Without Network Rail upgrades, the Northern Powerhouse will falter
01 July 2015
01 July 2015
Improvements in infrastructure are of vital importance in revitalising the northern economy, explains economist Geraint Johnes.
Plans to upgrade the Midland main line, and the Manchester-Leeds (or HS3), York-Sheffield and York-Manchester rail links have been “paused”. It is not yet clear what this means – the upgrades may go ahead later. But there are clearly grounds for concern that the delay (or worse, cancellation) of the project could kill off the Northern Powerhouse before it has come to life.
The idea of a Northern Powerhouse was launched last year amid much fanfare. The rationale came from Zipf’s law, which originated as a linguistic analysis of word frequency, but was later successfully applied to the question of city size. In essence, the law states that, looking across countries, there is a stable, inverse, relationship between the rank of a city (whether it is the first, second, third biggest in the country) and its size (in terms of population). So, for example, the population of America’s biggest city – New York – is roughly twice that of its second biggest city, Los Angeles.
In comparison with other countries – and in relation to the size of London – the UK’s second city (Birmingham) is smaller than Zipf’s law might lead us to expect. But we know that large cities benefit from agglomeration economies – that is, the networks that spring up between businesses and people in close proximity to one another. Agglomeration economies mean that big cities tend to be characterised by relatively high levels of productivity. So, the idea for a Northern Powerhouse gained traction on the basis that the gains from agglomeration could render infrastructure investment in the north particularly financially worthwhile.
But those responsible for the plans have already shown themselves to be confused about what the Northern Powerhouse actually entails. At the time of its launch in June 2014, the Chancellor of the Exchequer George Osborne talked of the Powerhouse as an entity that would combine the strengths of cities over a wide area. Osborne was referring to an area centred on Manchester, with a 40 mile radius encompassing Leeds, Sheffield and Liverpool.
He also flagged the creation of “a new high-speed rail connection east-west from Manchester to Leeds, based on the existing rail route, but speeded up with new tunnels and infrastructure – a third high speed railway for Britain”. One might note, however, that while improved infrastructure is doubtless a prerequisite for the Northern Powerhouse to become a reality, any HS3 would have to be accompanied by significant improvement in metropolitan transport links.
By November of last year, plans were in place for devolution of significant powers to Greater Manchester – the so-called Devo Manc deal. Although the deal is welcome in many ways, Devo Manc has compromised the vision of the Northern Powerhouse by making a single city the geographical and political focal point for the changes.
Manchester has been clearly identified as having growth potential, as evidenced by its position at the heart of the Powerhouse. But the argument for improving infrastructure as a means of securing agglomeration economies seems to be fading into the background. Failure to integrate the Northern cities with efficient transport links, while offering separate devolution agreements to each of them, is likely to blow apart any prospect of real consolidation.
There is no doubt that investment in HS3 would be costly, and difficult to deliver during a period of austerity. The government is working to arbitrary targets on the budget deficit, and a compelling argument can be made in favour of borrowing (at the current low rates) to finance profitable infrastructure investments. Yet the government will be mindful of the fact that those arbitrary targets have recently received the blessing of the electorate. The “pausing” of HS3 seems therefore to be a given.
That being so, perhaps the luxury of time at least offers an opportunity to undertake a proper assessment of the type of infrastructure that the north needs most. In other countries, large infrastructure investments of this type have been evaluated using comprehensive economic analyses. If the north has to pay the price of reduced investment now, the government should at minimum ensure that, when it finally comes, the investment is based on the most rigorous evidence.
Image mattbuck | CC BY-SA 3.0
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Geraint Johnes does not work for, consult, own shares in or receive funding from any company or organization 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.