English devolution can deliver inclusive growth

Devolution in England is happening, and this May we’ll see the election of new city-wide Mayors in Merseyside, Greater Manchester and West Midlands. The same deal is currently on the table for other cities and regions across England, including the West of England and Teesside. Devolution has been seen as a way to grow economies from the grassroots up. But how do we know that this growth won’t pass people and places by, and that it will instead benefit everyone?

In recent decades there has been an assumption that people in towns and cities up and down the country would feel the warm glow of London’s economic growth. But the reality couldn’t have been more different. Instead, we have seen London expand economically at a much faster rate than other UK cities, while some towns outside the South East have often struggled to keep pace with the changing world around them.

Most of the UK hasn’t benefited much at all. In Greater Manchester, one in four children live in poverty and over 500,000 people are officially classed as deprived. In my own constituency of Oldham West and Royton there are still far too many children living in poverty, with families desperately trying to make ends meet. A rising tide really hasn’t lifted all boats. So, how can we avoid repeating the mistakes of the past? How can we ensure that economic growth and better outcomes for people on low incomes go hand-in-hand?

The answer could lie in the concept of ‘inclusive growth’. Put simply, inclusive growth means economic growth that is felt by everyone across society, with the dividends – both financial and non-monetary – distributed fairly among them all. 

But why do we need inclusive growth? Poverty can have a disastrously negative effect on economic growth. Research shows that people living in poverty are less motivated to invest in their own education and employment prospects. Poverty also drains the public purse. Through every out of work claimant that moves into employment on the government’s so-called Living Wage, the Treasury gains £6,900. And regardless of the financial arguments, including everyone in growth is just the right thing to do. Recent political events on both sides of the Atlantic have brought into sharp focus the political and social consequences of leaving large numbers of people cut adrift from rising prosperity.

Devolution in England holds the potential to realise inclusive growth. In theory, the creation of Combined Authorities across city regions, with their own elected mayors, allows for towns to share in the economic growth of our cities, which have a pivotal role to play in promoting growth in their region.

So, how can this work in practice? Research from the Joseph Rowntree Foundation (JRF) shows that for successful inclusive growth you need to connect people to the opportunities that exist in the labour market. City regions have a huge role to play here in providing better transport, education and employment support.

Cities must promote a strategy for inclusive growth which looks to boost employers’ demand for skills, remoulds the occupational make-up of the economy and improves the pay and conditions of workers.

JRF offer some practical steps for city regions to realise these aims. Firstly, for inclusive growth to work there needs to be a coming together of policy and delivery. This means treating social inclusion and growth as the same thing, rather than different spheres of policy dealt with under different teams and strategies. Combined Authorities will be pivotal to redefining ways of working on this front.

Secondly, Combined Authorities must act as the linchpin in bringing together private, public and voluntary sectors organisations with a willingness to invest in inclusive growth. This means raising job quality, employees’ skills, wages and the capacity of small business to contribute to inclusive growth. 

Thirdly, and most importantly, there must be a shared investment in inclusive growth. We need to utilise the insights and experiences of local people to shape an agenda that meets their needs. The RSA are currently developing proposals for how citizen engagement can be realised as part of inclusive growth, and I look forward to seeing their findings.  

Finally, to take JRF’s recommendations a step further, I think it’s important to move away from just assessing growth in local areas. We need to be looking at what social value has been added by growth. Capturing this will be key to guiding future investment which benefits all. Instead of implementing ‘quick wins’, we can start to see long term planning that is felt now and across future generations.

Cities and towns are already doing a huge amount to foster growth that benefits all local residents. And I’m not saying that inclusive growth stops at large towns and cities, represented by a new city mayor. But as devolution ratchets up, city mayors have a golden opportunity to drive this agenda: one that inspires a vision for inclusive growth based on raised ambitions, increased resources and collaboration. A vision in which everyone can share in the economic prosperity our cities generate. 

Jim McMahon OBE MP is Shadow Minister for Local Government and Devolution