Connected Cities: The link to growth

8/12/2019 Connected Cities: The link to growth

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CONNECTED

CITIES:THE LINK TOGROWTHJULY 2014


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ABOUT THE CITY GROWTH COMMISSION

Chaired by economist Jim ONeill, the CityGrowth Commission was established in

October to understand: how we can achieve complementary

growth between London and ourother cities

what fiscal powers and governancearrangements are needed to deliverthis, and

how public service reform can start tomake cities more fiscally sustainable

The ultimate objective of the Commissionis to lay the foundations for a stronger UKeconomy through a significant power shiftaway from the centre and towards cities, andto show the next government, of whicheverparty, why this is needed and how it can beachieved. Our recommendations will set out

a road map for change; as the Commissionseeks to influence all political parties in the

run up to the UK General Election, andmake the case for cities to take a new role inour political economy.

The Secretariat is hosted and run by theRSA, an organisation committed to findinginnovative and practical solutions to todayssocial challenges through its ideas, researchand ,-strong Fellowship.

The City Growth Commission isfunded by the Mayor of London, London

Councils, the Core Cities Group andthe Local Government Association. Ourpartners include New Economy Manchester,the British Venture Capital Association,Universities UK and the Joseph RowntreeFoundation.


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FOREWORD

BY JIM ONEILL

It is so easy for me to say for each paperwe publish that the topic we are writingabout is the one that is most critical tothe Commissions work and goals, and itsimportance links to all the other ideas we

have. I said that for our skills report, andit was true. I am also saying it here for ourconnectivity report; it is true for both.

When I was considering the invitationto become Chair of the City GrowthCommission, I asked those with the idea asto what they thought our stance should beon High Speed (HS). The answer I gotwas, we assume other ideas will be moreimportant for the Commission.

They were right about the specifics of

HS, but were not about the broader aspects.Like many trained macro economists, andwhen the country is so focused on preservingits credit rating through conservative fiscalpolicies, I had my doubts about the cost ofHS. But as soon as I became immersed inthe role as Chair, I thought pretty quicklythat the proposed second phase, and morebroadly connectivity between the majornorthern cities via much faster train services,would be a key part of our thinking andambitious goals. The notion of connectinglots of mid-sized cities to much faster (andaffordable) transport is key to the ideaof creating, from a commercial if not anadministrative perspective, a metro area ofcomparable size to London. In this report,our research team spells out in detail whythis kind of ambitious thinking is critical for

boosting the long-term growth potentialof non-London metro areas.

However, better connectivity is notjust about physical infrastructure. In thisera, it is about so much more especially

digital connectivity. We have heard from ourevidence building and other trips aroundthe country in the last eight months sincewe started, upgrading, extending andexpanding our technological connectivityso that all urban businesses and residentscan do the same as the most advanced urbansocieties in the world can do is vital. Thispaper discusses this issue in detail and givesa flavour of the sorts of interventions wethink necessary to make a positive difference.

Last, but certainly not least, housing.One of the foremost challenges of currentand future times is the availability of housingfor our urban residents so that people cantruly benefit from the conceptual fruits ofurban living. Without having a comfortableplace to live and enjoy the benefits of a metrolife, all the other conceptual benefits remainjust that, conceptual. Our paper discussesthe need for more housing supply and waysof boosting supply effectively.

All of these initiatives alone will notguarantee a sustained stronger rate ofgrowth, but they are certainly necessaryingredients. With metros taking a strongerlead, enabled by greater flexibilities andfreedoms to deliver, we stand the best chanceof delivering city growth for the benefit ofthe whole UK.


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CONTENTS

FOREWORD

ABOUT THIS REPORT

EXECUTIVE SUMMARY

1. CONNECTED CITIES:

THE LINK TO GROWTH

2. WHATS HOLDING CITY

CONNECTIVITY BACK?

3. THREE CONNECTIONS

TO PLACE-BASED GROWTH

4. HOW CONNECTIVITY CAN

ENGINEER FUTURE GROWTH

5. RECOMMENDATIONS

REFERENCES

2

4

6

14

16

20

28

29

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1. Three relevant seminars were held on 1) Housing, Planning and Development; 2) Creating Global Connections for Growth; and3) Megabyte Metros how data and digital technologies can drive city growth. For more information please see http://www.citygrowthcommission.com/events

2. See our first two research outputs, Metro Growth: The UKs Economic Opportunity and Human Capitals: Driving UK metro growththrough workforce investment

ABOUT THIS REPORT

This report is based on evidence receivedand research undertaken by the City GrowthCommission. It has been informed bythree regional hearings, subject specificseminarsand in-depth discussions withover experts across local, city and national

governments, academia, other think tanksand consultancies.In this report, as with all reports in

the City Growth Commission,we usethe concept of a metropolitan area asthe relevant geography to understand citygrowth. Metros are not just about citycentres. Their reach extends to suburbsand surrounding areas as places of work,leisure and retail. Many rural businesses,for example, depend upon metros for

accessing urban markets, customers and theconnectivity cities provide to the rest of theUK and the world. This report uses the termsmetro, city and city-region interchangeably,to indicate this scale of analysis.

This paper argues that connectivityneeds to encompass housing and land useplanning, energy distribution and intercitytransport. Similar arguments apply tometros water, waste management and otherutilities. For the sake of brevity, we focus onthree key forms of infrastructure that arosefrom our research although similar systems-thinking would apply.

This research output, the Commissionsthird report, offers a bold alternativesolution to the current inefficient centralisedmodel. It does not presuppose that city-level

investment and decision making is alwaysbest, but instead aims to demonstrate thebenefits that can exist in a metro-driven,systems-based approach to infrastructureand connectivity.

AcknowledgementsThe authors would like to thank CityGrowth Commissioners Jim ONeill,Bridget Rosewell and Peter Vernon for theirguidance throughout the project. Alex Royand colleagues at New Economy Manchesterhave also provided research support andpolicy insight throughout the process.

The practitioners and policymakerswith whom we have consulted in thisproject are too extensive to mention here.

However, particular thanks should beextended to a few individuals who havebeen particularly generous with their timeand support: Damien Smith, Joe Manningand Andrew Sissons (Cabinet Office, Citiesand Local Growth Unit); Jeremy Skinner(Greater London Authority); Karl La Ferla(Infrastructure UK, HM Treasury); LizStevenson (Connecting Cambridgeshire);Tom Flude (Transport for London); andcolleagues at the Local GovernmentAssociation. Thanks also go to those whoresponded to the City Growth InfrastructureSurvey. These responses were especiallyhelpful for framing the debate. Finally, wehave drawn on written evidence submitted tothe Commission, which is available to viewonline at www.citygrowthcommission.com.
http://www.citygrowthcommission.com/eventshttp://www.citygrowthcommission.com/eventshttp://www.citygrowthcommission.com/http://www.citygrowthcommission.com/http://www.citygrowthcommission.com/eventshttp://www.citygrowthcommission.com/events


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LONG-TERM CAPITAL INVESTMENT

Source: National Infrastructure Plan3

Figure

1

SCOTLAND

Devolved responsibilities include: rail, roads, local

transport, water, flood and waste Real terms increase in capital budget New capital borrowing powers of 296m in

201516 High Speed 2

New InterCity Exoress rolling stock East and West Coast Mainline capacity upgrades Super-connected cities: Aberdeen, Perth and

Edinburgh

NORTH EAST

A19 Testos flyover construction A19/A1058 coast road near Newcastle improving

access to Port of Tyne and major employmentsites

A1 upgrade Works Lobley HIll

High speed 2 Increased rail capacity on East Coast Mainline andNewcastle

New InterCity Express rolling stock Rebuilding 31 schools in poor condition as part

of the Priority School Building Programme

NORTHERN IRELAND

Devolved responsibilities include: rail, roads, localtransport, water, flood and waste

Real terms increase in capital budget Additional borrowing powers of 100m over two

years to support investment in shared housing and

education

Super-connected city: Derry/Londonderry

NORTH WEST

M60 J2427 and 14, the M62 J1012, the M56J68, and the M6 J1619 and 21a26 managed

motorway schemes 814m Mersey Gateway Bridge government investment

and pre-qualification for a UK Guarantee High Speed 2 Northern Hub rail link upgrade programme

Manchester City Deal finalised Rebuilding 39 schools in poor condition as part


WEST MIDLANDS

Managed motorway schemes on M5 J4a6 southof Birmingham, M1 J1319 Rugby, M6 J24 and

J1315 M54/M6 link road Wolverhampton High Speed 2 Rebuilding 22 schools in poor condition as part


WALES

Devolved responsibilities include: roads, localtransport, water, flood and waste

Real terms increase in capital budget Exploring M4 funding options alongside response

to Silk Commission Great Western Mainline Electrification extended

from Cardiff to Swansea Welsh Valleys electrification New InterCity Expressrolling stock

Construction of a new prison in north Wales Super-connected cities: Cardiff and Newport

SOUTH WEST

Electrification of Great Western Mainline Capacity upgrade to Bristol Temple Meads station

New Heathrow link from the Great WesternMainline

Hinkley C Nuclear Power Station pre-qualificationfor a UK Guarantee

Rebuilding 17 schools in poor condition as part


LONDON

Crossrail 2 examining fundingand financing options

Upgrades to Piccadilly andBakerloo lines

Gospel Oak and Barkingelectrification

High Speed 2

Thameslink upgrade Improvements to London

Waterloo station Increased capacity across

London, including at London

Bridge, Victoria, and StPancras stations

Rebuilding 46 schools in poorcondition as part of the PrioritySchool Building Programme

SOUTH EAST

M4 J312 London to Reading managed motorwayscheme

M23 J810 managed motorway scheme nearGatwick

Managed motorway schemes on the M20 J35Maidstone, M27 J411 and the M3 J914 nearSouthampton

A21 upgrade Tonbridge to Pembury A27 Chichester Bypass improvements M20 J10a A2 Ebbsfleet Junction A2 Bean

Lower Thames Crossing East-West rail project from Oxford to Bedford, via

Milton Keynes and Aylesbury Upgrade Harwell Science and Innovation Campus Rebuilding 27 schools in poor condition as part


YORKSHIRE AND THE HUMBER

A 63 Castle Street access improvements to thePort of Hull to relieve congestion and improvesafety

A160/180 Immingham dualing scheme Transpennine electrification Additional rail capacity in Sheffield and Leeds The electric spine rail enhancement programme

A1 Leeming to Barton converting dualcarriageway into 3 lanes Super-connected city: York UK Guarantee issued for Drax biomass conversion Rebuilding 36 schools in poor condition as part


EAST OF ENGLAND

A14 Huntington to Cambridge A5M1 new link road M25 J30 improvement work Lower Thames Crossing Upgrade Barbraham Research Institute

Alconbury Enterprise Campus* Super-connected city: Cambridge Rebuilding 15 schools in poor condition

as part of the Priority School Building

EAST MIDLANDS

A38 Derby junction improvements M1 J2425 managed motorway scheme at Long

Eaton M1 J2831 accelerated delivery pilot The electric spine; rail enhancement programme MIRA technology park Automotive Research

Centre*

Super-connected city: Derby Rebuilding 28 schools in poor condition as partof the Priority School Building Programme

3. HM Treasury (2013)


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4. CEBR (2013)5. The RSA Public Services 2020 Commission argued that a new approach should be taken to public services, striving for social

productivity which focuses on the social value which is created through the interaction between public services and civil society (seeKippin, H. and Lucas, B. (2011)).

6. ONeill, J. (2014)

EXECUTIVE SUMMARY

High quality infrastructure is a criticaldriver of productivity and economicgrowth. Effective infrastructure enablesagglomeration effects by increasing thedensity of economic activity, creating

positive multiplier effects that increasethe value of other types of investment.The UK has chronically underinvested

in infrastructure, trailing that of otherleading global economies. The impactof underinvestment is considerable; it isestimated that the UK experienced anaverage of five percent lower growth eachyear between and as a result.

However, what is needed is not necessarilyjust moreexpenditure on infrastructure;

it matters wherethis investment is made andhowit meets current maintenance and futureinfrastructure needs within and betweenour city regions. There is no point havinginfrastructure if it does not create effectivelinks, connecting businesses to tradingpartners, workers to jobs and people to theplaces where they live, socialise and buildcommunities. Whether through broadbandor energy distribution, connectivity ofpeople, places and resources creates thenetworks needed to support economicand social productivity.

A more strategic, whole-systemapproach is needed to capitalise on everyadditional pound spent on infrastructure.Metros need to be at the heart of this newapproach, so that they can maximise thesocial and environmental productivity oftheir place. City leaders need also to work

with one another as part of a connectedUK system of cities so that the valueof the UKs system of cities is realised.In this respect, the Chancellor of theExchequers recent proposal for a connected

Northern Powerhouse is potentiallygamechanging. This supports the CityGrowth Commissions frequently emphasison the need to improve rail connectivity,particularly between northern metros wherethe marginal economic impact of investmentcould be considerable.

However, the city voice is currently weakin national policy making. The UK economyrelies upon connected networks but decisionsare taken without sufficient consideration of

the inherent interlinkages between differenttypes of infrastructure and the importanceof those interlinkages within and betweenmetros. This generates problems withhousing, transport, broadband, energydistribution, and other utilities. Metrosshould be allowed to contribute more to theplanning and delivery of local, regional andnational infrastructure.

But cities need to step up to the plate too.While the Chancellor recently acknowledgedthe trend that global cities have powerfulcity governments, the reality in the UKis that our major metros lack sufficientcity-region governance and/or powersto implement policies in the interests oftheir particular economies. While a fewleading metros are breaking away from thistrend with the establishment of integratedtransport authorities (eg Transport for


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7. Osborne, G. (2014)

Greater Manchester) and CombinedAuthorities, other metros should demonstratetheir ability to take on these risks, petitioningfor more direct responsibility for networkmanagement and major transport investmentas a first step. Only then can the UKs metro-driven economy be greater than the sum of

its individual parts.The City Growth Commission argues

that individualcities need the freedom tooperate as whole systems, making decisionsin the best interests of their metro, ratherthan relying upon national governmentsinherently centralised decisions oninfrastructure investment. In turn, citiesneed to have the freedom to work together,enabling pan-regional investment fora moreproductive system of cities

to facilitateand share in economic growth for the UKas a whole.

Infrastructure should be a system ofinter-connected parts that meet theneeds of the local economy and enableit to grow in the context of national andinternational markets

Newcastle

Government growth incentives notaccruing to the city

Hull & Humber

In delivering effective infrastructure for trulyconnected cities, we need:. Vision:The UK needs a strategic

investment framework to inform local andnational-level decision-making, cuttingacross the siloes of transport, housing,or other areas to set a vision based onthe interests of Gross Value Added(GVA) and connectivity. In deciding whatinfrastructure investment we shouldpursue as a country or as cities, we needto start from the premise of what doesthis place need? and then devise a long-term strategy detailing pace of deliverybased on affordability.

. Holistic, metro-wide growth: Industrialstrategies and national-level infrastructure

plans need to be considered from theperspective of specific, metro-level

economic geographies. Infrastructureacross sectors (eg rail, highways anddigital) and its economic, social andenvironmental impact are inherentlyinterlinked. Decision-making and financefor infrastructure need therefore to beadministered in the round at city-level,

to ensure the right priorities andsequencing of delivery to maximiseeconomic and social productivity.

. Innovative finance: Transformativeprojects with major direct public andprivate investment can bring aboutpositive, additional economic benefitsat a local-level. However, at the national-level, these benefits are too frequentlydismissed as mere displacement activity,

an interpretation that severely limitsinfrastructure investment and servesas a self-fulfilling prophecy when placesare then constrained from, and evendisincentivised against, enabling growth.Earn Back and Gain Share schemes aretwo examples of early pilots where citieswill retain some of the upside fromthe growth they create from additionaleconomic activity. These schemes shouldbe developed further with significant

transfer of risk to those metros ableto shoulder it.. Coordination and forward thinking: Delivery

of major infrastructure investmentprojects can be disruptive and costly when poorly timed or sequenced. Forexample, building works for the NorthernHub will be followed, after some delay,by Phase of High Speed (HS), andultimately, the next phase of the NorthernSuper City network,operations thatcould otherwise have been coordinatedthrough long-term planning and metro-centred decision-making. Planning overlong-term investment periods enableslower cost delivery of new homes, retailand commercial sites based aroundexisting transport capacity. France, forexample, was able to build extra highspeed rail connections with relative ease,because it thought ahead to build stations

it knew it would one day need.


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. Better appraisal of transport investment:The Green Book is an adequate wayof determining the business case forindividual projects, but a holisticinvestment strategy needs to determinehow to prioritise schemes across the metrolevel. Taking a GVA and labour-market

perspective, the question becomes notwhether projects can be justified in and ofthemselves, but how to prioritise projectsto maximise growth and job creation.

Summary of RecommendationsThe following recommendations set out howthe next government could deliver the above,creating a viable system of UK connectivity

and enabling more sustainable, productiveeconomic growth over the long term. Theseare expanded further on pages :

. Develop a stronger, metro-focusedInfrastructure UK (IUK)

We recommend the creation of a stronger,metro-driven IUK to recognise theimportance of metros infrastructuredecisions for the UK. As the major driversof growth, metros should be actively

engaged in national decisions, particularlythose that have a significant local impact(eg airports, new rail lines and energygeneration). Infrastructure decisions ofnational importance are, in effect, decisionsof importance for the system of cities.Over the long-term, this principle could beapplied to other areas of nationalgovernment policy, where metro leaderswould assert greater influence over nationalpolicy decisions alongside furtherdevolution to their own metros.

Metros need to set the high-levelstrategic objectives that can ensure greaterconnectivity between and within them,for the benefit of the UK as a whole. Werecommend metros have the autonomy to:

Plan, develop and deliver theirinfrastructure strategies wheredecisions impact within theirboundaries;

Collaborate at regional level, workingwith other city-regions and county

authorities to ensure efficient, effectiveconnectivity across their boundaries;

Assert their voice in national decisionmaking, programme delivery andnetwork management via metro leaderrepresentation on the IUK AdvisoryCouncil (eg replacing Departmental

Permanent Secretaries). This willrequire metros to work togetherand prioritise investment programmesin the interest of an effective systemof cities.

. Create a fairer and more flexible fundingsystem

We recognise the steps IUK has taken todevelop a range of flexible and innovative

funding and finance systems to ensure astrong pipeline of investment for futureinfrastructure plans. However, theUK must learn from high-performinginternational competitors, which typicallyallow metros much greater flexibility andlong-term certainty of funding.

In our next report, the Commissionwill argue for a broad devolution ofrevenue-raising powers and substantialrisk transfer to those metros able to

shoulder it. With regards to infrastructureand connectivity, we argue that metrosshould be responsible for approving andsecuring finance to develop schemeswithin their boundaries. This meansthat metros would be free should theydetermine it in the best interest of theirplace to:

Develop effective forms of taxincrement financing

Develop models such as Earn Back andGain Share suitable to their own cities;and,

Apply a range of user pays and levy-based finance models.

This shift in control from the centreto the metro-level extends beyondaccountability for resources and value formoney. Like other American, European orAsian cities, UK metros should have the

powers to identify opportunities in thebest interest of their economy and find


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innovative ways of financing these to meetcurrent and future infrastructure needs.The cultural shift required in Whitehalland many metro governments will besignificant.

. Introduce a flexible and innovative planningsystem

Metros should take on planning authoritypowers, aggregating up decision-makingto complement strategic investmentacross the city-region. Metros should havethe power to convene relevant agenciesand make planning decisions across allmodes of transport; from traffic orderson local roads, to building a new railway,or closing a pathway to enable major

developments to get ahead. In addition,they should be free to: Designate housing zones;

Make greater use of CompulsoryPurchase Order (CPO) powers;

Create an open register of public sectorland at the metro level; and

Reclassify poor quality Green Belt andpromote Green Belt swaps.

In addition, we recommend

Government review the insufficiencyof fibre connectivity in key parts ofcities (especially final connections tobusinesses and households), in light ofwhat seems to be insufficient competitionin the high-speed broadband market.The Governments review would considerwhy this is the case and how it mightbe resolved.

. Follow a measurement system thataccurately reflects the costs and benefits of

infrastructure investment

Interpretation of the Treasury GreenBook by central government departmentsoften elevates the economic and financialconsiderations above other the aspectsof the five business case model. Thismeans the full suite of potential economicimpacts, such as the interlinkages ofinfrastructure with other place-based

policy and metros contribution to

regional and national economic growth,are not routinely taken into account.

To enable better infrastructureappraisal at national, metro and locallevel, we recommend HM Treasury, IUKand the Department for Transport:

Ensure appraisal methodology (and

its application by other governmentdepartments) takes account of theimportance of place;

Ensure other emerging techniquesof appraisal are taken into account,continually pursuing improvementsin appraisal methodology across theboard; and,

Work with ONS and other data richbodies to publish better local and

metro level connectivity data.. Enable metros to rise to the challenge

The UKs highly centralised systemof government has contributed to anerosion of local government capacity.Some leading metros are breaking awayfrom this trend with the emergence ofCombined Authorities. Some are alsostarting to focus on developing internalcapability and capacity to deliver robust

appraisals, strategic plans and long-termcollaborations with other cities, regions,agencies and the private sector.

To support these moves werecommend:

Private sector swaps between metroofficials and private sector expertsto learn from and share expertise,especially risk management andfinance;

Similarly, public sector swaps betweenlocal and national government officialsto build expertise and experience;

Greater collaboration between cities,including through sharing services orcreating centres of excellence to servegroups of cities in eg procurement;and,

Metro-level skills planning for a moretargeted skills system, discussed inthe City Growth Commission report,

Human Capitals.


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:

1.30 1

:

, ,

KEY TAKEAWAYS FOR LONG-TERM METRO GROWTH

As a counterbalance to London

and South East, investment in

connectivity between northern cities

(via the Northern Hub, HS2 Phase

3 or other schemes) should beprioritised.

Metros need to improve and

demonstrate their capacity to identify

and manage risks, following the lead

of a few UK city-regions in developing

innovative, place-based approaches

to financing investment.

Metros should take on planning

authority powers, aggregating updecision making to facilitate strategic

investment across the city-region.

Government should commission

a comprehensive review on how our

current and future needs for digital

infrastructure can be met, especially

in the face of strict EU State Aid rulesand a highly concentrated high-

speed broadband market in which

major players such as BT and Virgin

can constrain supply and market

competition.

Metro leaders should influence

infrastructure decisions of national

importance, which are decisions of

importance for our system of cities.

Over the long-term, this principlecould be applied to other areas of

national government policy, alongside

further devolution to the metro level.

8. CEBR (2013)


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, 90 BILLION

0

5

10

15

20

25

%o

fGD

P

30

2012

2010

200

8

200

6

200

4

200

2

200

0

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

Year

45

40

35

Australia Canada Germany Euro area France

UK Japan OECD members USA

Source:World Bank10

11

LONG TERM UNDERINVESTMENT BY UKIN INFRASTRUCTURE9

Figure2

9. Note: it is difficult to measure the current stock and future need, although work by the International Centre for Infrastructure Futuresand i-BUILD, led by consortiums of UK universities as well as efforts by Infrastructure UK, aim to move us closer to a more accurate

analysis. Other proxy measures, such as gross fixed capital formation, also suggest we continue to fall behind our internationalcompetitors. The World Bank defines Gross Fixed Capital Formation, a National Accounting measure, to includes land improvements;plant, machinery, and equipment purchases; and the construction of roads, railways, and the like, including schools, offices, hospitals,private residential dwellings, and commercial and industrial buildings.

10. World Bank Data (Accessed June 2014)11. CEBR (2013)


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:

35%

3.5

4

4.5

GlobalCompetitiv

enessIndex

Quality of overall infrastructure

5

76.565.554.543.5

6

5.5

FALLING BEHIND OUR COMPETITORSFigure3

Source:World Economic Forum12

12. World Economic Forum (2013)13. CBI (2014)


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THE PLANNED UPLIFT IN THE INFRASTRUCTUREINVESTMENT IS WELCOME

13

Figure4

283MILES

:

-: 49 MINS( ) -: 32 MINS( )

-: 55 MINS( )

0

20,000

201314 201415 201516 20162020 2020 onwards

40,000

60,000

80,000

100,000

120,000

160,000

140,000

Energy WasteFlood WaterIntel lectual capital Transpor tCommunications

million

s

Source:HMT National Infrastructure Pipeline14

14. HMT (2013)15. National Rail enquires via BBC article(2014) referring to Osborne, G. (2014)
http://www.bbc.co.uk/news/uk-27969885http://www.bbc.co.uk/news/uk-27969885


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1. CONNECTED CITIES:

THE LINK TO GROWTH

The UK is regularly criticised for itshistoric under-investment in infrastructure.Recent analysis by the World EconomicForum ranked the UK as th for overallquality of infrastructure, behind France,

Japan, the United States, Canada and ourScandinavian rivals. This works against oureffective regulatory environment and flexiblelabour market, dragging down our overallcompetitiveness, where we just scrape intoth place.

This can be partly accounted for whenwe think about the relationship betweeninfrastructure investment and connectivity;infrastructure is only maximisingproductivity when it is connected to

the wider system. There is no point havinginvestment unless it leads to efficientnetworks, connecting people, places andcommunities with markets and resources within and between cities, nationallyand internationally.

While the Coalition has attempted tore-prioritise investment,many UK metro-areas lack sufficient connectivity to serve theneeds of their people and businesses. Only percent of firms believe current policy willimprove infrastructure on the ground overthe next five years,and as the Chancellorof the Exchequer noted in his recent speechon the economic potential of our northerncities: Manchester and Sheffield are justw miles apart yet it takes over one hour minutes to travel by car. In that time youcan get from Southampton to Oxford, which

is twice the distance.Without a focuson fast, efficient connectivity between andwithin metros, we risk hindering long-term,sustainable economic growth.

It is increasingly recognised that clusters

of economic activity can support higherproductivity and growth.AcknowledgingRichard Florida, Chuka Umunna, ShadowBusiness Secretary, recently referred to citiesas the economic growth machines of thest century, powered by diverse and self-reinforcing networks of knowledge, suppliersand support.

Sustainable cities need to be places wherepeople want to live and work, and thisdepends as much on aesthetic considerations

as it does on opportunities afforded by thelabour- market in supporting, for example,power couple,dual career families. Metrosneed to offer a range of opportunities andcultural experiences to continue to attracthigh skilled talent, investment and jobs.The RSAs work with British Land furtherconsiders the role of place-shaping andsocial and economic productivity at locallevel (see below).

Individuals, communities, firms and civilsociety organisations need to be connectedwithin their own metro boundaries to enableindividual cities to maximise their social,economic and environmental productivity.As complex systems, cities need to be ableto respond flexibly to local needs so thatinvestment is efficient and effective in creatingvalue both public and private that also

16. World Economic Forum (2013)17. HM Treasury (2014)

18. CBI (2014)19. Osborne, G. (2014)20. Florida, R. (2006)21. Umunna, C. (2014)22. Costa, D. L. and Kahn, M. E. (2000) cited in Cheshire, P.C., Nathan, M. and Overman, H. G. (2014)


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BRITISH LAND AND RSA: DEVELOPING SOCIALLY PRODUCTIVE PLACES

In April 2014 The RSA brought together

over 100 professionals from a wide range

of organisations to discuss planning

and the built environment. Gathering

innovative examples emerging across theUK The RSAs research in association

with British Land concluded:

Socially productive places require a

system of physical assets homes,

streets, open spaces, shops,

workplaces and community

facilities which serve the networks

of people who will use them to

live and work, strengthening

relationships.

Networks operate at multiple

scales,from next-door neighbours

supporting one another; to

commuting patterns and business

supply chains, which stretch across

cities and regions. Networks of

human interaction depend on trust

and are the operating system of

social and economic activity.

Planning can be a catalyst for forging

community identityand participation,

but community engagement

must focus on the place itself not

the technicalities of traditionalplanning documents. It must also

communicate clear principles for

development, emphasise high-quality

design and ensure development of

physical and social infrastructure

goes hand in hand, working across

local authority departments (e.g.

housing, transport, education and

healthcare).

Socially productive places buildcommunity capacity to benefit from

growth and increase resilience. Planning

should therefore be conceived of as a

frontline service, which can enhance the

value of other public sector activities and

pro-actively strengthen relationships

between the private sector and civil

society. For more information, see the

forthcoming report available at

www.thersa.org

promotes future sustainability. Connectivitybetween metros is also vital, enabling widerregions to share the benefits of trade acrosslabour and consumer markets. Wheredistances are smaller, for example betweenthe major city-regions of Manchester,Liverpool and Leeds, agglomeration effectscan be intensified by better connectivity.

Speaking in Manchester in June, theChancellor declared: We need a NorthernPowerhouse not one city, but a collectionof northern cities sufficiently close to eachother that combined they can take on theworld.Better connectivity is at the heartof this vision, and its delivery will requiresignificant change within central and localgovernment.

City dominance:

By billion people (% of worldspopulation) will live in cities, up from.bn today; urbanisation is a globaltrend and the uk is experiencing a similarshift in population.

In the last years core cities grew by .%against overall population growth of .%.

Cities with populations between, and million had % of globalpopulation in , but are forecast togenerate % of all global GDP growththrough .

23. Osborne, G. (2014)24. United Nations, Department of Economic and Social Affairs (2011)25. McKinsey Global Institute (2011)

15
http://www.thersa.org/http://www.thersa.org/


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26. United Nations, Department of Economic and Social Affairs (2011)27. Inferences taken from the City Growth Commission City Infrastructure survey

2. WHATS HOLDING

CITY CONNECTIVITY BACK?

History has influenced how we currentlyplan and invest in infrastructure andconnectivity; the role of central- and localgovernment has fluctuated over time. Inthe thcentury the UK was a world leaderin developing municipal water, waste and

transport systems. Throughout the sto s there was significant expansion ofnational infrastructure under state controlincluding motorways and North Sea oil andgas. By the s, the UK emerged as an earlyleader in privatisations across infrastructuretypes signifying a shift to market-drivendecisions on infrastructure.

While this crude account of infrastructurepolicy masks various complexities andnuance, it is clear that the UK has since

moved further along the road of marketprovision, pioneering new forms of privatesector engagement including Public PrivatePartnerships (PPPs) and Private FinanceInitiatives (PFIs) of varying success inthe s, leading to today where a largemajority of investment in infrastructurerelies upon private-sector finance.

The evolution of infrastructure financeand decision making has arguably generatedsome of the issues were faced with today.With so many different combinations ofpublic and private control across differentforms of infrastructure, it is little wonderthat once set within a siloed, highlycentralised system of national government the interdependencies of infrastructureare lost.

In a world where resources are limited andthe demands of urbanisation and populationgrowth are increasing,making the most

out of each time a digger hits the ground

is vital for keeping the UK on the path toprosperity. The need for cities to plan forresilient, connected infrastructure cannotbe overemphasised.

Cities themselves are aware of theimportance of strategic planning to aid

efficient investment and future resilience.

Population growth, climate change and anageing population pose some of the biggestfuture pressures to the resilience of citiesinfrastructure, with extra demand to befelt most strongly on maintaining currentinfrastructure, broadband and transportconnectivity, affordable and private housing,and education and health facilities.

However, cities feel that they are currentlyinhibited from making and delivering these

future plans because of the inflexibility,and lack of, funding and the dominance ofcentral government control. These issues arecompounded by a frequent lack of metro-level power, which works as a disincentiveto investing in the capacity of metro officialsand in collaborating with other cities,regions, the private sector and agencies.

While cities may have detailed visionsof future infrastructure investment, theyare not always able to convene the necessarypartners (public or private) or fundingstreams, let alone realise the benefits ofcollaborating with other cities for thebenefit of the UK as a whole. This is duein part to the fact that most investmentfunding is allocated by central governmentand on the basis of competition ratherthan collaboration. While Local GrowthDeals aim to take a small step away fromsiloed funding arrangements to promote

some collaboration, these too are based


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INFRASTRUCTURE UK

In 2009 the then Labour Government

created Infrastructure UK (IUK).

This new body, now based in HM

Treasury, represented a step towards

greater strategic thinking in nationalinfrastructure policy in the UK. IUK

aimed to bring decision making on

infrastructure investment into one place

in central government, with a view to

develop long-term plans and identify

priorities, improve delivery and bridge

finance gaps. Oversight and scrutiny

were established via an expert advisory

council of Whitehall Department

Permanent Secretaries and external

private sector specialists.

The Coalition Government added political

clout to this arrangement with the

creation of a Cabinet sub-Committee,

the Economic Affairs (Infrastructure)

Sub-Committee, chaired by Danny

Alexander MP the Chief Secretary to

the Treasury. This committee brought

together ministers from relevant central

government departments.

The Coalition Government also

introduced the Top 40 in 2011, a rolling

list of schemes picked by importance

according their potential contribution to

economic growth, national significance,

and their ability to unlock significant

private investment. This list is reviewed

regularly by Cabinet Committeemembers and officials and updated

annually with the publication of the

National Infrastructure Plan.

While the City Growth Commission

does not take a view on which projects

have been given the stamp of Top 40,

it is interesting to consider this centrally-

determined prioritisation exercise. As

a list of individual projects across the

country, the IUK model does not moveus closer to taking full advantage of

the interdependencies of infrastructure.

Arguably, it simply compounds issues

previously experienced in this space,

especially the inherently political nature

of such large-scale public expenditure

with visible local level impact. A balance

is needed between achieving political

buy-in and moving beyond electoral

timetables. The City Growth Commission

argues that metro representation should

be central to systems-based, long-term

decision making in the interest of growth.

17

, , ,


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18

28. Osborne, G. (2014)29. The Core Cities are a self-defining group of the 8 largest cities in England by population size: Bristol, Leeds, Sheffield, Birmingham,

Newcastle, Manchester, Liverpool and Nottingham. The Key Cities are a self-defining group of a further 23 mid-sized English cities.

on single Local Enterprise Partnerships(LEPs) competing for resources, and strongidentities (political and cultural) can makeit difficult to realise joint ambitions. AsGeorge Osborne, the Chancellor, alludedto in his recent speech, cities need to helpthemselves too, working to break these

barriers to take advantage of beneficialcollaboration between metros: The citiesof the north are individually strong, butcollectively not strong enough. The wholeis less than the sum of its parts.

Improving collaboration with other citieswas a popular policy proposal amongstrespondents to the City Growths surveyon infrastructure and fiscal devolution. Thissurvey sought the views of cities, the Core

Cities and Key City groups

, the GreaterLondon Authority (GLA) and LondonCouncils, of which cities responded.

The aim of the survey was to identify themajor issues impacting cities infrastructureinvestment and connectivity, as reportedby cities large and small. The key results areset out below, with finance and investmentapproval processes being major themesthat cut across individual policy areas, such

as transport and digital infrastructure. Notethat some cities acknowledged that theymight also need additional resources tobolster their capability and capacity.

Increased possibility for jointinvestment with public sector and

government agencies at a cross-city/regional level without having to refer tocentral government accountability and

funding would allow for increased risksharing with the private sector and wouldallow for local innovation

Manchester


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CITY GROWTH INFRASTRUCTURE SURVEY

The City Growth Infrastructure Survey

aimed to use the unique opportunity

created by the City Growth Commission

to get direct information from 40 cities

plus the Core and Key City groups,30

the Greater London Authority andLondon Councils, on the main barriers

to developing and delivering city

infrastructure plans and to test policy

solutions on how to overcome these

barriers.

We had 17 responses from Core and

Key Cities across the country31and

a collective response from London

Councils, taking the total to 18

responses. The dominating themefrom the survey was cities desire and

ambition to have greater financial control,

governance and accountability. Cities

saw the current system as holding them

back from delivering their plans for

growth and prosperity for their citizens.

Some of the key findings include:

89% of respondents had an

infrastructure plan; five percent

had plans in development.

Maintenance of current infrastructure

(89%), population growth (83%),

climate change (78%) and an ageing

population (67%) are the key

future pressures on infrastructure

in their cities.

These future changes will lead to

extra demands on infrastructure

cities identified the key areas

as: transport connectivity (56%),

broadband connectivity (72%),

affordable housing (50%), private

housing (44%) education (44%)

and health facilities (44%).

If money were no object, 52% of

cities would prioritise investment

in transport connectivity over

anything else much higher than

education facilities (12%).32

72% of cities tell us that a lack of

funding is the key thing holdingthem back from delivering their city

infrastructure plan. Funding is also

the key thing identified by cities as

greatly inhibiting them from meeting

future demands 94%.

61% of cities thought the current

methodology for measuring costs

and benefits holds them back from

delivering their city infrastructure plan.

Too much government control (50%)and a lack of city-level governance

(39%) could help explain why 39% felt

there are insufficient incentives

to invest.

Cities felt cooperation would increase

if there was a move away from the

current balance of city and central

accountability and funding 39%

thought cooperation would increase

between regions; 39% thoughtcooperation would increase with

other cities; 44% thought cooperation

would increase between agencies

and 33% thought cooperation would

increase with the private sector.

Popular policy changes advocated

by cities included: devolution of

financial instruments to city level

(80%); devolution of accountability

structures (60%); devolution ofplanning system to city level (45%);

improving collaboration with other

cities and private sector (both 55%);

updating the current methodology for

measuring costs and benefits (60%)

and improving capability/capacity of

the city (40%).

30. The Core Cities are a self-defining group of the 8 largest cities in England by population size: Bristol, Leeds, Sheffield, Birmingham,Newcastle, Manchester, Liverpool and Nottingham. The Key Cities are a self-defining group of a further 23 mid-sized English cities.

31. Birmingham, Bristol, Hull & Humber, Kirklees, Leeds, Liverpool, Manchester, Milton Keynes, Newcastle, Nottingham, Peterborough,Plymouth, Portsmouth, Preston, Sheffield, Stoke-on-Trent and Wolverhampton.

32. In most questions, cities were able to pick more than one option. For this question, cities were asked to pick only one out of a listof different types of infrastructure. The option for other was also chosen by 12% of respondents who commented that greeninfrastructure and leisure and health facilities were where they would prioritise investment. 19


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20

33. Although we recognise important areas of infrastructure stretch far beyond these34. See European Commission (2012) and Eddington, R. (2006)35. National Rail enquires via BBC article referencing Osborne, G. (2014)36. Osborne, G. (2014)37. ONeill, J. (2014)38. Royal Town Planning Institute (2014)

3. THREE CONNECTIONS

TO PLACE-BASED GROWTH

This section focuses on three aspects ofinfrastructure policy transport, housingand broadband.During the course ofour inquiry, these areas emerged as key toholistic, place-based city growth and should

be central to the development of city-regional devolution.

Transport connectivityTransport connectivity is vital to realisingthe ambitions for an efficient city systemand a productive system of cities. Withouteffective, integrated transport connectivity,cities limit the size of their labour markets,risk the competitiveness of their businessesin connecting to trading partners, and

undermine the ability of people to accesspublic services and build social capital.The UK currently loses billions of poundsevery year as a result of congestion andpoor connections between cities.UKproductivity and growth is being held back.

Transport connectivity is also criticalin enabling agglomeration effects withinand between places. A good example isManchester and Leeds two cities that are asfar apart as London and Reading, but it takestwice as long to travel between them.ThisCommission has spoken previously about theimportance of connectivity between cities inthe north to capitalise on the agglomerationpotential of the wider region. We thereforewelcome David Higgins, the new chair ofHS Ltd, emphasis on the importance ofPhase of HS and the Chancellors backingof connectivity in driving economic growth

within the Super-city region: step onein building the Northern Powerhouse isa radical transport plan so that travellingbetween cities feels like travelling withinone big city.

Jim ONeill, Chair of the Commission,has previously referred to a future tubesystem for the northand its role drivingeconomic growth. While connectivity to ourglobal capital is vital, northern connectivityis in a dire state.As a counterbalance toLondon and South East, investment in

connectivity between northern cities (via

HS2 Phase 3 or other schemes) should be

prioritised.

More broadly, the Commission supports

Lord Deightons focus on integrationbetween national high speed and local,integrated transport networks as keyopportunities for growth. The challengefor many metros will be to make the mostof these new connections between andwithin their city regions, so enabling themto maximise growth and create jobs.

Critical for delivering this strategic visionof connectivity is getting the governanceright at the metro level, to develop acoherent plan for the long-term whichtakes account of how transport can linkup with other forms of infrastructure andeconomic activity. Without this, project costsand rationale can seem unpalatable whenthought of in isolation, even when theymay well deliver far-reaching and valuablebenefits.The right metro governance allowstransport to be a key part of the wider vision


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HIGH SPEED 2

High Speed 2 (HS2) has been a project

steeped in controversy since its inception

in 2009. The proposed high speed rail

between London, the West Midlands and

possibly, in its earliest consideration,

to Glasgow/Edinburgh, was designedto meet rising demand for passenger

and freight rail services, as well as a way

of cutting journey times.

Plans for Phase 1 of the project

between London and Birmingham

have been largely finalised, after many

years of economic, legal and planning

considerations. Phase 2, from the West

Midlands to Leeds and Manchester, is

less advanced in finalising its route andtimetable, but David Higgins, new chair of

HS2 Ltd, has emphasised the importance

of completing this phase from the

perspective of economic growth. It is

possible that construction of Phase 2

might be brought forward to accelerate

the realisation of these economic

benefits to cities in the north and to

the UK as a whole.

In addition to Phase 2, the Chancellor

recently spoke of the need to improve

East/West connectivity so called HS2

Phase 3 to improve links between

northern cities. This announcement

is a strong signal that agglomeration

economics and the role of multi-modal

connectivity in enhancing productivity,

jobs and growth especially outside

London are increasingly recognisedby central government.

BNS :

5%

2.5BN

, ,

24.5BN,

39. Eddington, R. (2006)40. European Commission (2012)41. European Commission (2012)

21


24/43

22

42. The HS2 Growth Taskforce brings together key leaders of cities/LEPs across the proposed HS2 route. Led by Lord Deighton it aimsto ensure cities and local areas are able to realise the benefits of HS2 through aligning policies and plans and take full advantage of thepotential economic benefits of HS2.

43. Cheshire, P. and Hilber, C. (2007)44. CBI (2013)

for the whole metro, driven by the interestsof economic, environmental and socialproductivity.

Transport for London (TfL) demonstratesthe importance of enabling appropriategovernance structures to take advantageof infrastructure interdependencies. For

example, devolving the former SilverlinkMetro franchise (now London Overground)to TfL and integrating it onto the Tubemap has generated a percent increase inpassengers carried per km between and . The whole London Overgroundnetwork now connects up of Londons boroughs and has particularly benefittedareas of London previously lackingin high-quality connectivity (eg East

London). Greater Manchester has alsomade considerable strides in enablingstrategic investment via its single fund,allowing otherwise fragmented fundingstreams to be pooled and leveraged. Itsoverarching organisation, Transport forGreater Manchester, works closely with the boroughs that comprise the CombinedAuthority.

At a national level, engaging metros earlyin the decision making process should be

considered vital. Early engagement ensuresmetros can influence and buy into projects,enabling citizens to more readily see thedirect impact on, and potential benefitsfor, their city-region. It also allows leadersto prepare for, and maximise the valueof, national schemes. As Lord DeightonsHS Growth Taskforce has underlined,the benefits of national infrastructure aregreatest when they connect and enhancelocal networks.Currently, metros are notpart of the national project feasibility anddecision-making process, limiting the degreeto implementation to serve the best interestsof city growth.

Housing and the built environmentSeveral major UK cities face a hugeundersupply of housing. There are bothsocial and economic consequences of this,

mostly felt in London, the South East andcertain parts of other city-regions (eg Bristol,West Yorkshire). Barriers to home ownershipare driving up wealth inequalities withinand between generations, impacting onindividual wellbeing and social cohesion.Similarly, office space is at a premium in UK

cities, with evidence suggesting that even inmedium-sized cities such as Birmingham, thecost of office space is more than percenthigher than in Manhattan.In certain areas,these issues are impacting on firms locationand investment decisions.

While increasingly part of monetarypolicy considerations, housing and thebuilt environment are commonly missedout of the debate on infrastructure and the

operation of cities as systems. Yet withoutappropriate housing, people cannot beconnected to where they are able to workmost productively; nor are businesses ableto locate where they can most easily takeadvantage of agglomeration economies.The issues are so problematic and stark thatthey cannot be omitted from this report.

In terms of public policy, housing hasfaced a mixed history. Recent governmentattempts to boost demand (eg Help to

Buy equity loan and mortgage guaranteeschemes) are under close scrutiny bypolicy-makers given the impact on priceinflation and risks around leverage that wereexposed in the crisis, and the financialindustry itself is tightening access to funds(eg imposing a cap on borrowing by certainmultiples of household income).

While the market has picked up againsince the recent and protracted crash, thereis no sign that supply has begun to respondto need. The result is that London (andother areas over time) could start to priceout its young talent and start-up businesses,squeezed by unaffordable rents. Governmentintervention is needed to instigate long termsupply side structural change.

There are some innovative examplesof change at the local level. For example,Greater Manchester and Abu Dhabi United


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RANK CITY CONGESTION 2013 CONGESTION 2012

1 Belfast 36% 35%

2 London 34% 32%

3 Edinburgh 34% 34%

4 Bristol 32% 33%

5 Brighton 31% 30%

6 Manchester 26% 26%

7 Leeds-Bradford 26% 29%

8 Sheffield 26% 22%

9 Liverpool 25% 25%

10 Nottingham 25% 23%

11 Leicester 25% 22%

12 Newcastle 23% 23%

13 Birmingham 23% 22%

14 Portsmouth 22% 20%

15 Cardiff 22% 21%

16 Glasgow 22% 22%

17 Southampton 20% 19%

45. TomTom (2014)46. Leach, B. & Malnick, E. (2012)

23

ALL OUR MAJOR METROS EXPERIENCEHIGH CONGESTION45

Note: Percent represents the percent time longer a journey took than if traffic had been free flowing.

, , ,


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24

47. Home Builders Federation submission to the City Growth Commission call for evidence (Jan 2014)48. Government Office for Science (2010)49. Cheshire, P. and Hilber, C. (2007)

Group (ADUG) recently agreed a bn dealto create the Manchester Life DevelopmentCompany which will oversee a -yearproject to create more than , new homesin once rundown parts of Manchester.However, much more needs to be done toenable supply across a mix of housing types

and tenures. In some places, availabilityof land is not necessarily an issue butmetros still need the ability (and sometimesresource) to remediate land for development.

One of the most important issues tobe tackled is the timely delivery of publicservice and transport infrastructure, linkinghomes and offices to labour markets, retailand other economic, social and culturalopportunities. This requires coordinationat the metro level, promoting a holistic,

place-based approach to growth.

:

124,720 ,

.

600700

.

- ,

40% .


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25

BARKING RIVERSIDE

As a 445-acre brownfield site along

the Thames in East London, the Barking

Riverside development is part of the

London Riverside Opportunities Area

and, should it secure final planning

approval, has the potential to provide

nearly 11,000 new homes and 6,000

new jobs.

The site has full planning consent andan initial phase of 1,000 homes has been

a huge success. However, building is

set to halt once a further 200 have been

completed unless the development of

new public transport links is started,

as per a requirement of the original

planning permission.

An extension to London Overground

to Barking Riverside would unlock this

growth, but securing approval from

central government and numerous

other stakeholders has so far failed

to progress. Green lighting the extensionwould permit work to start on 3,000 new

homes and 7,000 more would become

viable once the extension opens.

Photo credit: Transport for London, 2014

25


28/43

CONNECTING CAMBRIDGESHIRE

Some cities have also taken innovative

steps to further enhance national

programmes. Cambridgeshire City

Council has introduced the Connecting

Cambridgeshire programme. This

integrates all work across the city

region relating to digital inclusion andbroadband infrastructure to ensure

their citizens and businesses are

receiving the fastest digital connectivity

possible and have the skills to access

that connectivity and on future-

proofing their city region taking

advantage of the interdependencies

of infrastructure to ensure their city

is prepared for future change and

growth. Programme funding comes

from BDUK, Cambridgeshire and

Peterborough County Councils and

through a contracted partnership

with BT, who were tendered through

a competitive process.

By 2015, 98% of homes and businesses

across the city region can expect to

have access to fibre-based broadband,

estimated to bring an additional 500

million to the local economy within 5

years of completion.

Unfortunately, similar schemes are not

available for larger metros, classified as

urban areas; here State-Aid rules apply

much more restrictively.

Broadband connectivityHuge technological changes over the lastfew decades have transformed the waywe live, work and communicate. Digitalconnectivity is as important as physicalconnectivity in the modern economy, andthe UK has one of the highest rates of

internet use in the world.While urbanconnectivity across the country is farfaster than rural connectivity averagedownload speeds were found to be almostthree times that of rural areas in November broadband variability within urbanareas is a key concern, evidenced recentlyby Ofcom, who found that there are stillsignificant gaps in availability of standard

and super-fast broadband services acrossUK cities.

The key issue raised by cities isthat current provision of broadbandinfrastructure does not match urbanrequirements for high speed, super-fastconnectivity. It seems private suppliers do

not have the incentives to invest in networkand last-mile infrastructure, especially tomeet the demands of small start-ups thatrequire lower-cost, flexible packages ofsuper-fast broadband. Supply is deliveredto the point that it is most profitable in theshort run, rather than in the interests oflong-term city growth. The end result beingthat infrastructure investment is inconsistent

50. Information Geographies at the Oxford Internet Institute51. Ofcom (2013)52. Ofcom (2014). This research tested availability in sample cities across the UK: London, Birmingham, Manchester, Cambridge, Exeter,

Glasgow, Inverness, Cardiff, Bangor, Belfast and Derry-Londonderry.

26
http://geography.oii.ox.ac.uk/?page=internet-population-and-penetrationhttp://geography.oii.ox.ac.uk/?page=internet-population-and-penetration


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CITY

PROPORTION OF

CONNECTIONS WITH SPEEDS

LESS THAN 2MBIT/S

CURRENT AVAILABILITY OF

NGA INFRASTRUCTURE FROM

BT AND/OR VIRGIN MEDIA

2012 2013 2012 2013

UK 10% 8% 65% 73%

London 5% 4% 88% 88%

Birmingham 6% 4% 89% 91%

Manchester 8% 6% 86% 86%

Cambridge 4% 3% 94% 96%

Exeter 7% 6% 90% 90%

Glasgow 8% 6% 63% 67%

Inverness 10% 8% 0% 2%

Cardiff 10% 8% 92% 92%

Bangor 7% 5% 85% 95%

Belfast 5% 4% 97% 98%

Derry-Londonderry 12% 9% 99% 99%

Chicago 98%Hamburg 95%Milan 55%Seoul over 90%Warsaw >95%

Sources:Ofcom (2014).55 NGA stands for next-generation access broadband coverage. In the UK the infrastructure for NGA is from BT and/or Virgin Media.Data for Chicago, Hamburg, Milan, Seoul and Warsaw is only available for NGA coverage in 2013.

and often inadequate. Compounding thisprivate sector issue (heightened due tothe concentration of the market in one ortwo players BT and Virgin), metros arefurther constrained by European State-Aidrules, which prohibit public investment ininfrastructure where private sector investment

already exists or is planned to exist.National government policies have

been put in place to try and alleviate theseissues across rural and urban areas. Forexample, the creation of Broadband DeliveryUK (BDUK)aims to tackle poor ruralconnectivity and the SuperConnectedcitiesprogramme has distributed m across cities as part of the governments m

investment in digital infrastructure acrossthe country. This programme includes thecreation of connection vouchers, which helpalleviate the costs of connections to super-fast broadband for small companies.

While European State-Aid rules aredesigned to ensure public investment does

not carry deadweight and does not interferein the operation of efficient markets, thedefinition of existing infrastructure andhow adequate that infrastructure is for thest century, limits the freedom of metros tohelp enhance the quality of supply above andbeyond that provided by private firms, in theinterest of economic and social productivity.

53. https://www.gov.uk/broadband -delivery-uk54. Department for Culture, Media and Sport (2012)55. Ofcom (2014)

27
https://www.gov.uk/broadbandhttps://www.gov.uk/broadband


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56. Osborne, G. (2014)

4. HOW CONNECTIVITY

CAN ENGINEER FUTURE

GROWTH

In delivering effective infrastructure for trulyconnected cities, we need:. Vision: The UK needs a strategic

investment framework to inform local andnational-level decision-making, cuttingacross the siloes of transport, housingor other areas to set a vision based onthe interests of GVA and connectivity. Indeciding what infrastructure investmentwe should pursue as a country or as cities,we need to start from the premise of whatdoes this place need? and then devisea long-term strategy detailing pace ofdelivery based on affordability.

. Holistic, metro-wide growth: Industrialstrategies and national-level infrastructureplans need to be considered from theperspective of specific, metro-leveleconomic geographies. Infrastructureacross sectors (eg rail, highways and digital)and its economic, social and environmentalimpact are inherently interlinked. Decision-making and finance for infrastructure needtherefore to be administered in the roundat city-level, to ensure the right prioritiesand sequencing of delivery to maximiseeconomic and social productivity.

. Innovative finance: Transformativeprojects with major direct public andprivate investment can bring aboutpositive, additional economic benefitsat a local level. However, at the nationallevel, these benefits are too frequentlydismissed as mere displacement activity,an interpretation that severely limits

infrastructure investment and serves asa self-fulfilling prophecy when placesare then constrained from, and even

disincentivised against, enabling growth.Earn Back and Gain Share schemes aretwo examples of early pilots where cities

will retain some of the upside fromthe growth they create from additionaleconomic activity. These schemes should bedeveloped further with significant transferof risk to those metros able to shoulder it.

. Coordination and forward thinking: Deliveryof major infrastructure investmentprojects can be disruptive and costly, whenpoorly timed or sequenced. For example,building works for the Northern Hub willbe followed, after some delay, by Phase

of HS, and ultimately, the next phaseof the Northern Super City network,operations that could otherwise have beencoordinated through long-term planningand metro-centred decision-making.Planning over long-term investmentperiods enables lower cost delivery of newhomes, retail and commercial sites basedaround existing transport capacity. France,for example, was able to build extra highspeed rail connections with relative ease,because it thought ahead to build stationsit knew it would one day need.

. Better appraisal of transport investment:The Green Book is an adequate wayof determining the business case forindividual projects, but a holisticinvestment strategy needs to determinehow to prioritise schemes across the metrolevel. Taking a GVA and labour-marketperspective, the question becomes not

whether projects can be justified in and ofthemselves, but how to prioritise projectsto maximise growth and job creation.


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29

5. RECOMMENDATIONS

Government policies and fundingarrangements are fragmented andinconsistent and in combination, they

tend to inhibit growth rather thanfacilitate itMilton Keynes

The following recommendations set outhow the next government could deliverthe above, creating a viable system ofUK connectivity and enabling moresustainable, productive economic growthover the long term.1. Develop a stronger, metro-focused

Infrastructure UK2. Create a fairer and more flexible funding

system

3. Introduce a flexible and innovative

planning system

4. Follow a measurement system that

accurately reflects the costs and benefits

of infrastructure investment

5. Enable metros to rise to the challenge

. A stronger, metro-focused InfrastructureUK (IUK)

The longevity of IUK, created under theprevious government and evolved underthe current administration, demonstrateshow far the UK has moved in the rightdirection to prioritise national strategicinfrastructure investment. However,despite best intentions, IUK is stillsubject to short-term national political

timetables and ministerial demands which

can disincentivise long-term strategicdecision making.

This system has led many to call for

independence on infrastructure decisions,including the most recent Armitt Reviewof Infrastructure.An independent bodyis an attractive policy option, but giventhe ever emerging demand for moreand higher quality infrastructure, thelimited resources including finance andskills available to deliver competingprojects and the level of local impact,infrastructure investment decisions areinherently political.

To ensure the best possible result forcity-level and UK wide growth, metrosshould be actively engaged in nationaldecision-making early on, particularlyregarding projects that have a significantlocal impact (eg airports).It also ensurescitizens and businesses can understandthe merits and costs of proposals andhow their metro will benefit; gettingbuy-in early can help to smooth the wayfor making difficult choices at local andnational level.

Metros need to set the high-levelstrategic objectives that can ensure greaterconnectivity between and within them, forthe benefit of the UK as a whole. For thatwe recommend:

Metros should be allowed to functionas place-based systems metrosshould be able to control theirown destiny; to plan, develop and

deliver their infrastructure strategies57. Armitt, Sir, J. (2013)58. Recent NAO work demonstrated that in a world of greater devolution, better communication between local and national is needed to

avoid the high risk of waste and optimism bias that can result in thefailure of programmes.NAO (2013)
http://www.armittreview.org/http://www.armittreview.org/


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30

59. Announced and given statutory backing by the Government in 2012 provides financial guarantees from government for plannedinfrastructure projects whilst private sector investors are sought.

60. The Green Investment Bank was set up to acknowledge the significant risk of a gap emerging in the provision of equity capital tosupport the large scale investment in infrastructure needed in the low-carbon sector. It operates on a commercial basis backed by publicand private financing.

61. The first of its kind in the UK, the PIP was the result of a Memorandum of Understanding between Government and UK pension funds

to develop a facility to help UK pension funds invest more in infrastructure assets.62. The most recent assessment showed 19 percent (73 bn) of investment in the infrastructure pipeline will be publicly funded, 17 percent(63 bn) represents a mix of public and private funding and 64 percent (240bn) is purely privately funded (not all of this is secured) -HM Treasury (2014)

63. Inderst, G.& Della Croce, R. (2013).

where decisions impact within theirboundaries. This requires transfers ofpowers, accountability and risks downto metro-level for those sufficiently ableto shoulder this;

Metros should collaborate at regionallevel to ensure efficient, effective

connectivity across metro-boundaries,metros should collaborate at regional-level, working with other city-regionsand county authorities;

Metro-level representation on IUKmetros should have the autonomy toassert their voice in national decision-making, programme delivery andnetwork management via metro-leaderrepresentation on the IUK Advisory

Council (eg replacing DepartmentalPermanent Secretaries). They wouldsit alongside external experts fromplanning, development, design andengineering, as in the current Council,to ensure decisions are taken in light ofkey information from leading sectors.Metros would be required to worktogether at the national-level to ensuredecisions are fully informed of currentand future infrastructure needs and

existing delivery plans to create a moreefficient connected system of cities; Stronger metro representation in

national infrastructure decision-makingover the long-term, this principlecould then be applied to other areasof national government policy, wheremetro leaders assert greater influenceover national policy decisions,alongside governing further devolutionto their own metros.

This isnt going to be easy. We donot wish to advocate another bureaucraticlayer of government that becomesunwieldy and ineffective. To avoid

an unwieldy council, metro representationwould have to come from the largestmetros in terms of population andeconomic might, rather than every metroacross the UK. This would mean metroswould need to collaborate with smallercities in their vicinity but also with other

metros represented in IUK to ensure moreeffective strategic planning for the UKas a whole.

The newly modelled IUK will requirean increase in strength. Formal andinformal networks will need to be createdacross Whitehall to ensure that the long-term, strategic decisions are adhered to bydepartments.

. A fairer and more flexible funding andfinance system

We recognise the steps IUK has taken todevelop a range of flexible and innovativefunding and finance systems to ensurea strong pipeline of investment forfuture infrastructure plans with theintroduction of UK Guarantees (),the Green Investment Bank ()andthe Pensions Infrastructure Platform (PIP)().However, while these recentsteps demonstrate flexibilities at the

national level,metros have been severelyconstrained in their ability to respondto the needs and opportunities of theirplaces in the interest of holistic, metro-wide connectivity and growth.

Evidence of what works well abroadcan show us how to improve investmentcertainty in the UK over the long-term.For example, Australia and Canadahave two of the most innovative financesystems in the world, using a flexiblearray of models to suit differentinfrastructure needs at local, regionaland national levels.

Throughout the course of the CityGrowth Commissions inquiry, we have


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64. User-pays models eg capital recycling, leverage the value of existing assets to increase the capacity to invest65. Adams, D., & Watkins, C. (2014)66. Savills (2013)

heard from cities that the level andinflexibility of (often siloed) fundingstreams is the key barrier keepingthem back from delivering their cityinfrastructure plans and securinglong-term finance. In our next report,the Commission will argue for a broad

devolution of revenue-raising powers andsubstantial risk transfer to those metrosable to shoulder it.

Uncertainty around quantity and timingof funding availability restricts the extentwe are able to meet future infrastructuredemands

Stoke-on-Trent

With regards to infrastructure andconnectivity, we argue here that metrosshould be responsible for approving andsecuring finance to develop schemeswithin their boundaries, drawing onprivate expertise and finance to createinvestable joint-vehicles to secureinvestment and expertise. This meansthat metros should be free should theydetermine it in the best interest of theirplace to:

Develop effective forms of Tax IncrementFinancing (TIF) based on reinvesting aproportion of an areas future businessrates back into infrastructure andrelated development. Although notsuitable for all schemes, it is a firststep towards allowing metros to havegreater financial autonomy to invest inlocal infrastructure plans;

Develop models similar to Earn Backand Gain Share suitable for the citybased on TIF but extended beyondbusiness rates to the wider tax base.These models are not suitable for allcities, but those that demonstrate thecapability to manage the financial riskscould be given greater flexibilities toinvest for growth;

Apply a range of user pays64and levy-based models at the metro level, whereappropriate.

. A more flexible and innovative planningsystem

The planning system needs tobe reconnected with delivery andcommerciality

Wolverhampton

Planning is a critical supply-side driverof growth and it can shape markets toa considerable degree.While long-termcertainty is vital, the planning systemneeds to be flexible enough to allowmarkets to grow and innovation toflourish. It also needs to encourage long-term resilience in infrastructure networksand the built environment, helping to

reduce future costs.Since March , local authoritiesin England with responsibility forplanning have followed the NationalPlanning Policy Framework (NPPF),which was introduced to consolidate andstreamline existing guidelines and therebyimprove the efficiency of the planningprocess. House builders and policyexperts have spoken positively about theNPPF to the City Growth Commission,

and it has been found to have made anearly and successful impact on grantingpermissions.

However, to support more efficientcity systems, planning responsibilityneeds to be set at the right scale toensure strategic (and sometimes difficult)decisions are taken in line with thepromotion of economic growth. Localauthority responsibility is not the rightscale for making many of these decisions,especially those with wider economicimpact. Crucially, local politics andparochialism make it difficult to pursuestrategic and long-term objectives in theinterests of the city-region. To enableeffective connectivity planning, metrosshould take on planning authoritypowers, aggregating up decision-makingto complement strategic investment acrossthe city-region. For example, metros


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67. Norton-Taylor, R., (1982) and Home, R. (2009)68. Wider economic benefits including agglomeration impacts, competition impacts and connectivity improvements, which capture the

effects of investment on supply, competition and labour.

should have the power to convene relevantagencies and make planning decisionsacross all modes of transport: from trafficorders on local roads, to building a newrailway, or closing a pathway to enablemajor developments to go ahead.In addition, they should be free to:

Designate housing zonesacross metros,incorporated into NeighbourhoodPlans to enable communityengagement in strategies for meetinghousing needs across metro areas;

Make greater use of CompulsoryPurchase Order (CPO) powers, anestimated , individuals ownabout two-thirds of UK land,whichcan restrict land supply. Greater use

of compulsory purchase powers bymetros could help work against this; Create an open register of public sector

land at metro-level (aggregated atnational-level), enabling metros toleverage these assets flexibly, helpingalso to improve transparency of theland market; and,

Reclassify poor quality Green Belt andpromote Green Belt swaps, whereapplicable, engaging with local people

to create buy-in for more flexiblearrangements for enhancing economic,social and environmental value.

The planning system is not fit forpurpose; the delivery mechanism caninhibit councils

Newcastle

In addition, we recommend Governmentreview the insufficiency of fibreconnectivity in key parts of cities(especially final connections to businessesand households), in light of what seemsto be insufficient competition in thehigh-speed broadband market. TheGovernments review would considerwhy this is the case and how it mightbe resolved. In particular:

Thenational interest case for having fullyfibred systemsin dense urban areas;

Whether open access matters and if sowhat would be needed to drive real price

and service competition and innovationinto the fibre/ducting level;

Whether the structure and regulationof the market are holding back thedevelopment of the above; and,

Theimpact of the current state aid rulesand how options for addressing them.

. Follow a measurement system thataccurately reflects the benefits of

infrastructure investment

Robust analysis and appraisal areneeded to underpin political decisions inallocating infrastructure investment atboth the metro and national-level.

The Treasury Green Book providesa trusted and authoritative source ofappraisal guidance for assessing therelative merit of investment in differentinfrastructure projects. It is used by manyacross and within local and nationalgovernment, by academics and externalconsultancies. However, cities tell usthat the current methodology is holdingthem back from delivering on their futureinfrastructure ambitions, largely as a

result of the application of that guidanceby central government departments ingranting project approval.

The Green Book advocates use ofits Cost Benefit Analysis (CBA) toolfor demonstrating the economic andfinancial case for investment alongsideother information and evidence as partof the five business case model. However,its application by many governmentdepartments is often the only methodused to judge the relative case forinvestment in projects. This means the fullsuite of potential economic benefits arenot routinely taken into account:

Metros contribution to economicgrowth although wider economicimpactsare taken into account inGreen Book appraisal, these are largelylimited to estimated productivitygains rather than the potential


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EUSTON AREA REGENERATION PROJECT

Developed by the London Borough

of Camden and the GLA, the Euston

regeneration project aims to take

advantage of the benefits afforded by

the HS2 station at Euston. There is little

brown-field land for redevelopment inthe area, so maximising floor space

within the station is vital for creating

additional jobs, homes and GVA.

Economic plans from the Borough and

GLA for a Euston Area Economic Vision,

based on an alternative station design,

estimate up to 13,500 additional jobs

and GVA of over 950m per annum. This

compares to the estimates for 7,000 jobs

and 270m GVA per annum based on the

current HS2 Euston station design.69

Designing major infrastructure projects,

such as HS2, without due considerationof place, and the wider potential

economic benefits that those places

might generate, means the proposal is

not always the best possible option for

regeneration. The Higgins Review has

highlighted the issue and called for a

change in station design to unlock these

potential extra benefits,70but recognition

of place is too rare at present.

JUBILEE LINE EXTENSION

Initial appraisal of the Jubilee Line

Extension estimated the BCR to be less

than 1 (0.95:1), which would typically

deem the project unviable. However,

a political decision was taken on the

grounds the extension was vital for the

Docklands regeneration project andshould go ahead despite the low BCR.

Later, an updated methodology was

used to complete a CBA appraisal ex-

post CBA, which gave a BCR of 1.75:1.

Inclusion of non-transport economic

benefits, such as additional land value

uplift took the BCR closer to 2.75:1

indicating strong, positive economicviability.71

69. Atkins (2014)70. Higgins, D. (2014)71. Estimated total property value increase around Southwark and Canary Wharf Stations is over 2.1 billion, which is solely attributable to

the impact of the Jubilee Line Extension. Banister, D. (2007)


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growth opportunities afforded frominvestment in metros (eg land valueuplift). Moreover, they are often onlyappraised as a sensitivity test anafterthought, rather than a primarybenefit of a scheme. When appraisal isthe main element of decision-making,

this approach could undermine thelevel and nature of investment.

Interdependencies of infrastructurewhile much has been done to improveappraisal so that it is viewed withina wi

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