New GDP figures may herald return to growth, but worst performing cities continue to struggle

Tomorrow’s GDP figures will show a return to growth. In many places, however, it won’t feel like the good times are back, with the North-South gap widening.

Tomorrow’s GDP figures should have Labour pollsters champing at the bit; a return to growth could be just the shot in the arm that Gordon Brown needs to keep his election hopes alive as the national economy finally turns the corner. In many places, however, it won’t be feeling like the good times are back.

Last Monday, the Centre for Cities’ “Cities Outlook” report showed that the recession has widened the gap between the UK’s best and worst performing cities – a divergence we expect to continue during the recovery. The persistence of this gap suggests that we need a new urban policy, one that’s more realistic about the different capacity of cities to grow.

Policy needs to work with the grain of economic reality. Despite a decade of investment through the Regional Development Agencies, the South East has continued to grow faster than the North. Academic literature suggests regional convergence is by no means certain to occur.

Cities with real economic potential need to be allowed to grow, allowing more houses to be built in areas of high demand and investing in transport infrastructure. Reducing living costs in growing cities would give people a choice so that if they want to move to work in more vibrant economies they can. In Cambridge the typical first-time buyer’s house costs ten times their salary. Such a situation is not great for labour or social mobility.

And for the likes of Stoke and Burnley this means a reality check. Reinventing their economies into a bioscience or green technology cluster is unlikely, despite the rhetoric of local politicians searching for an answer. Improving the skills level of people in these places will improve their employability and aid their mobility.

Connecting struggling cities to larger, dynamic cities where jobs are being created could also increase people’s opportunities. It is no panacea, but if transport links between Bradford and Leeds were improved, unemployment in Bradford would probably fall.

Labour’s regional policy has aimed to achieve equal growth, everywhere. Unfortunately the data shows us that this isn’t very likely. Most economic activity takes place in big cities. Forty per cent of England’s jobs are in Greater London, Birmingham, Leeds, Liverpool and Manchester. The party has started to acknowledge this with its creation of City Regions in Manchester and Leeds, but there is further to go.

We are not suggesting that government stops spending money in less successful cities; improving the quality of people’s lives in struggling cities is a socially desirable outcome in itself, but it would help to be clearer about the aims of such policies.

Overstating potential economic benefits that such spending might have – in term creating knowledge jobs – rather than focusing on the real benefits to people, by improving the areas they live in, has resulted in a lot of money being spent on the wrong things.

If the recession has taught us anything, it is that politicians should be a little more contrite about their ability to shape the economy. As the election battle kicks off the parties should ensure that their manifesto commitments help cities with the potential to grow to drive the economic recovery, while being more realistic about the objectives of government spending in less prosperous areas.

Our guest writer is Kieran Larkin, an analyst at the Centre for Cities

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