speri.comment: the political economy blog

Transport investment and the North’s development dilemmas

The gap between rhetoric and reality with regard to transport investment in the North of England encapsulates all the problems of Northern economic development

Tom Hunt, Policy Research Officer, SPERI and Craig Berry, Deputy Director, SPERI

huntt_berryc_100In June 2014 George Osborne laid out his ‘Northern Powerhouse’ concept in a speech in Manchester. He set out the four ‘ingredients’ of his vision:

By joining our northern cities together – not physically, or into some artificial political construct – but by providing the modern transport connections they need; by backing their science and universities; by backing their creative clusters; and giving them the local power and control that a powerhouse economy needs.

In the long term, if the Northern Powerhouse agenda is significantly to change the political economy of the North, then it is the fourth ingredient – devolving economic powers – that could prove to be the most significant. Yet the plans in this regard are far from transformative. It is clear that Osborne saw the most important priority to be his first ingredient: that is, improving transport connections. Later in his 2014 speech, he went on to promise ‘a series of massive investments in the transport infrastructure in the north’ and grabbed headlines by raising the prospect of building a ‘High Speed 3‘ rail link between Manchester and Leeds.

Increased transport investment would of course be welcome throughout the North. But in-itself, this represents a rather conservative agenda for economic change. Better transport alone will not transform the dysfunctional markets that characterise many industries in the North. In fact, it is largely an agenda for making the North more attractive to globally mobile transnational corporations, rather than nurturing domestic productive capacity.

This is actually what makes it all the more surprising that the Government is now failing to put its money where its mouth is. Transport investment in the UK remains heavily concentrated on London and the South East. IPPR reports that transport investment in London is £2,730 per head, but just £134 per head in the North West. London’s Crossrail project will receive nine times more funding than all the rail investments across Northern England currently planned!

It is hardly surprising therefore that the decision to pause (indefinitely) the electrification of the Manchester-Leeds rail line and the Midland Mainline between Sheffield and London has generated such a strong reaction, and indeed led to a public discussion about whether the Northern Powerhouse is more style than substance.

The recent publication of the Airports Commission’s final report demonstrates that a similar approach prevails in relation to increasing the UK’s airport capacity. The commission was tasked with choosing solely between options for expanding capacity in the South East. It chose a third runway at Heathrow, because its remit demanded it take the short-term interests of existing airline and business users of Heathrow into account above all other considerations.

The notion that the Government may use the opportunity to enhance airport capacity in the North was not even on the ballot paper, as it were, because this would have represented a market-shaping, rather than market-chasing, strategy.

It is worth pointing out that there is significant opposition to Heathrow expansion within Conservative constituencies, and even the Cabinet (led by Boris Johnson, who continues to peddle his idea for a Thames estuary airport). The inhabitants of Surrey and West London do not want more overhead traffic. Heathrow expansion may well be the issue where the political philosophy of neoliberalism and the political geography of conservatism finally come unstuck – which underlines again the oddity of the Government’s indifference to the North as an alternative hub, especially given the possibility of linking an expanded Manchester Airport to High Speed 2.

There are of course no easy answers here. The issue of transport investment brings into view three key dilemmas regarding the Northern Powerhouse agenda for political and economic actors in the North. Firstly, such is the subservience of Northern elites to a London-led development model that many Northern-based business bodies actually support Heathrow’s expansion. The graphic below is taken from a page titled ‘Supporting the Northern Powerhouse‘ on the ‘Your Heathrow’ website:

Backed-by-the-North_edited-2_650
It’s not difficult to pick up the whiff of intra-North rivalries at play – divide and rule is alive and well. Supporters include several Merseyside-based bodies, and a few from the North East, but none from Greater Manchester (which could have been an alternative Northern hub).

The Airports Commission’s report does include recommendations to ensure that Heathrow’s new traffic helps to put the North more firmly on the aeronautic map of the UK, such as Public Service Obligations to ensure the provision of connecting flights with regional airports. However, it remains to be seen whether the Government will support such proposals. In any case, they would not transform the North’s developmental path and may serve to lock in regional economic imbalances even further.

The second dilemma concerns whether the North should simply be calling for more public investment here. Such demands, as have followed the electrification decision, acknowledge, and arguably accept, that central government, and particularly the Treasury, holds the purse strings. Investment would involve doing deals with Osborne that would inevitably leave the North constrained from developing alternative approaches to generating growth, even if also slightly better off.

Furthermore, in the short term, if the Northern Powerhouse concept becomes equated simply with more central government money for the North, then the Chancellor will be able to argue that any new funding for the North is a good thing, even whilst making cuts at the same time, as his recent budget demonstrated. After confirming £7.2bn rail investment in the South West and signalling his support for Crossrail 2, the Chancellor announced just £30m to the new Transport in the North body to ‘connect northern England together’. This came with a plan to create a London-style Oyster card for the North, yet provided no new funding to develop a Northern railway network worth using such cards on.

Consequently, and thirdly, should the North be demanding that revenue-raising powers, as well as spending powers, be fully devolved? In an ideal world, this is where most advocates of devolution would like to end up. But such arrangements could actually leave the North chronically under-resourced. In a cruel ‘chicken-and-egg’ dynamic, there is insufficient high-value economic activity here to generate the kind of revenue that would, in turn, be invested in a way that could nurture the development of high-value economic activity.

In sum, if the Northern Powerhouse is to become a reality, it means first disrupting a national growth model that is wedded to the City of London and, increasingly, property wealth. Only then will major infrastructure investment in the North start to look like common sense, rather than empty rhetoric. But this can only really be done by central government and would require greater supranational economic co-operation.  Sadly, it doesn’t seem to be part of Osborne’s recipe for the North.

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Categories: Development, Economics, Inequality, Politics and policy, Social science, SPERI Comment | Tags: , , , , , , , | Leave a comment

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