Monday, November 03, 2014

The Chancellor of the Exchequer has announced that new powers are to be devolved to the Greater Manchester Combined Authority (GMCA). The GMCA will gain powers in the areas of policing, planning, transport and housing, and will be required to introduce the post of a directly elected mayor.

These powers are modest and do not offer the promise of any real capability to stimulate economic development. If the north of England is to be able to position itself as more power is devolved to Scotland and other regions, it will itself need further discretionary powers.

But the absence of such powers in the current proposals might in fact be a blessing.

For while this move is being portrayed as progress in the development of the Northern Powerhouse, it is not at all clear that it represents a positive development in that context. The Northern Powerhouse is intended to create a single urban area stretching across the Pennines, bringing in Leeds and Sheffield as well as Manchester - and reaching out further in both directions along the M62 corridor. Creation of a nexus of political authority in Manchester may well hinder economic integration of the north rather than aid it.

Northern cities face a drain of human capital to London and they lack the capital's levels of business investment. The disadvantage faced by the north thus amounts to much more than the lack of a high speed rail link over the Pennines. Integration requires a unified political purpose that is not well served by creating divisions now between Greater Manchester and weaker local authorities elsewhere.

Creating new jurisdictions in a UK that is characterised by devolved government requires careful thought. It should not come about purely as a consequence of 10 local authorities deciding to work together. Wider interests are at stake, and central government has a duty to take those fully into consideration. Should Manchester be a metro in its own right? What then of the Northern Powerhouse? So should the metro include Liverpool, Leeds and Sheffield? Maybe. But what then of Newcastle? And what of the rural areas in between? These are questions worthy of debate. Computable general equilibrium models are used to evaluate such issues elsewhere. Serious research is needed in the UK too.

Today's first step is not altogether promising.