepresent the data when denying it, risks undermining the case for agglomeration. If people in towns near cities cannot access jobs in those cities, they have little reason to support agglomeration. While they wait, they need to trust that improvement is coming.
Connect cities within themselves better. The Bus Services Act and the ability for cities to undo three decades of failed deregulation and franchise buses is a good start. But the UK government must remove much of the ability for existing bus companies to push back against franchising. It should also devolve significant funding so that cities can make franchising work quickly. If people living in and around our cities cannot experience the whole city, there is little reason for them to support agglomeration, nor in fact any agglomeration benefits to experience.
End local government cuts and let places raise money themselves. It is extremely hard to sell the benefits of agglomeration, and thus local prosperity and empowerment, when none of the local prosperity can be retained by local government. Central government must end local government austerity, so that local government can continue to exist, and then loosen the restrictions on local government raising money to fund itself.

There are reasons why all three things are extremely hard within the strange systems of UK politics. But that’s for another time.