Powerhouse has become the catchphrase for regional clusters forming to compete with the might of London to attract investment. The northern powerhouse, southern powerhouse and Midlands engine have become part of the political lexicon since the Treasury began unveiling its devolution agenda last year. To better balance the UK economy, the government has pledged to devolve fiscal and planning powers to combined local authorities to help speed up economic growth.
“Whether North, South, or in the West Midlands, if a ‘powerhouse’ constitutes joined-up thinking and the handing down of more tools for growth to a regional level, we see potential for the real estate industry,” says British Property Federation chief executive Melanie Leech. “Local decision-makers know their areas best and are able to identify opportunities and barriers to growth much more effectively than Whitehall can, so provided that it is done sensibly and in line with local needs, devolution is something we support.”
Here we take a look at the intentions of the powerhouses and, more importantly, whether they can achieve their ambitions.
Northern powerhouse
Chancellor George Osborne put the northern powerhouse at the heart of the Conservative Party’s “one nation” agenda during a speech in Manchester in June 2014.
Transport infrastructure investment is central to the scheme, which will link the city regions of Manchester, Leeds, Liverpool and Sheffield with improved highways and faster rail connections, including HS2. A Department for Transport report has set out how the infrastructure will be expanded with the support of Highways England, Network Rail, HS2 Ltd and local enterprise partnerships. But some business leaders have questioned whether it will be enough to achieve a real northern economic force.
Chris Hearld, chairman of KPMG in the North, says: “One would hope that this is not the sum total of investment in our regional road and rail networks. Rather this should mark the start of a transformative programme, which delivers world-class connectivity between our towns and cities.”
Paul Hirst, partner and head of transport at Addleshaw Goddard, says a coherent plan for attracting more private investors is needed to plug the public funding gap.
To demonstrate its commitment to the scheme, the government has appointed a northern powerhouse MP in the form of James Wharton.
“For the first time in a long time there is a real positive energy across the North,” says Wharton. “We want to work with communities to identify and deliver all that we can to realise their economic potential.”
Sir Richard Lees, Labour leader of Manchester city council, believes “things are moving in the right direction”, but argues cuts to local authority funding risk undermining the powerhouse ambitions.
The Greater Manchester Combined Authority, established in 2011, will have an elected mayor in 2017 as part of the devolution deal with government.
Midlands engine
Launching a long-term economic plan for the Midlands in February, Osborne said the region would become an “engine for growth” in the UK economy.
By 2030, the government has pledged to create 300,000 new jobs, boost growth by more than £30bn and deliver £5.2bn of investment into new transport infrastructure in the region, including faster rail connections.
As part of the plan to get the Midlands to “punch its weight” in the UK economy and political sphere, councils in the East and West Midlands have moved to create combined authorities.
Bob Sleigh, leader of Solihull council, which earlier this month signed up to join the West Midlands Combined Authority, reckons it is “a lifetime opportunity for the West Midlands to speak as one voice to government and to the wider world”.
He says the WMCA will focus on improving skills, connectivity and economic growth and insist that decisions affecting the region are made in the Midlands – not in Whitehall.
In the East Midlands, combined authorities are also planned for Derbyshire and Nottinghamshire, but they will all need parliamentary approval.
Business leaders in the region have demanded more details from government about how investment will be delivered.
Dave Bullock, managing director of Compendium Living, which plans to build 800 homes in Castleward, Derbyshire, by 2035, says more infrastructure investment is needed to connect cities and improve broadband connectivity if the region is to compete with London and the South East.
“It is a great time [to invest in Derby],” says Bullock. “We have been building in Derby now for two and a half years. The economy is very strong. It is a place which does create a lot of wealth for the country and people need more houses.”
However, Bullock believes that it will be more challenging to create a combined authority in the East Midlands than in the North, because the cities are “very different”.
Southern powerhouse
Not to be outdone, London and the South have also put forward multiple bids for getting more powers for the mayor, councils and the London Assembly.
London mayor Boris Johnson has met with communities secretary Greg Clark to try to secure a new devolution deal for London, giving the mayor more powers over transport, housing, criminal justice and skills.
The London Assembly Devolution Working Group published a report last month calling for an overhaul of the mayor’s powers to reflect London’s challenges of building more homes and creating high-tech jobs. Devolution of business rates, the skills budget and suburban rail would help the capital thrive, the report argues.
It comes after GLA Conservative Andrew Boff’s report in January, which argued that London and the South East should join forces to build one of the world’s largest economies.
Devolving tax powers to a new Thames City political body, he argued, would allow Greater London to work with Essex, Kent, Surrey, Berkshire, Buckinghamshire and Hertfordshire to co-ordinate large-scale projects to fill growing gaps in housing and transport provision.
Hampshire and the Isle of Wight have also put forward a bid to be the new southern powerhouse as a combined authority to help attract investment around the Solent.
Jonathan Bacon, leader of Isle of Wight council, says keeping more business rates would help fund public services. A combined authority, he says, would give the region “a stronger shared position to challenge other parts of the country and create a strong and successful economy from which we can all benefit”.
