My Lords, I too thank the noble Baroness, Lady Massey, for instigating this important debate. I also thank IPPR North for a very incisive report, which I think takes the debate on slightly, as I shall explain in a moment.
I never thought that I would say this in a debate, but I agree with the noble Lord, Lord Prescott. If the strategic argument and the strategic framework are not sorted, then in everything we have been talking about we are simply tinkering at the edges. This is a northern issue, but it is not just about our towns, our regions or our cities; there is a northern dimension that needs to be dealt with here.
I am in the middle of reading a great book by an author called Philip McCann. It is called The UK Regional-National Economic Problem and its subtitle is Geography, Globalisation and Governance. It deals with specific regions. He argues that the UK economy is decoupling into three economies. That is brought about not by government policy but by globalisation and the way that different parts of the UK now trade globally. Therefore, there need to be different responses, and policymakers at the centre, through a framework, need to think strategically about what that actually means. I do not believe that there is a policy to deal with this—there is tinkering but no strategic policy.
For example, the London economy acts on agglomeration, which we assume is the be-all and end-all of every economy in the world. However, in Europe, and particularly in some of our regions, including the north, the approach is more polycentric, which is about how the cities and towns work together, how the rural and urban work with each other. That is not based purely on a city region devolution basis; it goes much deeper than that. The northern powerhouse is based predominantly on cities, particularly Manchester, and not on the whole northern area.
The book also shows that there is no trickle-down effect and that the prosperity of the south-east and London is not shared equally across the whole country. Half the UK’s population live in regions where productivity is below that of the poorer regions of the former East Germany. The weak, long-run productivity performance of the UK is largely a result of the fact that productivity benefits do not spread across the country but remain largely located in the south.
Meanwhile, the highly centralised and top-down UK governance system, which is being tinkered with but has not been significantly reformed for our economy, is appropriate only for governing a country whose economy is homogenous. That is not the case in the UK. This mismatch between the UK’s imbalanced internal economic geography and its overcentralised governance system on a regional-national basis is the key issue that has to be addressed if we are to unlock the economic performance of all regions in the UK. It is a deep-seated problem which will not go away, and tinkering with a few quality issues will not solve that. That is why we clearly need to grasp an understanding of how our economy works at the city, town, sub-regional and regional levels. Without that we will not unlock the potential of the north and other regions in this country to deliver the economic performance that they can achieve. The IPPR report, in talking about a plan for the greater north, begins to tackle that strategic policy issue.
Therefore, I ask the Minister: what work is really going on, not just in relation to cities and devolution at a local level but in relation to the conundrum between the regional and national economic problem? That needs to be addressed if we are to achieve total and prosperous economic development. It is so fundamental that not addressing it will mean that all devolution of skills, business development and other issues, which noble Lords have talked about, will not have maximum effect. It is so fundamental that it needs to be addressed. Yes, we need to address the local level and the polycentric at city and town level, and at the level of urban and rural working together, but we also need a policy framework that untaps the potential at the regional level and in the wider north. Again, I agree with the noble Lord, Lord Prescott. Transport for the North starts to address that but it needs to go much deeper and much further.