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State of the City: a prosperous future for Newcastle

July 29, 2014

I want to start by talking about our radical past, and how I believe that passion and spirit is intact and is key to helping us prosper over the years ahead.

You know, there’s a mistaken perception put about by some that local government is always reluctant to embrace radical change. That we’re the last bastion of outdated working practices, a barrier to progress and out of touch with the ‘real world’.

The truth is utterly different. Newcastle is forging a reputation as a place that’s not afraid to do things differently. In the face of the biggest budget challenge for a generation we’ve had to ‘think different’ to save libraries, swimming pools and children’s centres from closure.

We’ve been at the forefront of the argument for cities to have more control over the money they raise, creating jobs and connecting people back to decisions taken on their behalf. Newcastle is one of the 8 English Core Cities – along with Manchester, Birmingham, Nottingham, Leeds, Sheffield, Bristol and Liverpool – and two years ago we formed a political Cabinet of leaders to accelerate the pace of change. As Vice Chair of the Cabinet I am proud to be leading the Core Cities work on public sector reform – arguing the that local government and all public sector organisations to be given the freedom to pool budgets and spend them as they, not some distant Whitehall mandarin, feel fit.

We’ve been pioneering this work here. We’ve created the UK’s first Culture Fund, our initiative to establish a culture of philanthropy towards our city’s arts institutions.
We’ve continued to build, helping to change our city’s skyline by partnering with others on developments like Science Central and Stephenson Quarter.
We’ve embraced and worked with the Government to deliver the Troubled Familes programme making a real difference to hundreds of lives blighted by unemployment, poor school attendance and alienation.

I want to place work like this into an historical context. Two centuries ago, in cities across the North people started to come together to talk about the big issues of their time. The coffee houses where people from Hall Green, Gorton or Grainger Town met were the birthplaces of movements that changed British society for the better. Those reformers had that precious resource that tends to galvanise any social movement: anger. Anger at injustice and a vision for a better, fairer world. All of England’s core cities, including Newcastle, played a role in achieving badly needed social change, fighting against an establishment that – when not indifferent – was actively hostile.
And sometimes they did fight. They were home to revolts and uprisings around everything from rising food prices to the threat of machines in textile mills. But as well as taking part in the occasional violent revolt, our radicals engaged. They published pamphlets, formed movements for change, lobbied their often hopelessly corrupt MPs and gradually achieved real change. They formed power companies, transport boards, housing corporations. They invested in clean water supplies and sewers, built schools and provided health care facilities. They were the radicals of their day, creating the concept of municipal local government.

Today, here in Newcastle, that public spirited legacy is in great danger. Having already implemented the most severe cuts to our revenue budget in a generation we now face a least three more years of austerity.
The challenges and potential reductions to services are difficult to contemplate. My argument is that if the city council is to survive it needs much greater freedom and flexibility from central government to take charge of our own destiny.

Less than one fifth of the council’s budget is raised through council tax. The rest comes from government grants and other funding handed out via formulae that are often changed at the stroke of a ministerial pen. Yet probably about 90% of what the council does is required to be done by Acts of Parliament. As a consequence, when government funding is cut, real people suffer – buildings close and services reduce. We need to fix the broken relationship between income and expenditure, with much greater local control over both.

Let me give you some examples of how we want to do things differently.

We’ve all seen it in Newcastle, the devastating effects of long-term unemployment. The solutions aren’t simple, it’s not a case of ‘get on your bike and find work’.
Unemployment in Newcastle is caused by a complex mix of barriers to opportunity, poor health, poor housing, poor skills, job insecurity and an under-performing economy. Although other areas suffer similar symptoms, the causes are different. You won’t find the same mix of challenges in Newcastle as in Derby, Brighton or Cardiff.

That’s why these challenges require local solutions, tailored to the needs of individuals and their communities. They can’t be addressed through contractual relationships with prime providers covering whole regions, through complex payment-by-results mechanisms which distort activity towards those least expensive to help.

We all know the nationally commissioned Work Programme hasn’t delivered to expectations. From the core cities, on the current level of performance, we know that half a million people will complete the programme without finding work.

But we know locally delivered programmes get better results. While the national Youth Contract programme underperforms, the locally delivered pilots in Leeds, Newcastle and Gateshead are delivering results that are nearly twice as effective. Yet this freedom wasn’t given to us; we had to bid for it, in competition with other areas, in effect having to beg permission to use our own money.

We’re also prepared to take more responsibility for the other big challenge of our time, our ageing population.
Make no mistake, it’s fantastic that medical advances, better diet and better technology mean people live longer, but it presents us with a number of practical problems.

That’s why we’ve been at the forefront of the age friendly city movement. We value the tremendous social and economic contribution of our elders. We’re willing to redesign services and think differently about how our cities are designed. We see an ageing society not as a burden but as an economic and social opportunity.

But we also face the downside. Spiralling budgets for social care, creating unsustainable costs for councils, constant arguments with providers over money and reduced spending on preventative services that keep older people healthy and out of hospital.

The core cities including Newcastle, are willing to take responsibility for a new approach. We need to break through the institutional barriers that get in the way. A more locally-accountable health and social care service, a whole system approach which saves money, and improves care and life chances.
The evidence has shown that integrating health and social care could save up to 15% on delivery costs, for reinvestment into services which improve outcomes for our most frail and vulnerable citizens.

Two examples of modern radicalism in Newcastle – unemployment and an ageing society. But if we are prepared to be radical, we must persuade Whitehall – which has its fair share of outdated working practices and methods – to do the same and join us on the journey.
I believe we’re starting to win the battle. Last month the Chancellor made major commitments to northern cities, and a few days later a report by Lord Adonis – no doubt heavily influenced by his work in the North east – reinforced the view that England’s cities are major economic powerhouses with enormous untapped potential.
It is no accident that we are beginning to see an emerging cross-party consensus behind the idea that devolving powers and resources to cities like Newcastle will help us create more sustainable long term growth.

There is an undeniable need to break free of our overdependence on London as the focus for the UK’s economic growth. It results in an unbalanced and fractured economy. All of us have the potential to contribute – we just want the freedoms to play our part.
Many organisations like the Centre for Cities, together with all the English Core Cities, have been campaigning long and hard to encourage Whitehall to allow us to have greater control over how the taxes we raise are used to deliver the best outcomes for local people.
We believe that we have an inarguable case – and our goal is the ensure that this is reflected in the manifestos of all three major political parties ahead of next year’s general election.
We make this case not because we because we believe cities should be independent of central government – but because we are a vital delivery partner for a government seeking to accelerate growth. Our cities are at the forefront of social and economic change. We have led the way on everything from manufacturing technology to public health. Cities can be the engines of growth but they must be freed from the shackles of government control if they are to truly reach their potential.

Let’s look at some of the facts. The core cities together with their surrounding urban areas:

  • Are home to 16 million people – a third of the population of England.
  • Generate 27% of England’s wealth (that’s more than London).
  • House half the country’s leading universities.

Yet in England 95% of all taxes raised in cities go back to the government, and most of the funding that comes back to us does so with strings attached. This is stifling local innovation and hampering the ability of local decisions makers to pursue local priorities.

This centralist approach is in stark contrast to the rest of the world – German cities control six times more of the taxes they raise, in the USA it is seven times and in Canada ten times more of locally raised taxes are controlled by the authorities that directly represent the local tax payer. In other countries it is the norm for major cities to outperform the national economy. In the UK only London does this consistently.
English cities lack the level of financial control enjoyed by our international competitors. We are not competing on a level playing field. In a Global marketplace we are competing against other cities for investment and jobs hamstrung by Whitehall meddling which stifles local ambition and innovation.

This matters because I defy any Whitehall mandarin or politician to surpass the passion we feel for our city. I defy them to demonstrate a greater understanding of the needs of our local communities and businesses. We understand the nature and needs of Newcastle and the North East better than anyone else.

Newcastle has a sense of pride and passion that is unsurpassed. Our pride in place is what binds us all together. It is what makes us care for each other and creates the opportunity to define a stronger sense of what a cohesive society in a great city can be.

The likelihood of some form of devolution in Scotland, no matter what Scots decide in September, adds another dimension to the debate. If greater powers and financial flexibility are good news north of the border, why not in the great English cities? The English Core Cities are already in close dialogue with Edinburgh and Glasgow to discuss how we join together to develop the devolution debate in the interests of us all.
Greater freedom to decide how to spend the money generated in cities, such as property taxes, would help the Core Cities meet their target of outperforming the national economy, and becoming financially self-sustaining.
Independent forecasts demonstrate this could mean an additional £222 billion and 1.3 million jobs for the country by 2030. That is like adding the entire economy of Denmark to the UK. This could also mean and additional £41.6 billion to the government in taxes from increased jobs by 2030 – enough to pay off almost half the national deficit. And that’s not by raising the level of taxes – just by changing how taxes are invested.

I have no doubt that the government would argue that it is already on the road to empowering cities – through the local growth fund and City Deals.
Whilst these are welcome developments, we should remember that local growth pot of around £2 billion is a drop in the ocean compared to Lord Heseltine’s original recommendation that £70 billion be devolved from Whitehall to local areas to get the economy moving. Persuading Whitehall mandarins to relax their iron grip on the purse strings remains one of biggest challenges.
But we must make the most of what is available and it would be churlish not to acknowledge the potential we have been able to unlock through the City Deal which I was able to negotiate for Newcastle. The deal allows us to borrow to fund development and use the additional business rates by the investment to pay the loan back. This releases £92 million to invest in our cities future, generating a massive £1 billion return and 13,000 jobs over the next 25 years.

And already we are beginning to see the benefits – the development of the Stephenson Quarter moving forward at pace; Science City, the biggest city centre investment site outside London, rising up on the site of the old federation brewery; and Central Station transformed into a modern gateway to a vibrant city.

The City Deal has also unlocked transport improvements around the city with improvements to key junctions on the A1 – particular at the UKs most congested road junction at Lobley Hill which will be improved in the very near future.

Modern cities need modern and effective transport systems if they are to remain competitive and it was pleasing that all of our proposals for upgrading Newcastle’s road network were successful in the recent round of local growth fund allocations. This will contribute to one of the most significant transformations of our road network for a generation as we implement a plan to improve links around, across and within the heart of the city. Much of this work will begin in the year ahead. The long term benefits will be enormous – but inevitably there will be some short term pain for motorists as we carry out the work. Please bear with us!

A key part of our city’s transport future will be linked to cycling. I’m proud that we’ve managed to lever in almost £6m from central Government through the Cycle City Ambition Fund. There will be again be short term disruption while we build the infrastructure, but again I believe the pay-off – in terms of easing congestion and public health – will be enormous.
Meanwhile, good work is happening now. Newcastle’s growing reputation as a cycle-friendly place will be underlined this weekend when thousands of cyclists take part in SkyRide on Newcastle and Gateshead Quayside.
And our Go Smarter campaign continues to tempt more and more people away from the car, easing congestion at peak times and encouraging healthier and more active lifestyles.

Another vitally important part of our future plans is to create more places for people to live within our city. One of the reasons why our roads are so congested at peak times is because a lack of family homes within Newcastle means many people have to commute from outside the city for work. The unprecedented demand for the first homes to be built in Scotswood is a real sign that there is untapped potential in our housing market.
That is why the proposals for new homes in our Local Plan are so important if we are to plan effectively for the expected growth in our population. The plan is currently being examined by a government appointed planning inspector. There are still some issues to be resolve – but we hope the plan will be adopted early next year to provide a clear blueprint for how our city will develop and grow in the years ahead.

We know we are going through tough times – but this is not a time not despondency. Despite what some national journalists might have you believe we are no Detroit. Nor are we teetering on the brink. There is no denying that our city and our region have challenges that we must face up to and address. But we also know that we have the boundless ambition, energy talent and passion to fight for our city and our region.

After a lengthy gestation the North East Combined Authority is up and running and taking responsibility for the big strategic decisions that impact on skills, investment and transport across the region. Our Local Enterprise Partnership is bringing political leaders, public policy makers and business brains together to make the right investment decisions for the North East – on the back of a coherent Strategic Economic Plan based on consensus not competition. We have the structures and governance in place to take full responsibility the decisions that impact on our local community. All government needs to do is release the brake to allow us to travel further and faster.

Here in Newcastle, and in all the other Core Cities, we are taking responsibility for shaping our own future. Together, through our ‘City Centred’ campaign we are making some fundamental requests to Government, this one and the next:

Extend the concept of the Local Growth Fund for capital funds – but make it big enough support cities and regions to make big decisions.

Lift the Housing Revenue Account borrowing cap so that cities can fund more housing development.

Generate certainty with greater local control of public spending and budgets that are the length of parliaments.

Devolve property taxes to cities and enable them to control other local taxes.

Consider the formation of a Local Investment Bank across all the core cities

To do this we need “place-based” settlements for public spending in each of our major cities, rather than the fragmenting of scarce resources through multiple Whitehall departments and agencies. And we recognise that this approach requires a culture change in our cities, as well as in Westminster and Whitehall. We have been working hard with our partners in Newcastle to develop our own thinking about how we pool our resources, capacity and knowledge to address our challenges.

I’ve talked tonight about how we can prosper if we have more control. But it’s no use having more freedom if there’s a vacuum of ideas. It’s no good if all this discussion simply creates an expectation of greater public sector involvement or intervention. Tonight’s debate must also be about what you, the collective leadership of this city, can do to make a difference, however small, to the state of Newcastle. It’s about how we work together.

Tonight’s hashtag is Think Newcastle and that’s exactly what I want you to do. Think about what you can do to make our city an even better place to live and work. Think about your role in our city’s civic life.
Think about the apprenticeship you can offer, the schools you could work with, the campaigns you can back, the letter to an MP or decision-maker you can write, the local initiative you can sponsor.

Think about what you can do to make a difference and continue our radical heritage well into the 21st century.

Now is a time to be bold, to think different, to think Newcastle.

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