Regional Empowerment: Britain’s ‘City Deals’

by Mark Muro, Kenan Fikri | January 24, 2012

Here at the Metro Program we have long advocated a “bottom-up” approach to economic development. 

Such an approach calls for a major reorientation of federal-state-metro relationships--one that empowers metros and regions with real flexibility and resources so as to enable them to chart their own courses. And so we have often looked abroad for ideas as we have worked on concepts, such as Metropolitan Business Plans (coming soon: Metropolitan Export Plans) and our proposals for aiding and abetting the self-organized initiatives of innovation clusters. For example, we have closely followed developments in the United Kingdom, where the government has been tinkering for years with its regional policy and experimenting with its own sets of reforms in an endeavor to optimize the devolution of power and decision-making in its centralized system. 

Now, the Brits are at it again. Having created a new Cities Commission chaired by the deputy prime minister, the Coalition government has just released a vividly written new blueprint for going much farther and getting much more serious about local self-determination, bottom-up regional business plans, and true regional empowerment. To be sure, the initiative is not without its cynics, with many particularly on the opposition benches skeptical about the return of localism at a time of controversial budget slashing by the national government. Yet even so, the innovations will be and should be watched closely by fans and critics alike (in addition to loyal regional policy wonks), coming as they do on the heels of a controversial round of reforms that brought the austerity axe to regional policy-as-usual. All of which means that once again we will be watching developments carefully as should anybody who cares about remaking U.S. federalism so it reflects the true regional nature of the economy.

So what’s going on? The current U.K. push has its intellectual roots in the ruling Coalition’s decentralization agenda but stems directly from the “Localism Act” signed into law in November 2011. Through the act, the Coalition government legislated for itself the means to devolve significant power and resources in a variety of realms--housing, infrastructure, job training, and more--to specific cities via the “City Deals” it is now proposing.   Through these “deals” Whitehall proposes to work directly with the eight largest cities in England--and their corresponding Local Enterprise Partnerships (associations of all of the local governments in what is roughly analogous to a U.S. metropolitan area)--outside of London to identify the specific priorities of each place and determine exactly which powers and resources should be devolved in response to each region’s strategic plan (akin to our metro business plan framework).   In exchange for the transfer of power, cities must document the economics behind the proposed devolution, prove their capacity to manage the specific plan and its budget, and demonstrate accountable governance representative of the appropriate geography.

Moreover, just as no two regional economies are alike, so will no two City Deals look the same. Leeds’ proposal may emphasize strategies to boost exports and support the development of the low carbon economy. Liverpool may aim to reduce its dependence on public sector jobs by supporting entrepreneurs, unlocking capital, and confronting its skills deficit. And for its part, Bristol will likely attack the serious housing shortages and road congestion that have accumulated thanks to years of growth in the city-region’s silicon design, digital media, and aerospace clusters.

As to the details of getting it done, the coalition government appears serious about being responsive and tailoring the specifics of each deal to cities’ individual needs. On page 8 of is “Unlocking Growth in Cities” white paper, for example, the government provides an “illustrative menu” of 21 very specific options for reform that Whitehall is prepared to explore with interested cities. The list includes items like these:

In short, Whitehall is explicitly goading both cities and itself, at a moment of crisis, to go farther--to be “ambitious and radical” in thinking what can be done differently and how national recovery can be generated by empowering regional growth. Such urgency and ambition would be a welcome development in parallel U.S. efforts, although it remains to be seen if eloquent British rhetoric will now be met by equally fierce implementation.

Now, in this connection, it’s true that the centralized U.K. system offers significant advantages for delivering this kind of reform: greater ability to bundle, pool, and package offerings across agencies, for example, and direct fiscal ties to cities and functional city-regions. Such institutional arrangements, after all, likely explain why in Britain a significant push for bottom-up action is coming from the top while  U.S. metropolitan areas--weary of navigating state and federal silos for a pittance here and a fraction there--lead the charge. 

Still, the U.K.’s experiment with “City Deals” bears watching. Institutional differences aside, the spirit of the deals should be an inspiring prod to federal and regional leaders as they seek to work out a new more flexible, effective, and empowering set of federal-state-metro relations to unlock economic growth. If the highly centralized British system can find a way to unleash city power so can we.

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