25th January 2009: Article for The Financial Times by Jesse Norman

For three centuries Britain’s economic growth has been driven forward by its cities. So how are our cities placed to weather the current recession? What factors will make the difference between urban resilience and urban decline?

Of course in a severe, general and prolonged recession all cities will suffer. But some will do better than others. As a new report by the think-tank Centre for Cities points out, cities that have relatively high exposure to the financial sector, such as Leeds or Edinburgh, or to construction are already suffering the effects of the downturn.

The town of Wigan is particularly unlucky, since it is vulnerable on both fronts, and it is already seeing one of the largest rises in benefits claimants as a result.

On the other hand, cities with large human capital resources, a balance across industry sectors and exports are likely to be more resilient. With the recent successes of Manchester and Glasgow, some people have claimed that the north-south economic divide no longer exists.

But in fact the evidence still points the other way. It is particularly striking that if you rank the top 50-odd English cities by the number of their employees in knowledge-intensive businesses, the top 10 are all south of Norwich, the bottom 10 all north of Mansfield.

This suggests that one effect of a prolonged downturn will be to increase the gap between the economically best- and worst-performing cities. But it also highlights, as recessions are apt to highlight, a much wider failure here in public policy.

The present government came to power with tremendous fanfare about its plans to regenerate cities. There have been important successes, as noted. But the overall picture has been one of monumental mess and confusion. In 2003 regeneration minister Lord Rooker memorably described urban policy as “a bowl of spaghetti”.

Why should this be? Why should political leadership have been so ineffective here? One reason is sheer complexity, with nearly 50 overlapping funding streams ranging from the New Deal for Communities through Positive Futures to Youth Music Action Zones.

A second and more fundamental reason is that urban development has been heavily focused on the state of the physical environment, and so dominated by architects and planners. This has encouraged property-led development and “high and tight” housing policies, which have packed dwellings together and reduced environmentally important brownfield space.

It has also led policymakers to underplay the economics of cities. The Urban Task Force chaired by Lord Rogers, the architect, produced an important report in 1999. But it included no economists and it is not clear that any were consulted. Partly as a result, urban policy has not in general been about cities as such, but about cities in difficulty, with a particular and understandable focus on the poorest neighbourhoods.

Economics by itself is rarely the answer to anything and it can hardly be wrong for politicians to seek to help the least well-off. But in this case, more attention to urban economics would have caused them to ask, not simply about the causes of city failure, but about the causes of city success.

This in turn would have forced them to look more closely at the very mixed record of regeneration efforts over the past three decades and in particular at the performance of the regional development agencies. It would have raised the question whether the current set-up of the benefits system may in fact increase long-term urban deprivation by reducing economic migration between cities.

It would have highlighted the crucial linkages between local civic engagement, greener urban environments and enhanced economic growth. It would have shown how greater localism can boost innovation and help each city to meet its own economic challenges. And it would have rammed home the importance of providing proper public transport infrastructure, as a way to “crowd in” private investment.

In short, a different and more economically literate perspective, as shown by Centre for Cities, would have brought more coherence to urban policy and greater understanding of how cities can fight recession. What we have now, however, is yet another colossal and expensive missed opportunity.