Osborne flies the flag for Manchester

George Osborne is in Manchester today. This morning he gave a speech at the city's Museum of Science and Industry in which he argued that Britain needs a "Northern powerhouse" as a counterweight to London, which, as we all know, sucks money and talent inexorably southwards. It wasn't a single city he was talking about—not even Manchester itself, which, as I show in a piece in the latest of issue of Prospect, grew quicker than anywhere outside London and the south-east in the decade leading up to the recession—"but a collection of northern cities sufficiently close to each other that combined they can take on the world."

Osborne has clearly been reading the abundant academic literature which shows that cities and conurbations are the engines of economic prosperity. His speech even contains a reference to "agglomeration effects," a jargon term that economists use to refer to the advantages that come from the physical proximity of firms, workers and consumers. What Osborne has in mind is not some utopian political scheme in which Liverpool, Manchester, Sheffield, Leeds and maybe Hull would be merged in one vast political entity, but a single economic area with the infrastructure to match.

Ah, infrastructure. Currently, rail networks in the north, not to mention arterial roads, are simply not up to scratch— for example, it takes nearly an hour to travel from Manchester to Leeds by train. The Chancellor's recognition that there will be no "Northern powerhouse" without dramatically improved rail links was echoed by Richard Leese, the leader of Manchester City Council, who I talked to when I was researching my article. In a part of our conversation that didn't make it into the published piece, I asked him about the suggestion that only an agglomeration on a trans-Pennine scale could resist the centripetal forces emanating from the capital.

"The economics of agglomeration do require scale, although not all economic growth comes from agglomeration," Leese said. "But it is significant. I think that’s a reasonable argument. Is Manchester on its own big enough on its own to provide that sort of scale? I don’t know the answer to that question. But what I am convinced by is that if Liverpool, Manchester, Leeds, Sheffield as well—if we had massively reduced journey times between those major urban locations then that would allows us not to become one city but to operate relatively as a single economy. Manchester to Leeds by train at the moment is getting on for an hour. The trains are reasonably regular, but that’s a hell of a long time. If you bring that down to, say, 30-35 minutes then Manchester and Leeds can start to operate, at least in global terms, as effectively one economy. They don’t need to merge. We don’t need a single combined authority to do that but we do need improvements in infrastructure that will drive benefits at both ends of that axis."

What about HS2, which Osborne suggested was the first step in liberating the economic potential of our northern cities? Some have suggested that the money being spent on improving north-south rail links (the first stage of HS2 will establish a high-speed rail link between London and Birmingham) would be better spent on improving connections between Manchester and its neighbours. Here again, Osborne seems to agree with Leese. "You need both," Leese told me emphatically. "It’s not either-or. To create a wonderfully linked network of northern cities that weren’t linked to London or the rest of the world would not be an enormous boost to our economy. To have good north-south linkages—and it’s about capacity as much speed—coupled with good east-west linkages is something that will really help boost growth in the north of England. We do need those improved trans-Pennine links. But we also need good north-south links. If you look at the economy of the UK at the moment, some of the fastest growing places economically are towns and cities on the periphery of London rather than London itself. It is because they have that good connectivity into London. For Manchester, Leeds and the north, if you reduce journey times you'd get similar sorts of benefits. If you link cities as well then you have the potential for the benefits of agglomeration because of those shorter journey times. But it really is the case that we need both."

Osborne ended his speech by dealing with the question of power ("a true powerhouse requires true power") —a recognition that, as Leese rightly insists, "not all economic growth comes from agglomeration." Governance and democracy matter too. The Chancellor talked of the advantages of cities having elected mayors. But this is to put the emphasis in the wrong place. Manchester doesn't have an elected mayor, but it isn't doing too shabbily. What it does have is a local authority, the Greater Manchester Combined Authority, designed on the scale of what policy wonks call the "functional economic area" and, in the persons of Leese and Howard Bernstein, the chief executive of Manchester City Council, remarkably stable and visionary leadership. When Michael Heseltine, in his 2012 report "No Stone Unturned: in Pursuit of Growth", suggested that other cities outside London would do well to "follow the lead set by Manchester," it was the example of Leese, Bernstein and their colleagues that he had in mind.