Memorandum by Professor Iain Begg and
Barry Moore Esq (UWP 41)
THE PROPOSED URBAN WHITE PAPER
INTRODUCTION
This memorandum is a response to the request
from the Committee, published as Press Notice 02/1999-2000, to
comment on various matters relating to the anticipated Urban White
Paper. Our comments draw on research in progress under the Cities:
competitiveness and cohesion Research Programme, funded by the
ESRC, under which we are carrying out a project on the economic
"performance" of British cities.
Our primary focus in this note is on the UK
urban system as a whole. In reviewing urban policy, it is important
to recognise that cities within this system have different histories,
functions and opportunities and that their prospects are affected
by what happens elsewhere in the system. The extent and nature
of a city's economic and social problems reflect not only the
effective and efficient functioning of the individual city as
a place supporting the employment, income and quality of life
of its residents, but also the city's competitiveness and role
within the wider urban system. Successful cities are cities that
both function well and compete effectively with other cities for
private and public sector resources which are the source of jobs,
income and quality of life in the city. A one-size-fits-all policy
is unlikely to be either desirable or viable in addressing urban
issues. Moreover, there are important national goals to bear in
mind when formulating urban policy.
SUMMARY OF
MAIN POINTS
1. The UK must be seen as an urban system
in which individual cities both compete with and complement one
another. As a result, policies aimed at countering urban problems
have to be tailored to the circumstances of individual cities
and sensitive to their potential role in the system.
2. Within this system, there are some cities
which have consistently prospered in recent decades, while others
have lost ground. The large conurbations, on the whole, continue
to have the most acute problems, although London seems to have
staged a recovery in the 1990s. Most New Towns have done well.
Amongst smaller cites and large towns, proximity to London and
an absence of traditional industry are characteristics associated
with dynamism, whereas many coastal urban areas and those in traditional
industrial areas—especially in the "North" have
endured decline. In addition, there has been a long-term drift
of both population and economic activity from cities to small
towns and rural areas, although this appeared to slow in the last
decade.
3. It is noteworthy that these patterns
of economic performance have been persistent, and that there are
few examples of urban areas achieving substantial turnarounds
in economic performance. Urban change does not happen quickly,
so that policy has to be set in a long-term framework.
4. Deprivation is found across the urban
system and requires action everywhere, but there are aspects of
"place" that are central to lasting solution. In many
areas, concentrations of dereliction, dysfunctional property markets
and a high incidence of social exclusion are significant sources
of competitive disadvantage. Dealing with such spatial concentrations
of problems must be a priority.
5. Many of the policies that shape the performance
of urban areas and affect social cohesion in cities are outside
the usual definitions of urban policy. We strongly support the
proposal, set out in the Urban Task Force (UTF) report, for an
Urban Policy Board to co-ordinate policies explicitly targeted
at urban problems and national functional or sectoral policies
in a coherent urban policy strategy.
6. Looking at urban policy from the perspective
of the urban system has a number of implications. First, it has
to be recognised that policy has simultaneously to manage problems
of growth and of decline. The evolution of city economies is driven
by market forces and long-term structural trends, but there are
obvious problems of over-heating and environmental pressure in
"favoured" southern cities just as there are problems
of decline elsewhere. Second, in an urban system there is bound
to be specialisation, so that not all cities can expect to attract
those activities that seem most attractive. Equally, viable "clusters"
can be developed in activities that are not at the leading-edge.
7. Taking a cue from the term "employability"
that is used in employment policy, we propose a new concept: "investability".
It can be thought of as a target for the various supply-side enhancements
underlying the competitiveness of a city and their integration
into a package of measures. This would shift the emphasis from
direct steering of activity to problem areas to equipping them
to attract activity when opportunities arise.
8. While we agree with the spirit of UTF
recommendation to devolve responsibility for specifically urban
policies to local government, it is important to recognise that
there is often a strategic dimension to policy that also has to
be accommodated. It may be that the new regional development authorities
(RDAs) are the appropriate level at which to reconcile the policies
implemented by different cities. In so doing, their remit should
be to integrate "top-down" policies from central government
and agencies such as the Learning and Skills Councils and the
Small Business Service with "bottom-up" regeneration
initiatives coming from individual cities.
9. Past urban policy has been bedevilled
by two opposing trends. On the one hand, there has been a tendency
to have too many poorly co-ordinated programmes—what the
Audit Commission writing in 1989 memorably described as "Programme
overkill within a strategic vacuum". On the other hand, policy
has gone through phases where there has been an excessive reliance
on measures affecting one dimension of cities, such as property
or training provision, while overlooking others.
10. We have reservations about the Task
Force recommendations concerning design quality and promotion
of "information" related activities. The danger is that
a new, and unduly narrow, policy focus will emerge in which other
facets of urban regeneration are neglected. A solution may be
to make economic development a strategic function within local
authorities with direct lines to RDAs.
LONG-TERM
TRENDS IN
URBANISATION
The UK is a heavily urbanised country, with
a preponderance of "older" industrial cities that grew
rapidly in the 19th Century. Their history inevitably affects
their prospects, and the scope for policy to improve their functioning
and competitive advantage. Cities cannot easily shed their historically
determined institutional, economic, social and physical structures
and the performance of a city in maintaining full employment and
a high quality of life for its residents is crucially determined
by this legacy. For example, cities in geographical locations
and with institutional structures, industry and occupational mix
etc which once provided competitive advantages for traditional
manufacturing, are often ill-suited to a national economy increasingly
dominated by modern service industries.
Our research on the urban system in the UK strongly
suggests that over periods of several decades broadly the same
cohort of cities perform well in terms of net job creation, rates
of unemployment and residential preference (population growth).
Such cities include the majority of New Towns, other cities and
towns in the immediate hinterland of London including those formerly
designated as "overspill towns" and selected cities
generally located close to the other major conurbations in the
UK. Equally the "bottom" cohort of cities identified
in the 1950s remains very much the same now. This stability in
the ranking of the top and bottom cohorts raises awkward questions
concerning the role of government policy in securing greater cohesion
across the city system. It also exposes the limitations of market
adjustment mechanisms in achieving convergence in unemployment
rates and access to new job opportunities over an acceptable time
period. Overall, the relatively successful cities (in terms of
relative population and employment growth and unemployment) in
the post-War period have been the smaller cities, typically but
not exclusively located in the South.
A feature of poorly performing cities in the
past 50 years, is that they entered the post-War period with relatively
high concentrations of traditional manufacturing industries compared
with the more successful cities. Coastal cities and towns which
in the 1950s and 1960s developed assets and services to support
growing domestic tourism now struggle to compete with overseas
tourism and adapt to changed competitive conditions. By contrast
many of the new and growing industries are located in New Towns
and cities that entered the post-War period with low concentrations
of traditional manufacturing industry. Many New Towns in particular,
not only offered factory and office space more suitable for modern
industries, but also better quality housing, infrastructure, transport
systems and other amenities, supported by institutional structures
more suited to dealing with change.
The major conurbations continue to present problems
for policy makers. Although the absolute decline in employment
and population has attenuated (with the exception of Merseyside)
their relative decline continues. Decline per se is not necessarily
a problem, particularly if the loss of jobs in the city is matched
by a parallel decline in the economically active population and
problems of occupational mismatch are not severe. But problems
arise because of geographical concentrations of disadvantaged
groups and such concentrations have always been a feature of our
major cities.
WHAT MAKES
A CITY
MORE OR
LESS COMPETITIVE?
Making effective use of urban "assets"
requires that the differences as well as the complementarities
of cities in the urban system be recognised. There are gains to
be achieved from exploiting the characteristics that distinguish
cities and give them their identity. Specialisation is also relevant
and it is worth reflecting on what it is that makes individual
cities more or less competitive. Four categories of determinants
of urban competitiveness can be identified. Some are mutually
reinforcing, others contradictory; some characteristics may be
favourable for a period, but turn sour subsequently. They are:
— Sectoral trends which captures the
main influences on the structure of economic activity in a city
and its prospects. These factors encompass the city's inheritance
in terms of the mix of industries and functions and the incidence
of "top-down" policy measures such as macroeconomic
or structural policies which have an uneven effect on different
activities.
— Company characteristics refers to
attributes of the companies in the local area, including ownership.
Are they, on average, large or small, dynamic or sluggish, financially
robust or precarious? Do they have access to efficient financing
or are they reliant on costly capital? An urban area with dynamic
companies, selling in growing markets and with strong growth potential
will tend to perform better.
— The business environment comprises
those factors which exert a significant influence on the attractions
of the locality for businesses. Many of the most telling influences
on urban competitiveness concern the mix of factors that affect
the input costs of employers. Some of these can shift from being
favourable to adverse fairly quickly as circumstances change.
Thus, if there is a good stock of desirable property which draws
in investment and raises rental values, but there is negligible
scope for new property development, the outcome could be to undermine
the initial locational advantages. Social and environmental factors,
such as the quality of residential accommodation, the crime rate,
schools and so on will play a significant part in persuading investors
to select a city to invest in. The availability of civic amenities
can be expected to work in a similar way.
— Innovation and learning refers to
those factors that inhibit or encourage the capacities of firms
to develop new processes and products. Investment in intangible
assets such as knowledge, or encouragement of the propensity of
the local area to foster entrepreneurship, especially in technologically
advanced areas, will be important. The hardware and software that,
together, provide the tools of the computer age have, it is argued,
to be complemented by brain-power or "wetware".
URBAN PROBLEMS
AND CHALLENGES
The ultimate target of public policy is the
standard of living, adjusted to allow for non-pecuniary influences
on the quality of life. This will encompass a range of variables
and be open to subjective weighting criteria, and tensions between
different objectives will arise. Higher incomes plainly raise
the standard of living, but could be offset by environmental degradation
or threats to personal security. Some thought consequently needs
to be given to how to weight targets in order to appraise the
relative merits of progress on some fronts but not others. In
the same way, it is likely that progress towards one target may
impede advances towards another, and such a trade-off has to be
looked at with care. The economic performance of cities can be
achieved in a number of ways. The most obvious and enduring is
to raise productivity, enabling an economy to generate more output
from a given supply of inputs. Regeneration can, however, also
be attained by activating otherwise unemployed resources. This
suggests that the focus of attention should be both on capacity
building and on capacity utilisation.
Historically the geographical distribution of
low cost public housing and private rented accommodation has been
an important factor concentrating socially and economically disadvantaged
groups and impeding mobility. Sometimes the concentrations are
located in the inner areas of our major cities and in others in
the peripheral estates. An important question for policy is whether
these concentrations matter for welfare and quality of life and
if so, whether they would be better resolved by the dispersal
of disadvantaged groups or by local regeneration and raising the
employability of those seeking jobs.
In assessing the new demands on policy, two
emerging trends have to be accommodated. Globalisation limits
the freedom of manoeuvre of individual governments at whatever
level of governance, obliging them to moderate regulatory demands
and tax rates. In parallel, changes in the organisation of production
have seen new forms of co-operation emerge alongside more extensive
competition, blurring the boundaries between bundles of assets
that comprise separate firms. Clusters of firms in similar activities
have been recognised as having the potential to be greater than
the sum of their parts because of various spillovers, and it is
arguable that the "assets" of the city complement these
private assets.
Various characteristics of different cities
that have in the past worked to their advantage or disadvantage.
Many of these features will have gone or moderated in their importance.
However in developing a framework for urban policy, it is important
to recognise that today's cities have different starting points
and that these starting points will in part shape the future trajectory
of the city and influence the role and effectiveness of urban
policies. In other words urban policy must be both sensitive to
its context and recognise that the context differs from city to
city ie bottom-up. At the same time, policy must take due cognisance
of the city as competing with other cities and being embedded
within an evolving urban system.
URBAN POLICIES
At its most general level, urban policy comprises
all those government measures specifically aimed at increasing
the economic welfare and quality of life of city residents by
influencing and regulating the economic, social and physical development
of cities. Other government policies, not specifically focused
on cities, may also influence their development beneficially or
detrimentally. Because cities differ in their structure and responsiveness
to non-urban policies, urban policy requires a strategic framework
that explicitly recognises the significant economic and other
impacts on cities arising from non-urban policies and the potential
interaction between urban policy and non-urban policies. Three
broad areas for urban policy intervention can be usefully distinguished:
— Policies to facilitate economic adjustment
and improve competitiveness.
— Policies to reduce social inequities
and social exclusion.
— Enhancing the management of cities
and the co-ordination between different levels of government,
different functional activities of each tier of government and
public and private sectors.
These three areas are not independent and policy
measures which fall under one can affect others.
The rationale for policy intervention and the
design or form that intervention takes to facilitate urban adjustment
and improved competitiveness, turns critically on the theoretical
framework within which urban problems are analysed. From the traditional
so-called "neo-classical" perspective the focus and
rationale for policy intervention is "market failure".
"A key argument for promoting economic
regeneration is that markets are not working properly. This may
be because of institutional constraints that prevent markets from
working freely (or adjusting quickly), or an external effect that
is not properly reflected in market prices. Correcting market
failures improves the supply side and increases the productive
potential of the economy as a whole, either in the short term
(by promoting flexibility and more rapid adjustment of the economy
to external shocks) or in the longer term (by increasing productive
capacity)". A Framework for the Evaluation of Regeneration
projects and Programmes. HM Treasury January 1995.
On this view, poor urban economic performance
and inadequate adjustment to a changing environment arises because
land, property, labour, housing and capital markets do not function
as efficiently in some cities as in others, so that policy intervention
is required. Policy informed by this view tends to be dominated
by supply side measures designed to compensate for, or remove,
market failure. What may be missing from this view is a statement
of those specifically urban constraints and factors which cause
market failure in cities or neighbourhoods, and an explicit treatment
of dynamics. General policies to correct market failure may miss
those causes of failure specifically arising from the urban location
of economic activity, leaving the urban problem untouched.
An alternative view is offered by evolutionary
economics and competence theories of the firm and city. On this
view the "dynamic" capabilities of firms and cities
are the outcome of their ability to raise their performance by
incorporating new information into their knowledge base. Instead
of seeing knowledge as a freely available input, this alternative
theoretical stance places great importance on investment in knowledge
by firms and other organisations in the city. Policy concern with
these dynamic processes has become more important with the growing
importance of knowledge and learning and therefore the need for
co-operation amongst firms and knowledge institutions. Existing
networks in the diffusion and absorption of knowledge can, for
example, form obstacles to the development of new competencies
requiring openness to other "knowledge and learning systems".
This points to a role for policy that extends beyond the correction
of market failure. Some cities are well-equipped to compete in
the new knowledge-intensive industries and thus to develop new
strengths. Others will struggle and will need a concerted policy
response to help them adapt.
Relatively little attention in these theories
is given to the distributional dimensions. Competitive success
by one firm or city may be at the expense of other firms and cities,
and within cities one social group may be more effective than
another at appropriating the benefits from co-operation and growth.
Much will depend on the bargaining power of the participants and
on how distributional disputes are resolved. In this respect,
an important role for policy is the development of institutional
structures, regulatory frameworks and codes of practice to limit
the exploitation of competitive advantage and strengthen social
cohesion.
THE NOTION
OF "INVESTABILITY"
A key plank of the European Employment Strategy
is the concept of "employability", which means equipping
workers with the attributes that they will need to be competitive
in the labour market. The significance of the concept is that
it is "upstream" of actual employment. The essence of
this philosophy is that an "employable" worker will
be better placed to compete for jobs when opportunities arise.
We suggest that a parallel notion of "investability"
should be developed to capture those characteristics of cities
that improve or worsen their capacity to attract investment and
thus to create employment. Many past policy initiatives have been
predicated on shifting economic activity from one area to another,
and can therefore become a zero-sum game in which one city's gain
is another's loss, often with a cost to the public purse. Sensibly
applied, an investability approach would emphasise upgrading of
each city's attributes so that it is better able to attract private
investment of all sorts and to compete for public investment when
opportunities arise. In principle, this would become a positive
sum-game. What it makes sense to support will vary between cities
and over time. The UTF is correct to identify design and built
quality as factors in economic success, but it would be wrong
to focus urban policy largely on these factors. The obstacles
to competitiveness may lie elsewhere and it is also important
to take account of the appropriateness of measures for the structure,
or potential, of the city economy.
POLICIES TO
IMPROVE THE
MANAGEMENT AND
CO -ORDINATION
OF POLICY AFFECTING
CITIES
Key issues here relate firstly to the management
and co-ordination problems that arise from the existence of different
tiers of government. What should be the respective roles and responsibilities
of central, regional and local government, including the many
agencies which operate at each tier of government, in the formulation
and delivery of urban policy? How should the development and implementation
of policy take account of the urban impact of non-urban policies?
With the increasing collaboration of the public and private sectors
in urban policy implementation there is a third issue relating
to the appropriate vehicles for managing and developing this relationship.
A distinction must also be made between the formulation of an
overall strategy for urban policy and the delivery of the various
programmes, measures and initiatives which operationalise that
strategy. This further entails separating out the different policy
functions which include: funding of the policy package; formulation
of programmes; and delivery. It can be argued that delivery is
the function where the case for being close to policy "clients"
is most persuasive, because local knowledge and identity can be
expected to improve quality, whereas a greater top-down element
is needed for funding and policy formulation.
Cities differ in the nature, scale and causes
of the economic and social problems they confront. An urban policy
appropriate for one city is therefore unlikely to be suitable
for another. Moreover, it is at the level of the city that the
"city specific" problems can be most easily recognised
and quantified, priorities established and detailed measures and
initiatives agreed. A bottom-up approach, albeit within the context
of the wider strategy for the region, is therefore desirable for
efficient and effective urban policy implementation. Similarly,
knowledge of local priorities can lead to better customisation
of programmes or policy instruments, including experimentation
with new schemes or innovative approaches.
Strategic policy formulation is, arguably, best
undertaken at the national and regional level of government in
the context of the evolution of national and regional urban systems.
In part, this conclusion reflects the fact that resources devoted
to improving the competitive position of one group of cities will
have implications for other parts of the urban system to which
they are denied and the full implications of this are best considered
at a national and regional level. The correct balance needs to
be struck between encouraging fruitful rivalry between cities
and wasteful competition. Equally, cities co-operate through specialisation
and exchange of goods and services, and as components in an urban
system that increasingly, transcends national borders. Co-operation
is also needed in dealing with common problems such as social
exclusion or environmental degradation. Co-ordination must, consequently,
try to steer a (third?) way between competitive and co-operative
exigencies.
The current debate on the emerging imbalance
between population growth and future housing land requirements
across the urban system clearly requires a strategic view. The
concentration of successful cities in the south of the country,
particularly in the hinterland of London, also demonstrates the
need for high-level strategy development. At the regional level
there is a need for urban policy strategy to recognise the heterogeneity
of its city system, the different problems faced by its cities
and the need to co-ordinate these policies with other functional
policies aimed at securing wider regional objectives. More generally,
national and regional based strategies are important because many
central government and regional based policies and actions have
impacts on the city and indeed may be inconsistent with the central
(and regional) governments' own urban policy objectives.
An effective urban system ought to have benefits
for the economy as a whole. The challenge for the White Paper
will be to ensure that regeneration initiatives improve urban
competitiveness and, by being more than a zero-sum game, contribute
to improved overall economic performance.
January 2000
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