When Thinking the Unthinkable Goes Wrong

It's rare for a think tank report to merit a full page in The Sun, but Policy Exchange has managed it this morning, with their report which, in tabloid speak, appears to call for the North of England to be closed down and turned into a museum.

Of course in reality it is much more complicated than that, as the report's introduction makes clear.

Geographical inequality is growing... Many of the forces that make life tough for struggling cities will continue. As demand for more highly qualified workers grows, the lower skill levels associated with regeneration towns will make it even harder for them to catch up – not least because their brightest and best educated leave for London after graduation. Nor is a change of government likely to continue supporting regeneration policy. Ministers in the current Labour Cabinet overwhelmingly represent inner city areas. A future Cabinet, perhaps more representative of suburbs and the wealthy South East, may not have the same commitment to high levels of regeneration funding, particularly if economic circumstances demand a squeeze on public spending. But if we are honest about the constraints and realistic about the opportunities then we can make progress. We need to accept above all that we cannot guarantee to regenerate every town and every city in Britain that has fallen behind. Just as we can't buck the market, so we can’t buck economic geography either. Places that enjoyed the conditions for creating wealth in the coal-powered 19th-century often do not do so today. Port cities had an advantage in an era when exporting manufactured goods by sea was a vital source of prosperity; today the sea is a barrier to their potential for expansion and they are cut off from the main road transport routes. More generally, the economic pull of Europe has boosted the South East at the expense of the North, Wales and Scotland.

Luck has also played its part: in 1900 London had finance and Manchester had cotton. Finance has since prospered and cotton collapsed, reinforcing geographical changes. There is no realistic prospect that our regeneration towns and cities can converge with London and the South East. There is, however, a very real prospect of encouraging significant numbers of people to move from those towns to London and the South East. We know that the capital and its region are economic powerhouses that can grow and create new high-skilled, high-wage service sector hubs. At the same time market mechanisms can be used to induce some firms to move out of the South East. We propose a significant liberalisation of land use in London and the South East. At present local councils ignore market signals and zone land for industrial rather than residential use. There are over 2,500 hectares of industrial land in London alone, and 10,000 hectares in London and the South East together. If only half of it were used for housing, it would create £25 billion in value and allow half a million people to move to an area that offers much better prospects than where they live now. Such a marketled policy would prompt many industrial firms that are based in London to relocate to where land is cheaper. So some people will leave regeneration cities; some jobs will move to regeneration cities. Both are desirable outcomes.

Desirable? Debateable, perhaps. But to assert, as the authors do, that cities like Oxford or Cambridge should be massively expanded, with all the greenbelt implications of that, is simply not realistic politics. I know think tanks are there to think the unthinkable, but they ought to realise that politicians are there to implement the implementable, not commit political hari-kari.

I imagine David Cameron is none too pleased to be having to deal with this issue today, as he starts a tour of North West marginal constituencies. What he should do is point out that one of the authors of the report, Dr Tim Leunig of the LSE is, in fact, a leading Liberal Democrat supporting economist!

One thing I was most amused by in The Sun was the short editorial spluttering by their Whitehall editor, the extremely affable Dave Wooding. Dave defends his home city of Liverpool and attacks the report for suggesting that Liverpool is anything other than the most wonderful place on the planet to live. I always find it amusing that Liverpool's greatest fans seem to be people who have done just what the Policy Exchange reports suggests - and moved away.

The fact is that in today's employment market people are far more mobile than they have ever been and are more happy to relocate than they have ever been. People go where the jobs are. There has never been a free market in this country. Governments of all colours have had regional policies and policies on regeneration, some of which have worked and some of which haven't. But to suggest that because some city regeneration projects have failed, more attention should be paid to building in areas which are already economically strong is muddled thinking.

If you want to see an example of a city which has been transformed by regeneration over a period of three decades, look at Cardiff. If I understand the Policy Exchange report correctly - and I have not yet had time to read it in its entirety yet - that investment would have instead been made in the South East.

I think I had better read up on this before my appearance on ANY QUESTIONS on Friday, don't you?!