Northern Powerhouse: cruel deception or cool conception?
06 August 2015
06 August 2015
Two parties. Two rivals. Two plans. One surprisingly similar outcome says LUMS economist Geraint Johnes.
Jeremy Corbyn, bidding for the leadership of the Labour Party, has described plans for a Northern Powerhouse urban region as a “cruel deception”. His alternative economic plan for the North of England – entitled Northern Future – was developed on the basis of some 1,200 responses to a consultation.
Yet Corbyn’s calls for “some sort of devolution to the North of England” contain clear echoes of the government’s Northern Powerhouse plan that he decries. In reality, Corbyn’s plans and those of the government share a common characteristic – both lack any semblance of clarity.
The government has yet to define the area that will be covered by the Powerhouse. The early dream straddled the Pennines with a high speed rail route. Then came devo Manc, centred very tightly around the Manchester area – all the more tightly, indeed, when it was announced that the rail investment would be “delayed”. But then, when the Petra Group decided to invest in the north east, all of a sudden that became part of the Northern Powerhouse too.
As for Corbyn’s plans, all we know is that they are something that the government’s plans are not. We know he is critical of George Osborne’s insistence on elected mayors for devolved city regions, but we have no information at all on what system of government he would prefer instead.
On the economic front, Northern Future argues for the economy to be re-balanced and redesigned “around some clear social and economic objectives” – though it is not clear what those objectives might be either. The document refers to the re-emergence of a “resilient industrial base” as a crucial path to economic development, hinting that the North of England is the natural geographic focal point for this.
This nostalgia for a strong manufacturing sector is widely shared: indeed, David Cameron has spoken recently about the need to rebalance. But politicians of different colours favour different mechanisms. If working with the market – as recent governments have done – has been ineffective, then perhaps there is appeal in alternative approaches to boost manufacturing. But such approaches need to recognise just how strong market forces can be – and how costly it can be to work against them.
Just as the government initially made the fabric of public services (particularly transport) a cornerstone of its plans for the Northern Powerhouse, infrastructure is a major plank of Corbyn’s vision of the Northern Future. He proposes the creation of a National Investment Bank, to promote investment and provide financing in areas such as construction. Local councils would be free to borrow, in order to fund infrastructure investments such as new social housing. Increasing the supply of housing is, of course, also a concern of the current government – though its favoured solutions differ somewhat from Corbyn’s.
Northern Future is also concerned with transport infrastructure. It argues for tighter regulation of the sector, claiming that this will allow local transport systems in the North to develop some of the more favourable aspects of London’s rail and bus networks. Whether it really is regulation, or other factors (the “thickness” of the market, for example) that has led to the success of London’s transport infrastructure is not explored.
The document also argues that “each rail franchise should be taken into public ownership as it comes up for renewal”, and for the restoration of rail electrification plans. The second of these is, of course, in line with the policy that the current government has “paused” for want of resources.
The first – the renationalisation of the rail service – is more controversial. For sure, some users of rail services are not happy with the services currently being provided. But it is not obvious that transferring ownership would necessarily lead to improved services: the case needs to be made in full, if it’s to be convincing.
Corbyn also laments the drain of highly skilled workers to the South East, and suggests a targeted graduate scheme with a view to “supporting people with roots in Northern communities to stay and build their careers and businesses there”. The precise mechanisms are not spelt out, but it looks like another example of pushing against the market.
While policies like these are well-intentioned, in practice they run the risk of being expensive, with little return on the investment. More attractive, if properly executed, might be his proposal to move some government departments out of London, rebalancing government spending on these bureaucracies across the country.
As a whole, Northern Future makes some interesting contributions to the debate about the North, and about the development of regional economies within the UK in general. Some of Corbyn’s proposals have a similar ring to Osborne’s – in intent, if not in method. But some do differ, and others actively push back against market forces. While a different approach is refreshing, it can sometimes come at a high price.
Geraint Johnes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.
is Professor of Economics in the Department of Economics and Director of The Work Foundation.
He has published widely in the area of the economics of education, including papers in the Economic Journal, Oxford Economic Papers and Oxford Bulletin of Economics and Statistics.
He researches labour market destinations in BRICs, labour market flows, and costs and efficiency in educational institutions.