Core Cities UK Position Statement on the Comprehensive Spending Review: Our Offer to the Nation Core Cities UK represents the cities at the centre of the ten largest economic areas outside London in England, Scotland and Wales. These places deliver 25% of the UK economy and contain 19 million people. Although our cities contribute massively to the economy, productivity is not going up and public spending is not going down within them. This means the current centralised approach to public spending and policy intervention is not achieving Government’s priorities for growing and rebalancing the economy, and for sustainable deficit reduction. Today we are making a unique, bold and realistic offer to Government and to all the nations of the UK. Our offer is to rebalance the national economy and contribute to sustainably reducing the deficit. To deliver more jobs, housing, economic and productivity growth. And by joining up local and national public spending in cities, to transform public services and reduce their costs. We will do this by making public funds go further. Over time we can significantly reduce the costs of some services, which together with increased productivity will make our cities financially self-sustaining. But to deliver this, a more locally focused, flexible approach to public spending is required, with budget certainty for the term of Parliament, so the different needs of different places can be met in a tailored way. Why Change is needed Although total economic output for the UK has returned to pre-recession levels, economic productivity – output per person, or per person in employment – has fallen, meaning that many people subsist on low wages which require topping up with benefits, and that tax returns to the Treasury are smaller. The Bank of England reports that productivity in the last quarter of 2013 was 4% below the pre-recession level, 16% below the level expected from the pre-crises trend. Over the last 16 years the productivity gap between the Core Cities and the nation has risen by 2.3%, a gap of £66.6 billion. Even taking London out of the equation there is still a big gap. This is bad for the economy and does not help deficit reduction. The issue is particularly acute in Core Cities as compared to the South East. We now have the widest regional economic imbalance in Europe, with international competitor cities who have more local control increasingly outperforming most cities in the UK. Productivity per person in Munich is 88.3% higher than the Core City average, in Frankfurt it is 80.7% higher, Rotterdam 42.8% and Barcelona 26.7%. Government has termed this the ‘productivity puzzle’ and what we suggest will go a long way to solving it. Big cities have big social challenges as well as big economies, which means they have to spend more than other places on public services. The average employment rate within core cities is 67.7%, compared to a national average of 70.6%. Higher welfare, health and other costs combined with lower productivity mean that although our cities are critical to the economy, the total tax raised across them is less than the amount spent on public services. But although public spending has been cut from some services like local authorities, overall it has not really gone down in our cities during the last five years. This is because cuts have been made centrally, not locally, with the result that services which prevent expensive demand have been hit hardest, so spending has simply increased in areas like health and welfare. In addition, big cities have to budget year on year, which makes achieving long term change almost impossible. Although Government understands the economic contribution of big cities, the way in which cuts have been made undermines their capacity to deliver that critical role. This disconnect is counter-productive. We need a different approach, understanding how the whole of public resources can be deployed to best effect in a city, providing multi-year budgets and joining up services to get more people into well-paid work, paying tax and reducing benefits and health bills. Local responsibility and choice We have made evidence-based arguments for a different 'place-based' approach, one that puts more power in the hands of local people, making the right decisions for investment in the local economy and putting in place the skills and infrastructure they need. Cities can use local knowledge and networks to join up public spending, make public services more efficient, cutting waste, duplication and transforming lives. Significant progress has been made with successive Parliaments. During the General Election all parties listened to what we said and made manifesto commitments to follow this approach. We also welcomed the Cities and Local Government Bill from this Government, designed to deliver devolution, which should be implemented in a way that helps each place that can – Core Cities and others - to do more for the nation. But without a similar approach within Whitehall, Holyrood and Cardiff Bay, joining up the way different departments work with local agencies and cities, we will not see the changes people want, need and deserve, in their lives and their cities. Without this approach we cannot see how Government can achieve its aims of economic rebalancing, deficit reduction or productivity growth. Our offer is not dependent on just more money. Instead it relies on a radical reform of the way our Governments work and how their departments spend, to make the investment that we will have go further. The Emergency Budget and particularly Government’s Comprehensive Spending Review (CSR) which follows will set the seal on how much of this offer can or cannot be delivered. A ‘business as usual’ approach to the CSR will result in a siloed way of spending public money, department by department, duplicating and wasting effort, not reducing demand – even increasing demand for some high-cost services - and not boosting growth and productivity. At this critical moment that would be devastating for our cities, impacting on the most vulnerable and on business alike. Now Government has accepted the role of our cities as engines of Growth, with the greatest potential to reform the public sector, it makes no sense for the machinery of Government to undermine that role. Instead we urge our Governments to undertake a ‘place-based’ CSR, looking at the total public resources deployed across a city or city region, and working with us to design how this can be joined up to get the best results for that place and save money, for the tax payer and for the nation. This should take place in the context of multi-year budgets for the term of the Parliament to allow longer term solutions. In addition each department should demonstrate how it is backing Government’s commitment to devolution and rebalancing, setting aside funds to be devolved and locally integrated to improve outcomes and save money. Ultimately, departments may need to be restructured, although that is a matter for each Government. Government departments could relocate more operations to Core Cities, stimulating growth and saving public money. And if the Houses of Parliament has to close for repairs, Government should come to a Core City. Our cities are Britain’s best bet for a brighter future Our offer represents nothing less than a choice about what kind of country we want for the future. One with low growth, low paid jobs and public services that cannot match need. Or one that creates and shares more prosperity, jobs, housing, growth; cities paying their way and helping the nation balance the books. We want to join forces with Whitehall to make these things happen, as a shared project. We are not lobbying for change – we are offering to be that change. Without it, we will continue to miss out on economic and jobs growth, and on sustainable measures to reduce the deficit, something our cities and the nation can ill afford. But the results of what we suggest could be spectacular. Closing the productivity gap for the Core Cities would mean an extra £66.6 billion into the UK economy every year, more people in employment, improved public services, less call on public spending and a reduced deficit. We call on all our Governments to help us make this vision a reality across our cities.