09 Jan 2019
The Institute of Economic Development (IED) Conference was held in London on the 6th December last year, its focus was 'productivity, place and people'. This blog reflects on the themes of the Conference, with a particular focus on the challenges facing the North.
The conference was timely in that it came the day after the Institute of Public Policy and Research (IPPR) published their annual 'State of the North 2018' report which sets out a number of key challenges for the North. The Report highlighted that the original Northern Powerhouse agenda focused on productivity. New investment was considered to be a positive outcome as it was anticipated that this investment would automatically result in benefits to all communities. The reality has not quite replicated this hypothesis.
Strategic Economic Plans (SEPs) and Local Industrial Strategies (LISs) have a key role to play in identifying the key sectors which are central to driving increased local productivity. LISs was the focus of the session facilitated by Lichfields at the Conference, to which there was considerable interest from practitioners across the country beginning to consider how a LIS may look for their area.
The relationship between a SEP and LIS will vary from location to location but emerging guidance suggests that LISs will focus on key sectors which will drive productivity. However, there are enabling sectors such as logistics and construction which will have a key role in facilitating increased productivity in key sectors rather than being a key sector themselves. It is expected that these enabling sectors which facilitate growth, will help to increase participation potentially for lower skilled jobs which would complement the growth in higher skilled employment. Increasing participation is aligned with inclusive growth and ensuring economic success is felt across communities and ensuring all communities can benefit from increased productivity.
There were positives from the Conference, particularly the opportunities provided by Innovate UK in terms of the UK being a leader in Artificial Intelligence and other emerging highly specialised sectors of growth, and Homes England's drive to boost housing delivery in areas affected by significant affordability constraints.
The IPPR report focuses on the need for northern leaders to ensure, in the future, that they start to monitor health and well-being and the impact this has on productivity and inclusive growth. The opening panel discussion at the IED Conference focused on what makes a successful place and health and well-being were highlighted as being central to this. Given the disparity in life-expectancy between parts of the North and South of England tackling this should clearly be a priority. This links to the IPPR report highlighting the need to ensure that going forward the Northern Powerhouse agenda must expand across the North and move away from solely focussing on the major city regions. This will be important to ensure that growth is inclusive and a range of different communities will contribute to the region's economy and the goal of increased productivity.
There are some stark indicators that more needs to be done to ensure growth is effectively inclusive; a quarter of northern workers - 1.6 million people- are paid below the real living wage (a wage which enables households to have an acceptable standard of living) and weekly pay has fallen by £21 since 2008 in real terms. (https://www.ippr.org/research/publications/state-of-the-north-2018).
Devolution provides important opportunities to align approaches rather than fragmentation. Beyond the development of LISs, there are challenges to ensure that Local Enterprise Partnerships (LEPs) and Combined Authorities work alongside key employers and education providers to ensure that local people moving out of education and into the workplace have the skills required to meet employers’ needs. Tackling the lack of participation in the workforce is an important component of achieving increased productivity, improving skills is critical to success.
In the North East, both of the existing LEPs (Tees Valley and the North East) are acutely aware of the need to ensure that historic trends in lack of participation and low aspirations are tackled from a young age. Both LEPs are working with schools across their LEP areas to help drive-up educational attainment and reduce the gap between the worst and best performing schools.
The IPPR report set out a number of key challenges not least the disparities of per capita spending on transport in the North compared to the south of England, and the overall impact of austerity policies, which has hit the North more than any other region. An efficient, well-connected and affordable transport network has a key role to play in facilitating economic growth through connecting places and improving accessibility of people to jobs and economic opportunities.
Figure 1 Transport Investment Comparison
Source: 'State of the North 2018' IPPR
Creating a successful and competitive economy in the North East will also positively impact on graduate retention, in the medium to long term, and stem the flow of highly skilled professionals from the region. The North East has so many attractive qualities such as proximity to the coast and countryside, historic cities and vibrant urban centres which are often under-valued by new graduates because of the lack of perceived opportunities for employment in key sectors. Providing the right choice of homes in the right places in the North East is also critical to supporting economic opportunities.
The Conference highlighted the future challenges in ensuring the UK can increase productivity, and ensure improvements are spread across all regions. The potential economic implications of Brexit and how this may impact on productivity, place and people were also reflected on throughout the day, particularly the impact Brexit is likely to have in the regions where there are lower levels of productivity. For the North the challenge is not only supporting key sectors to grow but also ensuring the growth of highly skilled jobs is supported by increased participation, by getting people currently out of work back into work, and by addressing fundamental inequalities to ensure productivity is experienced across all communities.
We are about to embark on a new LIS for Tees Valley. If you would like to know more about this and how we can help you through this journey, take a look at our product or get in touch with Ciaran Gunne-Jones, Lucie Bailey or Ross Lillico.
17 Oct 2017
As the initial flurry of analysis of the implications of the Government’s ‘Planning for the right homes in the right places: consultation proposals’ settles, there is time to review the content of the proposals and digest what it might mean for the north and more specifically to the north east – my particular area of interest being based in the North East.
When a Council prepares a new Local Plan, the most controversial issue is almost always the number of homes to be built. The existing Planning Practice Guidance (PPG) provides a flexible approach to understanding local housing needs to enable Council’s to choose their own strategies. However, in reality this has meant that there is a great deal of room for debate when a draft Local Plan is tested at Examination.
As someone who deals with OAN debates on a regular basis, I agree that the process would benefit from a clearer approach which is more transparent and accessible to non-specialists, including the local community.
However, the devil is always in the detail and in developing a methodology (and associated policy and guidance) which can be applied nationally, the Government will clearly need to ensure that;
a) The needs assessments it generates are realistically deliverable;
b) It helps to address the housing crisis and driver higher levels of housing completions; and
c) It does not undermine regional strategies focussed upon economic growth objectives e.g. Northern Powerhouse.
Across the North the Government’s proposed approach would mean a 24% per annum reduction when compared to the current assessments of housing need. In the North East this would result in a 20% decrease annually. The consultation does recognise the figures are a starting point and that local authorities have the opportunity to make an uplift beyond these indicative numbers.
Figure 1 Government indicative housing need against current local assessment of need
Source: Government Data/Lichfields Analysis
The North East has tended to be a region that recognised the importance of building more homes. So, if this decrease was simply accepted by Councils as the end point for plans – rather than, as Government indicates, the start point - it would clearly be counter-intuitive. The difference between the Government identified numbers and current OAN reflects the very different underlying assumptions:
Government figures are based one 2014-based demographic projections (plus an uplift for affordability) which simply project forward past trends; and
Current OANs are largely economic-led, reflecting the need to increase jobs and attract and retain skilled workers.
Because housing delivery is intrinsically linked to economic growth, the new approach could constrain the economic growth ambitions of North Eastern authorities and in some cases actually lead to decline if local authorities in the region fail to think beyond the methodology alone. For example, in Sunderland if the Government’s methodology is used the labour force could reduce by almost 1,500 over 10 years as opposed to the 2,500 increase needed to support the economic strategy underpinning the emerging Local Plan.
In order for the North East to achieve its economic ambition there is a need to retain and attract workers and that is intrinsically linked to the quality of place on offer, which of course includes housing. Recent analysis of the net flow of migrants to London highlights County Durham experienced a significant net outflow between 2013 and 2016. Without an ambitious economic growth strategy and the housing to support it, there is likely to be a continued loss of population to the South, particularly of educated and skilled younger people. This is an unsustainable position and runs counter to what the Government is trying to achieve through the Northern Powerhouse agenda.
Figure 2 Net migration flows to London
Source: twitter @election_data
The Government proposals do provide some ‘hooks’ for ambitious local authorities who want to deliver more homes (paragraphs 28 and 46 of the consultation). However, there is little in the way of the detail needed to ensure that local authorities feel confident to pursue a housing number in excess of that provided through the standard methodology. This is an area requiring more thought and incentives.
Without this additional detail and clarity, there is a risk that local authorities may shy away from delivering the housing needed to support their economic aspirations. Sticking to the levels identified under the Government’s standard methodology could result in a level of housing which is more palatable to local communities and avoids the challenges associated with identifying extra housing sites. However, it would fail to deliver the economic growth ambitions for the North East.
There are also significant economic benefits which are generated through housing delivery. In addition to the direct jobs created in the construction of houses, new residents spend money resulting in increased jobs and local authority revenue through Council Tax. The impact of this is increased revenue funding for local authorities to invest in communities and help support wider investment programmes.
The Government’s proposals raise key issues which will require careful thought to ensure that the revised guidance supports the increase in housebuilding in the North East and across England by providing the incentives for local authorities to deliver housing beyond the minimum identified within the proposals.
 https://www.gov.uk/government/consultations/planning-for-the-right-homes-in-the-right-places-consultation-proposalsLichfields has prepared an Insight Focus which summarises and provides comment on the proposed housing need methodology http://lichfields.uk/media/3326/housing-need_sep-2017.pdf