Economic Growth Strategy: Prioritizing Cities and Towns

Introduction

A “threatening situation.” That is how Birmingham was described by the incoming Labour government led by Harold Wilson in 1964.

Unemployment in Birmingham and the West Midlands was virtually non-existent in the post-war period, and average household incomes were well above the national average.

Government’s Approach to Success

However, rather than recognizing this as the remarkable achievement that it was, the government saw it as a problem.

It felt that Birmingham should not be able to become too successful as that might exacerbate the economic decline of other regions.

As such, it was decreed that people should be forced out of the city center lest Birmingham became even more successful.

Rishi Sunak’s Vision

Fast forward almost 50 years to present day Manchester. Current Prime Minister Rishi Sunak used his Conservative Party Conference speech last week to channel his inner Harold Wilson by announcing his ambition to shift the UK’s economic geography away from cities and towards towns.

The Neglected Potential of Towns

As someone who grew up on a council estate in Huddersfield (the same town as Wilson), I know all too well that many towns have so much untapped potential and have been neglected by successive governments.

Unfortunately, any plan for regional growth that ignores cities is destined to fail.

The Productivity of Cities

Cities tend to be highly productive. This is due to a confluence of factors flowing from the benefits of agglomeration.

The fact that there are so many productive people living and working in close proximity to each other helps to make them even more productive. This is particularly true for large cities such as London.

The Positive Impact of Economic Growth

Economic growth should not be seen as a zero-sum game. Productive cities help to create prosperous towns and villages.

The Importance of Productivity

As cities grow, these agglomeration benefits increase, and the city becomes even more productive.

Given that productivity is the key driver of economic growth, then this is incredibly important. When it comes to economic growth, size really does matter.

Supporting Less Economically Successful Areas

Economic growth means larger profits for firms and helps to create higher-paying jobs.

All of this raises revenue for HM Treasury, which can then be invested into less economically successful places.

There would be no money for improving towns if cities, particularly London, are deprioritized.

Spillover Effects of Cities

Cities also have successful spillover effects. Highly productive cities spread wealth to surrounding towns and villages, whereas towns and villages close to less productive cities tend to struggle.

As such, it is wrong for the government to pit towns against cities. Economic growth should not be seen as a zero-sum game. Productive cities help to create prosperous towns and villages.

Challenges to City Productivity

Unfortunately for the UK, many of our cities are not as productive as they should be.

The economy is smaller than it would be if our cities were as productive as those in continental Europe.

Barriers to Growth

The main reason for this is the UK’s dysfunctional and restrictive planning system, which prevents homes, offices, and labs being built in and around our major cities.

This has priced people out of city centers and means that businesses struggle to find the best people to work for them.

These highly talented people also have fewer interactions with other highly talented people, reducing opportunities for idea-sharing.

Transport Infrastructure as a Challenge

Moreover, the UK has failed to invest in transport infrastructure in and around our major cities.

Again, this discourages people from working in a role where they would be a great fit or are forced to undertake longer commutes.

Again, this also reduces their interactions with like-minded people.

Diminished Agglomeration Effects

All of this diminishes the agglomeration effects you’d normally expect to see in a highly developed country such as the UK.

The result is that our villages, towns, cities, and entire country are much poorer than they should be.

The Way Forward

If the Government is serious about growing the economy and leveling up, then it needs to prioritize cities. The planning system needs to be liberalized so that cities can build the homes and offices they so desperately need.

It also needs to invest in transport infrastructure to connect them to their neighboring towns and villages.

Conclusion

Harold Wilson’s attempts to spread prosperity by constraining Birmingham did not work.

Birmingham and the surrounding area started to decline while the rest of the country continued to stagnate.

Sunak’s plans are similarly well-meaning but are also a recipe for disaster.

If the Conservatives are serious about bringing economic growth to every part of the UK, then they will prioritize London and the other great cities and allow them to grow.

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