‘City Deals, ‘deal-making’ and UK local

and regional development policy’

Dr Peter O’Brien

peter.o’brien@ncl.ac.uk

Outline

• The problem…

• Influences upon UK local and regional policy

• City Deals

• Devolution Deals

• Pros and cons of deal-making

• Conclusions

Cumulative differential growth paths of London, the English core cities, Edinburgh,

Glasgow and Cardiff, 1981-2011

Source: Martin, R., Gardiner, B. and Tyler, P. (2014) ‘The evolving performance of UK cities: city growth

patterns 1981 – 2011’, Future of cities working paper, London, Foresight Government Office for Science: 21.

Uneven development

Pendulum swings in economic development

governance in England

Source: Pike, A., Kempton, L., Marlow, D., O’Brien, P. and Tomaney, J. (2016) Decentralisation: Issues, Principles and Practice,

CURDS, Newcastle University: Newcastle upon Tyne: 10.

From RDAs to LEPs…

Source: National Archives available at:

http://webarchive.nationalarchives.gov.uk/20080804135814/dcsf.go

v.uk/rsgateway/leas.shtml

Impact of austerity on local governmentChange in local authority spending power and central government funding,

2010/11-2015/16

Source: NAO (2014) Financial sustainability of local authorities, National Audit Office: London:

Launch of City Deals in 2011

“As major engines of growth, our cities

have a crucial role to play. But to unlock

their full potential we need a major shift

in the powers available to local leaders

and businesses to drive economic

growth. We want powerful, innovative

cities that are able to shape their

economic destinies, boost entire regions

and get the national economy growing.

The aim of these deals is to empower

cities to forge their own path, to play to

their own strengths and to find creative

solutions to local problems” (Nick Clegg,

Deputy Prime Minister, Foreword,

Cabinet Office (2011) Unlocking Growth

in Cities, London: piii.

Defining the deal-making process…

• Local development contracts in

France, Sweden and Canada

• Transactional agreements

• Rejection of formal KPIs

• Incentive-based

• Experimentation

• Payment by results

• Fast discourse

• Rapid brokering of confidential

bargains

• Intensified inter-urban competition

Rt. Hon Greg Clark MP, UK

Secretary of State for Business,

Energy and Industrial Strategy

Wave 1 Wave 2 Wave 3

Greater Birmingham The Black Country Glasgow Clyde Valley

Bristol Region Brighton and Hove Inverness

Greater Manchester GreaterCambridge Aberdeen

Leeds City Region Coventryand Warwickshire Cardiff Capital Region

Liverpool City Region Hull and Humber

Nottingham City Region Greater Ipswich

Newcastle Region Leicesterand Leicestershire

Sheffield City Region GreaterNorwich

Liverpool Mayoral Deal Oxford and Central Oxfordshire

ThamesValley Berkshire

Plymouth

Preston and Lancashire

Southampton and Portsmouth

Southend

Stoke and Staffordshire

Sunderland and the North East

Swindon and Wiltshire

Tees Valley

Three Waves…

• Variable

geographies

• Wave 2 includes

18 Deals that

involve 76 local

authorities (both

upper and lower

tier)

Source: Map produced by Wymer, C. based on authors’ own elaboration.

Collective GVA of UK City Deal areas (£675,648m)

35387652%

24227236%

7950012%

Wave 1 Wave 2 Wave 3

Source: Authors’ own elaboration from ONS, NOMIS and City Deal documents data.

Emergent infrastructure funding and financing practices

• Prioritising

• Innovating/experimenting

• Pooling

• Scaling-up

• Risk-sharing

• Revolving/recycling

• Tailoring

• Co-investing

• Integrating appraisal/

decision-making

• Aligning/co-ordinating

• Governing/accounting

Source: O’Brien, P. and Pike, A. (2015) Deal or No Deal? Infrastructure funding and financing in UK City Deals’,

National Institute Economic Review, 233, R14-26.

Instrument Description

Long-term infrastructure funding 15-20 year grant funding paid by national government to local areas in

tranches and subject to periodic independent assessment

Tax increment financing Borrowing against future business rate (tax) revenue

Buildings and public assets Pooling public and private physical (land and property) assets to

generate and capture revenues for re-investment purposes

Housing and regeneration Arrangements to plan joint national and local investment in housing and

re-use capital receipts

Economic investment funds Pooled funding, business rates (taxes), loans, borrowing, developer

contributions and recycling returns from loan payments

Local transport major funding 5 years devolved transport funding matched with local funds to deliver

strategic transport improvement programmes

One-off transport project funding Central and local co-investment in individual local projects

Low carbon and energy Reducing carbon emissions, environmental degradation, improving

green energy, infrastructure and local heat networks

Flood defences Locked-in public investment in return for private sector contributions

‘Superfast’ broadband and digital National grant investment alongside private capital

City Deal infrastructure

‘New funding’ (for all projects) by selected City

Deal (£ per capita)

800

556

385346

145

60 53 51 34 26 23 3 30

100

200

300

400

500

600

700

800

900

Source: Authors’ own elaboration based on Cabinet Office announcements and City Deal agreements.

Model Example(s) Description

Elected Mayor Liverpool City; Bristol City Directly-elected mayor with executive decision-

making powers

Combined

Authority

Greater Manchester; Sheffield City Region;

Liverpool City Region; North East; Tees

Valley; West Midlands; West Yorkshire

A statutory multi-local authority body that can

acquire powers devolved by national

government. Greater Manchester CA is chaired

by an interim metropolitan mayor.

Joint Committee Bristol and West of England; Black Country;

Coventry and Warwickshire; Hull and

Humber; Oxford and Oxfordshire; Plymouth;

Thames Valley Berkshire; Glasgow and

Clyde Valley; Cardiff Capital Region;

Aberdeen; Greater Cambridge

A statutory local government body.

Local Authority Sunderland, Inverness Individual or multiple local authority but with

involvement of business and universities.

LEP-led Greater Birmingham and Solihull; Greater

Ipswich; Preston; South Ribble and

Lancashire; Swindon and Wiltshire

Non-statutory private sector leadership (LEP

chair).

Economic Board Nottingham; Greater Brighton; Greater

Norwich; Leicester and Leicestershire;

Solent; Southend; Stoke-on-Trent and

Staffordshire

Non-statutory strategic body of local authorities

and the private sector.

Governance

Example #1: Greater Cambridge

• Fast-growing local economy in south east England – popn. 278,000

• Part of broader growth corridor linked to Milton Keynes and Oxford

• Partnership between 3 local authorities, LEP and university

• Transport improvements, housing development, skills, enterprise zones and streamlined local planning

• Key component of City Deal is £500m of central government grant funding over 15 years for new transport infrastructure

• Governance of executive (joint committee) and assembly

Example #2: Lancashire (Preston)

• Fast-growing local economy in north

west England – popn. 1.4m

• Aerospace, advanced engineering,

and manufacturing

• Partnership between 3 local

authorities, LEP, government

agencies

• Transport improvements, housing

developments and job creation

• 10-year infrastructure programme

resourced by joint local and national

governments funds, capital receipts

and local government pension fund

• LEP-led governance

Example #3: Sunderland

• Struggling economy in north east England – popn. 280,000

• Automotive (Nissan), digital and low-skill professional services

• Partnership between the local authority, LEP and universities

• Main focus of City Deal is on developing an international advanced manufacturing park

• Original proposal to retain local taxation in IAMP and cross-subsidise to reinvest in city centre – but rejected by UK government

• Part of combined authority but local authority leading delivery

Moving to Devolution Deals…

“Here’s the deal. We will hand power from the centre to cities to give you greater control over your local transport, housing, skills and healthcare. And we’ll give the levers you need to grow your local economy and make sure local people keep the rewards. But it’s right people have a single point of accountability: someone they elect, who takes the decisions and carries the can. So with these new powers for cities must come new city-wide elected mayors who work with local councils. I will not impose this model on anyone. But nor will I settle for less” (George Osborne speech on ‘Building a Northern Powerhouse’, 14 May 2015).

Rt. Hon George Osborne MP,

former UK Chancellor of the

Exchequer

Value of 30-year investment funds (£ per head)

815

675

503 491

424

368339 329

0

100

200

300

400

500

600

700

800

900

West ofEngland

Tees Valley Liverpool CityRegion

Sheffield CityRegion

GreaterLincolnshire

East Anglia WestMidlands

GreaterManchester

Source: David Paine, LGC (8 April 2016).

National Audit Office review…

“While there is some similarity in the total

figures for additional investment funding

provided to each local area as part of

devolution deals, there is more variation in

the allocations per person. The Treasury

and Cities and Local Growth Unit told us

that each amount was based on their

negotiations with local areas. These took

account of…the extent of proposed

governance reform, the ambition of efforts

to drive local growth and the local economic

profile. It is not clear how this translates to

the specific amounts allocated” (NAO

(2016) English Devolution Deals: 24).

Nature of Deals

Strengths:- Conduit for centre-local relationships

- Local ‘empowerment’

- Vision, strategy-making

- Encouragement/promotion of innovation

- Project, programme integration

- Investment leverage mechanism

- Local governance reform device

Weaknesses:

- Asymmetric information

- Centre as both supporter and appraiser

- Negotiating power resides nationally

- Lack of transparency

- Uneven outcomes of political haggles

- Disjuncture and slippage from announcement to implementation

- Limited monitoring and evaluation

Conclusions

• An ‘informal’ approach to public policy-making

• Practical developments rather than ‘great transformations’

• Clarify principles, rationales and process for deals

• Potential to ‘strengthen’ infrastructure scheme rationale

and appraisal – ‘co-production’ between national, sub-

national and local governments

• Strengthen monitoring and assessment of delivery

• Avoid the ‘zero-sum game’ (e.g. displacement)

• Organisational expertise and capacity at all spatial levels

• Post-deal announcement implementation guarantees

• Build in evaluation and reflection to inform future practice

This presentation is based on research undertaken by the

Infrastructure BUsiness models, valuation and Innovation for

Local Delivery (iBUILD) research centre, which is funded by the

UK’s Engineering and Physical Sciences Research Council

(ESRC) and the Economic and Social Research Council

(EPSRC) (https://research.ncl.ac.uk/ibuild/) and the ESRC’s

Impact Acceleration Account programme, which funded research

in 2015/16 undertaken by Andy Pike, Louise Kempton, David

Marlow, Peter O’Brien and John Tomaney.

Acknowledgements