The Northern Powerhouse: 5 years in

Background

The Northern Powerhouse agenda turns five years old this weekend. Like any new government programme it has attracted cynicism, but many saw as a great opportunity for the North of England. It moved beyond a tired old narrative which sets the North as inevitably poor, and the South as inevitably rich. It looked at the North in terms of its strengths and what the region could achieve together with the right powers and investment.

As initially conceived, it involved a number of related priorities: connecting the cities of the North with faster, better trains; supporting ground-breaking new technologies developed in northern universities; marketing the North to overseas investors; and devolving power to mayoral combined authorities. These all remain important priorities for the North.

But thankfully the Northern Powerhouse has evolved into more comprehensive and modern agenda for the North’s economy:[1]

• Not just focused on transport – but also on skills and health which all the evidence shows are also vital for any economy to function.
• Not just focused on cities – but also on those towns, economic and natural assets which are also important for the North, and for any region’s economy.
• Not just focused on productivity – but on inclusion and economic justice, without which all the evidence shows we can’t increase productivity anyway.[2]

It is important that this agenda doesn’t lose definition – it can’t spread investment too thinly and must focus on the North’s true strengths – but this evolution is largely a positive development.

It is particularly important to move on from narrowness of the original idea – that the economic strategy of the North should simply be to connect its cities into a single “labour pool” and that everyone would somehow benefit from it. This was particularly naïve and reductive, and simply not borne out by common sense nor economic theory: the evidence shows that a whole range of factors help regional economies to grow – Lancashire and Cheshire are some of the best economic performers; the North’s ‘energy coasts’ have some of the biggest wind farms in the world.

Progress to date?

It is fair to say that there has been some progress in five years. To date the major success of the Northern Powerhouse has been in devolving power to mayors and creating Transport for the North.

Since 2014:

• 5 ‘metro mayor’ elections have been held – in Greater Manchester, Liverpool City Region, Tees Valley, Sheffield City Region and the North of Tyne.
• 47.1 per cent of the North is now governed by a Mayor.[3]
• 69.6 per cent of the North is now covered by a combined authority.[4]
• Transport for the North – a new regional transport organisation – has brought forward a £70 billion investment package.[5]

But in several other respects the government has held back the North. Most significantly this agenda has proceeded against a backdrop of austerity. Our newest analysis shows that between 2009/10 and 2017/18 the North has seen a £3.6 billion cut in public spending, while the South East and the South West together saw a £4.7 billion rise (in real terms). London also saw a cut in spending, but by far less, at £256 million.[6][7]

And since the government introduced the Northern Powerhouse agenda in 2014:

• Public sector employment fell by 37,000, or 2.8 per cent, compared to 1.2 per cent in London, 1.6 per cent in the South West, and 1.7 per cent in the South East.[8]
• Transport spending rose by more than twice as much per person in London (£330 per person) as in the North (£149 per person), in real terms.[9]
• Jobs created or safeguarded by foreign direct investment (FDI) initially rose by 19.9 per cent between 2015-16 and 2016-17 while UK-wide this declined by 7.0 per cent – but this measure then fell significantly in the subsequent year. This means that total FDI jobs fell by 23.7 per cent between 2015/16 and 2017/18 in the North, while falling by 21.5 per cent nationally over the period.[10] Research has shown the North is twice as vulnerable to Brexit as London.[11]

Because of these factors, and longer-term changes to policy and the wider economy, the North has seen several negative changes during this period.

Since 2014:

• 200,000 more northern children are living in a poor household,[12] meaning there is a total of 800,000 children living in poverty in the North.[13][14]
• Weekly pay increased by only £12 (2.4 per cent) in the North compared to £19 (3.5 per cent) nationally (in real terms) – and over the last ten years weekly pay has fallen by £21.[15]
• The number of jobs paid less than the living wage rose by 150,000 – increasing by 10.9 per cent.[16]
• The number of cancelled and significantly late trains on TransPennine Express and Northern franchises has more than doubled from 20,000 (2.1 per cent) in 2014/15 to 47,000 (4.9 per cent) in 2018/19.[17]

Strong foundations

But some key economic indicators have moved in the right direction – they can’t realistically be attributed to government policy (which would take years to have an effect) but they do show that the Northern Powerhouse has strong foundations.

Since 2014:

• Economic growth was marginally higher in the North than the national average – growing by 10.7 per cent between 2014 and 2017; this compares to 10.6 per cent for the UK as a whole; and 9.7 per cent for the UK excluding London.[18]
• The North’s productivity gap with the rest of the country has narrowed slightly: productivity in the North grew more than London or any other English region between 2014 and 2017, growing by 8.5 per cent, and compared to 6.6 per cent nationally. The North has gone from 88 per cent as productive as the UK to 89 per cent as productive as the UK.[19]
• Employment in the North grew by 6.9 per cent – more than UK employment growth, which was 6.2 per cent.[20]
• Manufacturing employment has increased by 55,000 jobs, and professional scientific and technical jobs have increased by 35,000.[21]

This shows that the North does have a strong asset base to work with, and that the Northern Powerhouse agenda does have strong foundations on which to build.

The next phase of the Northern Powerhouse

This agenda has already changed from its initial, narrow proposition, and is now entering a new phase. The Northern Powerhouse is becoming a comprehensive agenda for the long-term, sustainable economic development of the North.

To realise the full capability of the North’s economy, central government must of course follow through on its promises to invest in northern infrastructure, which is long overdue.

But there is something fundamentally wrong with the fact that the North – home to 15 million people, and with an economy twice the size of Scotland’s – is governed almost entirely by Westminster. We know from other countries that devolution helps economies function – provided the institutions and governance are strong. And we’ve seen that central government cannot be relied upon to lead this agenda; now, Northern leaders must take up the reins.

As a top priority, the next Prime Minister must press forward with a wide-ranging programme of real devolution to the North, its city regions and its counties. It is now time for a Northern Powerhouse of the North, by the North and for the North.

Luke Raikes is a Senior Research Fellow at IPPR North

Marcus Johns is a Researcher at IPPR North