David Willetts is a member of the House of Lords.
One very important feature of Britain’s growth problem is the weak performance of our twin second cities – Manchester and Birmingham.
Their economic performance is much further behind the capital than in other European countries – Lyon or Milan or Munich do much better. Birmingham’s and Manchester’s productivity gaps with London are 37 and 35 per cent respectively. Closing them to the gaps in productivity between Lyon and Paris, 27 per cent, or Toulouse and Paris, 21 per cent, would lift national output by 1 per cent.
Two very effective regional leaders, Andy Street and Andy Burnham, both tried to tackle this. Manchester in particular has had some real success. The Greater Manchester region has had the highest growth rate of any English region over the past decade. Andy Burnham clearly intends to replicate this across Britain.
So how was it done?
George Osborne and Greg Clark, following in the foot-steps of Michael Heseltine, were crucial in negotiating the City deals which brought funding and powers for locally elected mayors. I was brought up in Birmingham and looked on enviously as Manchester did so well out of these. I asked George Osborne why he couldn’t do more for our other second city – Birmingham which appeared to be the fly-over state. He replied that the chief executive of Manchester, Howard Bernstein, did not send letters before the Budget complaining about public spending cuts: instead he wrote to the Treasury with pro-growth proposals where some public spend would crowd in private spend.
That was much more attractive for a Chancellor looking for practical things to do.
This purposeful city leadership started before Andy Burnham but he pushed it forward. He was helped by a broader political consensus across Manchester.
Birmingham and the West Midlands never achieved that. In some cities the division of responsibilities between different tiers of local government controlled by different political parties makes it much harder. Cambridge for example which should be one of our hottest growth centres is blessed with a City council, a county council, and a combined authority led by its directly elected regional mayor.
Much of the investment in Manchester went into the centre of the city. There are big economic gains from agglomeration effects if lots of smart people are working together in an area. This particularly matters for the service industries where Britain excels. Manchester’s growth has not been driven by re-industrialisation: it has been driven by a surge in high value services. Greater Manchester’s knowledge-intensive business services employment share rose from 5 per cent in 1991 to 15 per cent in 2021, with strong graduate jobs growth. That has been key to its strong productivity performance.
That is only possible if there is there is a good radial transport system bringing people into the city centre. Rail services matter: if only the £70b spent on HS2 had instead gone to improving transport connections from small towns into big cities. Buses matter too: something which Andy Burnham understood.
There also needs to be a supply of highly-educated young people with sufficient flexibility to move into new services sector jobs. Manchester’s five universities are key. There are over 100,000 students in Manchester. That large student population brings a buzz to the city and many of them stay – over 50 per cent of graduates from Manchester stay to work in the area. Birmingham by contrast has 70,000 students and about 40 per cent stay after graduating. One reason why universities flourished in Germany and the US was that cities and states understood that they were key to demographic competition – attracting students and keeping them drove their growth.
Some of these universities will be prestigious and research-intensive. Some people assume that is what a good university must look like and the rest must be bad universities which should be deprived of university title and converted to state-controlled polytechnics. But the best formula for strong city growth is to have several universities with different missions so that there are technical skills from applied higher education as well. Manchester thrived as these different types of university worked together. They helped attract more inward investment projects than any other British city after London.
The effects of all this show up in a key measure of city economic performance – the number and proportion of graduates living in the wider urban who can get into the city centre in 45 minutes. Birmingham scores 51per cent whereas Manchester is better with 62% of graduates well-connected to the centre. That links the quality of radial public transport, the amount of accommodation in the city centre and the attractiveness of its universities.
However there is still a lot to do to share the benefits of growth. Overall Manchester’s employment rates are below the national average and economic inactivity rates are above the national average. More people need to be brought into the labour market. There has to be a better vocational offer.
The Greater Manchester Baccalaureate, MBacc is a sensible attempt to address this. It offers better links of schools and colleges with local employers. That involves work experience and practical advice on routes to jobs in particular sectors, including crucial advice on the qualification best suited to them.
Many young people have good realistic ambitions for jobs they want to do but don’t know what the route map is to get there. MBacc tackles that. It avoids some of the pitfalls which have bedevilled such attempts. First, it recognises that there is more to employment and vocational training than apprenticeships. Secondly it promotes many forms of work experience – the attempt to promote T levels above all else did great damage to wider initiatives by directing large public subsidies specifically to very long periods of work experience as part of a T level.
There are useful practical lessons to be learnt from the success of Manchester. Conservative ministers, Labour mayors and high-quality local officials all deserve some of the credit.