The left’s next political economy, devolution, and industrial policy

Andrew Carter


Jeremy Corbyn and John McDonnell are often typecast as old-fashioned big-statists. But as Martin O’Neill and Joe Guinan recognised in Renewal’s summer editorial, the Labour leadership’s emphasis on workers’ cooperatives, new forms of ownership and extending local government may belie this characterisation. As Anthony Painter writes in the autumn editorial, however, the extent to which Labour’s ‘institutional turn’ centres on centralisation or decentralisation will be critical.

This debate prompts two broad reflections on Labour’s thinking on both local democracy and economic policy.

Firstly, any approach to achieving a more socially just, egalitarian and democratic political-economic settlement needs to start by thinking about the scale over which most people live their lives – where they go to school, commute, work, start and raise families. For many, this is only a matter of miles over the course of their life and, for 35.4 million people – more than half the UK’s population – this everyday life happens in and around cities.

Together, these urban areas – ranging from the biggest cities like London, Manchester and Birmingham to smaller places such as Worthing, Blackburn and Cambridge – account for 60% of the country’s jobs and firms, 58% of high-skilled workers and generate 64% of tax revenues. As such, to deliver the revenues for investment in the NHS, the education system and regional infrastructure that will be crucial for creating a fairer and more prosperous society, urban Britain needs to succeed.

Debates about the future of the country often pit cities against towns and rural areas with claims that cities have received all the attention and investment and are now economically vibrant.  But this perspective misses the fact that cities are also home to 63% of the country’s unemployed people and more than 80% of country’s most deprived neighbourhoods.And there is huge variation between cities – in Huddersfield, for example, average weekly wages are just shy of £424, but in Reading they are £230 higher. Within cities too there are significant discrepancies – Cambridge has the fifth highest average wages but is the most unequal city in the UK, and nearly half of Glasgow’s residents have a degree but one in eight have no formal qualifications.

All this points to significant variation in outcomes and experience depending on which city you look at.  For too long, the bizarre British response to this variation has been a top down, ‘one-size-fits-all’ approach to policy-making. It has not worked, and will not deliver the new political-economic settlement that the country needs. Instead, decision-making on public services, jobs, housing, transport, and public spending needs to take place as close as possible to the everyday lives of people affected by those decisions.  

All places need more powers and significant additional resources to address the social and economic challenges that exist in their communities. Not only would that enhance our democracy by involving people more, it would also support the creation of more and better-paying good jobs – thereby increasing opportunities for people across the country and strengthening the national economy.

In other words, devolving and democratising the economy requires devolving and decentralising the state. A commitment to devolution sits well with Corbyn and McDonnell’s emphasis on extending local democracy, giving a greater voice to people outside Westminster and empowering workers, as O’Neill and Guinan set out. Indeed, Corbyn has promised to put local leaders at the heart of Labour’s vision of ‘municipal socialism’, by giving them more freedom to run utilities and services, to ‘roll back the tide of forced privatisation’ and allow communities to shape and secure their economic future. 

In Opposition, the party has sought to define its approach to devolution and local government as being against that championed by the Cameron/Osborne government in the years before the EU referendum which, amongst other things, led to the introduction of metro mayors in seven of England’s biggest city regions.

For Corbyn, this has been a ’cruel deception’: local leaders handed responsibility for cutting services, but with no powers to prevent the cuts. He has promised to ‘end piecemeal devolution’, by extending the focus of devolution beyond major city regions and to more parts of the country. This approach reflects a wider critique of devolution in Labour circles – that it has been too focused on major cities at the expense of smaller towns and rural areas (a view recently articulated by Jon Trickett MP).

This perspective is understandable, especially in relation to austerity. It is undoubtedly true that many councils across the country are struggling after a decade of relentless tightening of their finances. Many urban authorities have seen indefensible cuts of nearly 50 per cent to their funding from central government since 2010, considerably more than the cuts that other parts of the Government have faced.

There is a risk, though, that the Labour leadership overlooks the opportunities that city region devolution – much of it led by Labour politicians – offers to deliver a fairer and more prosperous policy platform for the communities that metro mayors represent.

The impact of Andy Burnham in Greater Manchester over the past year illustrates these opportunities. As metro mayor, he has championed initiatives to increase support for disadvantaged children starting school, address the city region’s homelessness problem, reduce the cost of travel for young people and make more quality apprenticeships available. He has led the campaign for more investment in transport across the north, putting this issue on the national political agenda in a way that it would not otherwise have been.

This demonstrates the potential that city region devolution offers for Labour to actually deliver a more egalitarian and prosperous society – an opportunity that the party leadership should recognise and reconcile itself to. With more power and resources, local Labour leaders could do so much more.

In what can sometimes be abstract and philosophical debates about the future of the country, we need to bear in mind those everyday life journeys and ask the question: who is best placed to make the decisions that improve the lives of people across the country – the person in Whitehall or the person in the town hall? It is true that the devolution agenda to date has focused on cities, but we have to start somewhere and we must remember that cities are not islands – their relationships with nearby towns and rural areas need not be zero-sum, both can thrive in a more devolved country. 

The pasts, presents and futures of people living in urban areas are linked intrinsically to the towns and rural areas that neighbour them. If Greater Manchester’s economy is prospering that means more jobs and opportunities for the 2.7 million people who live in Greater Manchester as well as the many more in nearby towns and villages. 

As mayor of Greater Manchester, Andy Burnham has the scope and mandate to ensure that places like Wigan, Oldham and Rochdale, communities which have not yet seen the growth that central Manchester has, can benefit directly and indirectly from this growth.But what he lacks is the full suite of powers and resources over policies including housing, transport, education and training to ensure this happens. 

As such, Labour should embrace devolution as a means to decentralise both political power and the economy.Moreover, with devolution having stalled under the May administration, Labour has the opportunity to seize this agenda and to go further and faster in reshaping the state so it’s fit for the future challenges and opportunities that a more automated, globalised and post-Brexit UK will bring.

My second reflection is that the radicalism of Labour’s thinking on local democracy has not been reflected in its approach to industrial policy. That was illustrated by Jeremy Corbyn’s recent call for a manufacturing renaissance to drive post-Brexit Britain’s economy, in a speech which also argued that the political class had too long ‘kowtowed’ to the financial sector.

Such calls will play well among the party faithful, and among voters in places which are still recovering from the loss of traditional industries in the 1980s and 1990s. However, an overt focus on manufacturing risks ignoring the prevailing economic trends of recent decades. Even accounting for a range of manufacturing success stories in recent years – Nissan in Sunderland, JLR in West Midlands – overall manufacturing employment has been declining in the UK for decades. 

To remain competitive, manufacturing businesses have had to become much more productive which has resulted in them employing fewer workers to produce the same or more output.  Today, manufacturing accounts for just 8% of jobs across Britain.  So even if we do see a manufacturing renaissance it will be of the high-value, high-skilled kind rather than the mass employment kind envisaged by some politicians.

As such, whilst manufacturing remains an important and highly productive part of the economy, it is nonetheless a small part of the economy, particularly in terms of jobs – and funnelling resources and political capital into the sector is unlikely to change that, or result in many more jobs across the country.

Moreover, an approach that prioritises manufacturing could come at the detriment of the UK’s services sector, which makes up 80% of the economy and employs millions of people in villages, towns and cities up and down the country. The services sector doesn’t just mean banking, accountancy, management consultancy and the like: a huge amount of what Rachel Reeves has called the ‘everyday economy’ is in the service sector, and many of the jobs there are low-paid jobs involving caring work.

An economic policy for the many, not the few, must start with the industries that employ the vast majority of people. Instead of championing a renaissance of former industrial glories, Labour should instead focus on a knowledge-driven reinvention of the economy. Centre for Cities research shows that over the past century the most successful cities have been those that have been able to adapt to the economic and social changes that have taken place in that time, by shifting towards producing knowledge-intensive products and services which increasingly dominate the UK’s economy.

Cities such Manchester, Birmingham and even London, for example, long struggled to move on from the decline of their traditional industries, but in recent decades they have turned a corner. That change is mostly thanks to their forward-thinking leadership, which focused on bringing in more knowledge-focused industries to offset losses in more traditional sectors, creating many thousands of jobs in higher-skilled, higher paying occupations.

Labour has bold ideas for the renewal of local democracy, but they can and should be combined with a willingness to embrace the opportunities and potential offered by the devolution agenda. Moreover, the party needs to marry the radicalism of its democratic platform with an industrial policy that looks to the future in terms of the kinds of jobs and businesses it seeks to support in places across the country.

Andrew Carter is Chief Executive of the Centre for Cities