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Westlake Legal Group > Sunderland

Neil O’Brien: How to rebalance Britain’s unbalanced economy – by levelling up, not levelling down

Neil O’Brien is MP for Harborough.

Even Brexit, it turns out, is about location, location, location. Ben Ansell, an Oxford professor, has found that in wealthier areas, where the price of a house averages £500,000, 70 per cent voted to remain. Poorer areas, where the average house price was £100,000, were an exact mirror image, with 70 per cent voting to leave.

Like a disclosing tablet, the EU referendum highlighted the different economic experiences of different places over recent decades: booming London and the most prosperous home counties voted to Remain, as did Scotland, the next richest part of the country. The reviving cores of our large cities did likewise. But smaller towns and cities, the countryside and coastal places voted overwhelmingly to Leave, as did Wales.

In response, Boris Johnson recently set out his ambition to “level up” poorer areas in a fantastic speech in Manchester. It’s the right thing to do – and it makes political sense too. The 2017 election saw us losing ground in wealthier-but-Remainy areas, and gaining former Labour seats in the midlands (and north) which we’d never gained before. We have huge potential to win in seats where people have felt taken for granted and left behind for many decades.

The economic case for levelling up is clear too. There are no G20 countries which have a more regionally imbalanced economy than the UK and are also richer than the UK. Conversely, all large countries that are richer per head than the UK have a more balanced economy.

In other words, a more balanced economy is a stronger one. In a highly unbalanced economy, resources like land and infrastructure end up overloaded in some parts of the country, and under-used in others, which is costly and wasteful. Given that workers (particularly lower skilled people) don’t simply move away from their families in the face of local economic problems, having greater distances between unemployed workers and job opportunities may well compound problems matching people to job opportunities. There might even be compounding mechanisms: if some areas have high unemployment that can lock in patterns of worklessness.

But to bring about a more balanced economy, there are two big lessons that the Prime Minister must draw from previous successes and failures.

First, the crucial thing is to attract private sector employment – particularly jobs that are knowledge and investment-intensive. The work of academics like Enrico Moretti and think tanks like the Centre for Cities shows how gaining “brain jobs” in the private sector has a much bigger multiplier effect than just moving public sector jobs to an area.

Tax breaks for inward investment can be very effective in attracting in new investment, which is why most other countries offer them. Within the UK, probably our most successful ever regional intervention was Margaret Thatcher luring Nissan to Sunderland with a mix of investment tax breaks, lobbying and the offer of cheap land (an old airfield). It’s now one of the most successful plants in the world.

When people think about regeneration, they often start with plans for a new tram or shiny cultural facility, which tend to be popular, and can indeed help growth in areas that are already motoring along. But such investments aren’t going to do much for areas where the economic engine has rusted up and needs restarting. Detroit famously built a fancy monorail intended to fight its economic decline: but in a city where every factory was gone it remained largely unused, drifting through a city that looked like it had been bombed flat. Without private sector investment, there’s no demand for it or anything much else.

Second, different things work in different places and a different set of policies are needed for our towns than our city centres. During the 1970s and 1980s the “inner cities” were a byword for decline. But in recent decades capital cities and the centres of other larger cities have outperformed other areas, right across the world. The shift from a manufacturing to a professional services economy (plus the growth of universities) revived the centres of our cities.

There are still many problems to solve in our cities, but the places that have struggled the most in recent decades have been rural areas, smaller towns and cities, and the outer parts of large cities (even outer London). Places on the coast and places without a university have suffered particularly badly from a brain drain. Labour have tried to capitalise on their discontent with glossy ads like their film “our town”.

What to do for towns is even trickier than helping big cities grow. Though there are trendy small towns from Hebden Bridge to Hay-on-Wye, simply copying ideas from big cities, like “culture-led regeneration”, is often a recipe for failure in small towns.

Improving connections between city centres and towns might help – Tom Forth has highlighted just how bad we are at this in Britain. The Prime Minister’s new fund to help regenerate town centres is a good move and will make them more attractive. We should do things like re-examine funding historic funding formulas for government spending on science, transport and housing, which are still heavily geared towards supporting London and other areas that are already growing fast. And we should offer devolved economic powers to counties, not just big cities.
The more we can use free market mechanisms to help poorer towns, the more likely we are to succeed.

Looking at Britain as a whole, chronically low investment rates are a big part of our long-term productivity problem. We should cut taxes on business investment across the whole country, and make the UK’s capital allowances among the most generous in the world (at present they’re among the least).

But to level up poorer areas we should go further, and have even more generous tax breaks for investment there, where the problem of low investment and low productivity is most severe. We should also empower the Department for International Trade to take part in the same aggressive tax competition for inward investment that countries in Asia, the US, and our neighbours in Ireland do so successfully. And we should use those tools to encourage inward investment into poorer places.

More generous capital allowances would help lagging regions anyway, even if introduced across the board. While manufacturing accounted for around a quarter of productivity growth nationally since 1997, it provided 40–50 per cent of productivity growth in poorer regions like Wales, the West Midlands and North West. Manufacturing requires roughly twice as much capital investment as the rest of the economy, so an investment-hostile tax system hits poorer places harder.

Ever since the referendum, there’s rightly been renewed focus on how to help poorer places. Helpfully there is decades of evidence about what does and doesn’t work. If we can join up an energetic new Prime Minister with the bit between his teeth, plus a new agenda for left-behind places, then we can really get things moving.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Andy Street: What’s needed to make the West Midlands the world centre for electric cars

Andy Street is Mayor of the West Midlands, and is a former Managing Director of John Lewis.

Earlier this month, an announcement by Jaguar Land Rover electrified the West Midlands economy. The UK’s biggest carmaker revealed plans to build a range of new electric vehicles at its Castle Bromwich factory, starting with the new XJ model. The announcement meant the investment of hundreds of millions of pounds and job security for a skilled workforce of 2,500 people.

This signalled a new chapter for a site that built the Spitfires that won the Battle of Britain, which has been at the heart of the region’s automotive industry for generations.

Jaguar is just one of the many motoring names with links to the West Midlands: Rover, Singer, Triumph, Healey, Humber, Standard, Land Rover, Daimler, Morris, Austin, Hillman – the list goes on and on. When the UK’s population began to discover the joys of the open road in the twentieth century, it was our factories that produced the vehicles that got Britain moving. In 1960, with the UK’s first motorways driving private car ownership, the West Midlands’ workforce was the best paid in Europe.

Today, carmakers still call the West Midlands home. Over the last decade they have seen considerable success. After the financial crisis of 2009, production levels rose steadily, reaching a peak in 2016, thanks to investment and the popularity of our cars around the world. This progress must not be squandered. A No Deal Brexit remains a hurdle, potentially affecting supply chains and disrupting the arrival of just-in-time components to production lines.

The national Industrial Strategy, one of the defining legacies of Theresa May’s Government, earmarks the future of mobility as one of the UK’s ‘grand challenges’. Tellingly, the map it uses to outline the location of automotive activity glows red around the West Midlands, with 50 per cent of all research and development in the sector done within 25 miles of Birmingham.

If autonomous vehicles and greener power are to deliver an exciting new era in motoring, this investment in R&D is vital to turn ideas into reality.

But motoring markets and habits are changing. Younger people are not owning cars in the same way previous generations did. Our luxury manufacturers are seeing falling sales in territories such as China.

In the UK, this has meant a difficult time of late. Nissan has decided not to build a key new model at its plant in Sunderland. Honda will close its Swindon site in 2021. Ford plans to close its Bridgend engine plant in Wales by the end of next year. Here in the West Midlands, JLR faced tough choices too, announcing 4,500 job cuts in January.

One thing is clear: the future of the motor industry lies in electric and autonomous vehicles. The phenomenal popularity of Tesla in the USA, and the rapid adoption of electric in countries such as Norway, show that we are on the cusp of a seismic shift in motoring – and manufacturers are reacting to it. Over the next 18 months, new electric models will appear on the market, at more attractive mass-market prices.

The driverless car revolution is also quietly unfolding around us. Volkswagon and Ford are developing the Argo AI, intended to eventually deploy an autonomous taxi service. Google’s self-driving car project Waymo has now racked up 10 billion miles of simulated motoring, training and perfecting its software. In Detroit, the Motor City’s grand central station is being rescued from dereliction to become Ford’s new campus for mobility research, a clear signal of ambition and intent.

However, it is an ambition we match. The West Midlands is already the UK centre of driverless car testing. Autonomous vehicles are being put through their paces on the streets of Coventry and on the region’s motorways. Cutting-edge testing facilities found in Warwickshire are a hotbed of driverless motoring.

The West Midlands is pushing ahead with infrastructure changes – to road lay-outs and signage, for example – to enable autonomous vehicle testing. We are reaching out across the globe to entice more industry innovators to use our world-class facilities and share their knowledge.

In manufacturing, alongside JLR’s commitment to build vehicles at Castle Bromwich, electric drive units are being made in Wolverhampton, with battery assembly at Hams Hall in North Warwickshire. A new automotive cluster is taking shape here.

Now two more things are needed: the roll-out of a charging network – to change customer habits by giving vehicles longer rage and easier recharging – and battery manufacturing on a large scale.

The West Midlands needs a world-class ‘gigafactory’ capable of producing the batteries required to power our next generation vehicles. Battery manufacture is vital to the success of electric transport, as 40 per cent of a vehicle’s value lies in this crucial component. Batteries also form the heaviest part of the vehicle, meaning their production needs to be near the car’s assembly lines. Not surprisingly, battery development is where real innovation is being driven, and where our universities give us a real advantage.

Government has already played an important role in helping make the West Midlands competitive in this race, investing £108 million in a state-of-the-art Battery Industrialisation Centre in Coventry, and creating the Centre for Connected and Autonomous Vehicles. Now Government incentives could attract a global firm to create this much-needed gigafactory.

The biggest challenge lies in the infrastructure investment the new electric era will require – in terms of charging networks where vehicles can ‘refuel’ – and Government needs to step up to play its part. No single car manufacturer will be able to justify investing in such a vast endeavour.

It will be up to governments across the globe to intervene and accelerate a healthier and sustainable age of motoring, by creating charging networks and building capacity in power grids. New production facilities will require capital investment too.

This hugely important industry is undergoing rapid change. Through the Industrial Strategy, the Government’s role must be to support regional initiative and create the conditions for the West Midlands to take a leading role in the motor industry of the future. In the region that created the golden age of motoring, that’s an electrifying thought.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Alan Mak 1) Alan Mak: Conservatism 4.0 – Adapting our Party for the Fourth Industrial Revolution is our greatest challenge

Alan Mak is MP for Havant and Founding Chairman of the All-Party Parliamentary Group on the Fourth Industrial Revolution.

Later this year, the international commission that oversees the official geological timechart will meet to debate and decide whether the world has entered a new epoch. The “Anthropocene”, named after the humans that have had such a profound influence on our planet would, for example, sit alongside the Upper Jurassic and Pleistocence (Ice Age) periods and represent the biggest turning point in history for over 500 million years.

Advocates for the Anthropocene say this new distinct era started in the 1950s, identifiable from the radioactive fallout from nuclear weapons tests, the appearance of fossilised plastics, the rise in carbon pollution from the global post-war economic boom, the pervasive use of concrete, and the rise of mechanised agriculture. Opponents feel none of these changes has been sufficiently impactful to merit a new phase in history – and the debate continues.

In contrast, the start of a new Fourth Industrial Revolution (4IR) in the late 2000s is not in dispute. My previous ConservativeHome series on this topic outlined the historical background and economic importance of the 4IR – the fourth phase of industrialisation after previous eras defined by steam, electricity and then the internet. This latest series of articles, which begins today, outlines its political implications, and argues in particular that adapting conservatism to the politics and society of a Britain radically re-shaped by the 4IR is our Party’s biggest challenge in the coming years – not Brexit.

Like many activists around the country, I spent time during the local election campaign knocking on doors and speaking to voters. I found an electorate keen to talk about a range of topics, not just Brexit: the economy, schools, defence, the NHS. Brexit is certainly the focal point of our national discourse for now, and while it will continue to be the fundamental, short-term issue our new Party Leader must deliver on, a moment will arrive very soon where the Party must pivot to the future – and look beyond Brexit.

As the leadership contest begins, our next Prime Minister, who will take us into a second decade in power, needs to turbo-charge our domestic policy agenda post-Brexit.

The next general election, whenever it comes, will be fought against a Labour Party that has coalesced around a hard-left agenda with clear messages on austerity, state-aid, taxation and the state ownership of utilities. Worryingly, these big state, anti-capitalist arguments have gained traction for the first time in 40 years. Just as Margaret Thatcher defeated Michael Foot’s hard left ideology in the 1980s, today’s Conservatives need to re-win the argument for free markets and stamp out Corbynista thinking before it takes hold.

The battlegrounds for the next election are being shaped by the new, disruptive technologies of the 4IR, sometimes visibly, sometimes not. The underlying forces shaping the contours of our new society and economy – the automation of jobs, the creation of new businesses, regional growth and decline, the skills base in each community – are all driven by new technology. As our lives become ever more digital, our country faces a series of unique challenges that only Conservative values can fully address.

Our Party has to adapt to this new landscape – and develop a new set of positive policies that allows us to deliver on the changed aspirations of voters in this new setting. From helping people secure the new jobs that the tech revolution will create to tackling the downsides of growth such as preventing environmental degradation, we need to develop Conservatism 4.0 – conservatism for the Fourth Industrial Revolution.

Previous Industrial Revolutions saw Conservative leaders grasp the opportunity to reshape our Party as the country changed. Robert Peel repealed the Corn Laws, heralding Britain’s rise as a champion of free trade, and  Thatcher drove forward reforms that enabled the City of London to renew itself and flourish through the “Big Bang” of technology. Our next Leader must consider how the Conservatives will remain relevant to a new generation of voters whose lives, workplaces and communities are being shaped by artificial intelligence, robotics, big data, drones and a new phase of globalisation.

We Conservatives must adapt to this rapidly-changing social and economic landscape, just as Thatcher and her predecessors did. These four guiding principles should shape the next leader Conservative Leader’s thinking.

1. No community can be left behind

Young people thinking of careers after leaving school or university are now entering workplaces in every sector shaped by artificial intelligence and automation.

Just take the supermarket industry, a sector that employs 1.1 million people in the UK and which faces radical change. Ocado, for instance, has developed a warehouse in Hampshire dubbed “the hive” that sees robots processing 3.5 million items every single week. Meanwhile in America, the first trials have begun of “Amazon Go” – checkout-free shops where consumers walk-out with whatever goods they like bypassing traditional tills or scanners. Instead, camera-based tracking technology identifies the shopper visually, and the goods bought, and charges their credit card automatically. There are no staff in the “shop” – a radical departure from the high street shop my parents ran which relied heavily on human labour (including mine).

What do these innovations mean for shop workers, and the millions of others who will likely be displaced in similar ways in other industries? Just as in previous Industrial Revolutions new jobs will certainly be created, from app designers to data scientists to robot maintenance workers. Past experience also suggests more jobs will probably be created than are lost as the economy grows. But our challenge is ensuring we equip workers with the right skills to fulfil their potential and secure these new jobs.

That means a renewed focus on STEM skills and a wider strategic long-term plan for skills in our country. I’ve previously set out my belief that we should introduce a Future Skills Review, a big picture analysis of the skills needed for our economy over the next five years – akin to the Comprehensive Spending Review or Strategic Defence Review.

Automation will inevitably impact different areas of the country disproportionally. So our next Prime Minister needs to prevent widening regional inequality. The impact of the decline of heavy industry, especially in the North, is still felt to this day in areas that have struggled to fully recover. As the Fourth Industrial Revolution accelerates, we need to help every community adjust and prosper, getting a fair share of the fruits of economic success. Leeds re-invented itself as a hub for digital innovation, whilst Sunderland is home to Nissan’s highly productive car plant. So a new Northern Technology Powerhouse would be especially welcome in the years ahead, ensuring that it isn’t just the “Golden Triangle” of Oxford, Cambridge and London that benefit from the 4IR.

2. Public services should be more productive, more digital and more accessible

The smartphone generation demands services that are available at their fingertips, whether that’s ordering a taxi or making a bank payment. The average smartphone user can choose from around 2 million apps to download – everything from games to social media.

Technology means life is moving faster, and people’s expectations of similarly fast-movement and responsiveness from their government are rising too. Voters want a Smart State, not Big Government. And because we Conservatives are in office, we are expected to use new technology to deliver better, more efficient public services.

Perhaps one of the least recognised achievements of the Government since 2010 has been the digital transformation of our public services. The UK is currently fourth in the UN e-government league, having delivered more than £2 billion in efficiency savings through digital transformation since 2014.

But we shouldn’t rest on our laurels. We must strive to deliver more efficient public services by fully-digitising them in line with consumer demand. A poll by POLITICO in swing election seats showed that our Party still trails in the core issues ranked as the most important outside of Brexit – crime, housing and health.

We need to consider how we can use artificial intelligence to solve crimes; automated construction techniques to build much-needed homes; online courses to improve further education; and how we deploy apps to transform the NHS into a paperless service, so patients have their test results and medical records on their phones.

As a Party we need to harness technology to improve the delivery of public services and offer better outcomes, recapturing the initiative from Labour politicians whose focus on nationalisation and uncosted (yet endless) spending commitments often drives the debate.

3. Technology can help us become more relevant to younger voters

The age divide in our politics is now well-documented, with a recent Onward report showing 49 per cent of Conservative voters are now over the age of 65.

Yet as separate polling for the Centre for Policy Studies found, young people are still more likely than the general population to think that the Government spends and taxes too much and are not inclined to back nationalisation.

Instead, they want more control over their lives, and that includes over the money they work hard to earn.
In the age of the Fourth Industrial Revolution, Conservatives need to deliver the same message of economic freedom that propelled Thatcherism to unprecedented electoral success. By embracing tech, and making Britain a global tech superpower, we will create more opportunities for young people to start their own business and have a stake in our society by owning capital and generating wealth for themselves and others.

Our next Leader must position Britain as low-tax, high-innovation, pro-tech economy. We must cut corporation tax to attract inward investment – Jeremy Hunt’s proposal to cut our rate to match Ireland’s 12.5 per cent rate is very welcome – and be pro-active in creating a regulatory environment that gives tech companies the freedom to innovate. We must not follow Labour’s example by trying ban Uber in London and Brighton. Platforms used by younger people should be smartly regulated, not shutdown.

We win back younger voters by proving that we are a Party that believes in the future – and that means embracing technology, and the benefits it brings to everyday life.

4. Green growth must be at the heart of Britain’s Fourth Industrial Revolution

The fossil fuels that powered previous industrial revolutions left a dirty legacy which we are only now coming to terms with as we take decisive action on climate change.

The 4IR will be the first industrial revolution that offers the tantalising prospect of clean growth, with renewable energy and the next generation of batteries potentially signalling the end for dirty fossil fuels.

Similarly, carbon capture and storage technology has the potential to limit CO2 in the atmosphere; blockchain to improve accountability across far-flung supply chains; “smart boats” to help fishermen manage their catch effectively; and biodegradable plastics to protect our oceans.

These are just a small number of the environmental technology breakthroughs that will soon become pervasive.

Britain should be an advocate on the world stage for green growth, helping us bolster our credentials at home as the Party of good environmental stewardship too. The current Government’s 25-Year Environment Plan and commitment to biodiversity has been one of our most popular policy areas since 2017. By committing to ensuring that this new industrial revolution leaves the planet cleaner we can turn green growth in the 4IR into a new source of electoral strength.

All four policy areas matter regardless of Brexit or our future relationship with the EU. The current Brexit debate has meant they are not getting the focus they deserve, but our next Leader should put these principles at the heart of our Party’s response to the Fourth Industrial Revolution.

By doing so, we can successful help our Party adapt to the new political and economic landscape that technology-driven change is creating, so voters continue to trust us to govern for generations to come.

This article is the first in a three-part series explaining why adapting to a society and economy shaped by technology is key.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com