Cities Limited

Cities limited

Tim Leunig and James Swaffield

edited by Oliver Marc HartwichC

ities limited

T

im Leunig

and Jam

es Sw

affieldP

olicy E

xchange

£10.00

ISBN: 978-1-906097-09-7

Policy ExchangeClutha House

10 Storey’s GateLondon SW1P 3AY

www.policyexchange.org.uk

Britain has been an almost uniquely urban nation for twohundred and fifty years. Great cities such as Manchester andLiverpool defined a rich and confident nineteenth century Britainto the world. Yet the last fifty years have seen some of our oncegreat cities struggle. Governments have recognised this, andurban policy has been a feature of all administrations for morethan a generation.

Cities limited sets out some of the policy approaches that havebeen used and, more importantly, asks the critical question:have urban regeneration schemes regenerated urban areas? Toanswer this question we do not look in detail at particularpolicies, but instead look at the changing fortunes of eighteentowns that have been the focus of urban regeneration policiesover the last ten years. We look at gross value added, the localequivalent of national income, at personal incomes, and atunemployment. We look at whether people want to live in theseareas, as measured by migration and house prices.

The picture proves to be a bleak one. Far from catching up, mostmeasures show that the majority of these cities are slippingbehind both the national average and more successful cities.Urban regeneration has not worked, and the prospects forpeople living in these towns have been far from transformed.

Think Tank of the Year 2006/2007

px urban cover1-HDS.qxp 16/10/07 20:35 Page 1

Cities limited


edited by Oliver Marc Hartwich

Policy Exchange is an independent think tank whose mission is to develop and promote new policy ideas which willfoster a free society based on strong communities, personal freedom, limited government, national self-confidence andan enterprise culture. Registered charity no: 1096300.

Policy Exchange is committed to an evidence-based approach to policy development. We work in partnership with aca-demics and other experts and commission major studies involving thorough empirical research of alternative policy out-comes. We believe that the policy experience of other countries offers important lessons for government in the UK. Wealso believe that government has much to learn from business and the voluntary sector.

Trustees

Charles Moore (Chairman of the Board), Theodore Agnew, Richard Briance, Camilla Cavendish, Richard Ehrman, Robin Edwards, Virginia Fraser, Lizzie Noel, George Robinson, Tim Steel, Alice Thomson, Rachel Whetstone.

About the authors

Dr Tim Leunig is lecturer in economichistory at the London School ofEconomics. His research looks at Britainsince 1870, including a number of papersthat look at different aspects of city lifeover the ages. His work has won a numberof international awards, and was recentlyjudged to be “outstanding” by theEconomic and Social Research Council.He has advised Parliament, the Treasuryand the Department for Transport.

James Swaffield is a Research Fellow atPolicy Exchange carrying out research oncities and urban policy. He studiedGeography at Oxford University. Aftergraduating in 2004 he spent a brief periodworking in the public sector before com-pleting an MSc in Cities, Space, andSociety at the London School ofEconomics in September 2006.

Dr Oliver Marc Hartwich is ChiefEconomist at Policy Exchange withresponsibility for economic competitive-ness. He was born in 1975 and studiedBusiness Administration and Economics atBochum University (Germany). Aftergraduating with a Master’s Degree, hecompleted a PhD in Law at the universitiesof Bochum and Sydney (Australia) whileworking as a Researcher at the Institute ofCommercial Law of Bonn University(Germany). Having published his award-winning thesis with Herbert Utz Verlag(Munich) in March 2004, he moved toLondon to support Lord MatthewOakeshott of Seagrove Bay during theprocess of the Pensions Bill.

2

© Policy Exchange 2007

Published byPolicy Exchange, Clutha House, 10 Storey’s Gate, London SW1P 3AYwww.policyexchange.org.uk

ISBN: 978-1-906097-09-7

Printed by Heron, Dawson and SawyerDesigned by John Schwartz, [email protected]

Contents

Acknowledgements 4Foreword by Paul Cheshire 5Executive Summary 7Introduction 9

1 The role of cities 102 History of British urbanisation 143 A history of urban policy 184 Urban regeneration since 1997 275 Evaluating urban policy 356 Discussion 457 Conclusions 48

Bibliography 50

www.policyexchange.org.uk • 3

Acknowledgements

Policy Exchange would like to thank PhilHulme and The Hadley Trust for theirfinancial support. The authors thank PaulCheshire, James O’Shaughnessy, PeterScott and Tony Travers for comments, andDanny Dorling and Ben Wheeler of theJoseph Rowntree Foundation/Universityof Sheffield team for kindly allowing us touse their data. Ivan Constantino and SarahLester proved to be exceptionally talentedresearchers on this project. Finally, wethank Oliver Marc Hartwich for clear andinsightful editorial guidance and PhilippaIngram for proof reading: this paper wasimproved no end by their efforts.

4

Foreword

by Paul CheshireProfessor of Economic Geography,

London School of Economics

and Political Science

This paper is an entertainingly written butscholarly assessment of the efficacy ofBritish urban policies, woven into anaccount and diagnosis of why our cities areas they are and in the state that they are in.It is to be greatly welcomed: I look forwardto reading its two successors, surveyingexperience of urban development and pol-icy abroad and then drawing lessons as towhat policies might be successful.

It is particularly useful because we havebeen so ill served by urban analysis overthe recent past. At least since the InnerArea Studies of the mid 1970s the field hasbeen dominated by people who think pri-marily not in analytical but in physicalterms – architects, engineers and planners;or who have utopian visions of how citiesshould be. The present authors seem, ifanything, too generous in their assessmentof the roots of Britain’s urban policies.While it is fair to judge early regional pol-icy in the intellectual context ofKeynesianism and the positive experienceof state direction in World War II, morerecent policy has neither taken note ofdevelopments first in urban economicsand more recently in spatial economics;nor has it been inclined to evaluate – ifnecessary collect – relevant evidence.There were plenty of expert voices about,even in the late 1970s, who were warningthat small scale neighbourhood interven-tions were doomed because they failed totake account of how urban labour andhousing markets worked; or thatEnterprise Zones would prove no moresuccessful than ‘Special Area’ policies; orthat densification ignored the structure ofdemand and the welfare of individuals and

would inevitably lead to both rising realhouse prices and increased housing marketvolatility.

The authors of this paper, however,manage to put Britain’s urban problemsinto a skilful and informed account of 400years of economic history which bothinforms and helps understand the sourceof such problems and why so much policyeffort has been misdirected; and they man-age, in a few pages with a simple method-ology, to demonstrate (not beyond doubtbut on the balance of probability) thatrecent urban policy has had no real impact.It is possible that things in the problemcities would have been even worse withoutpolicy but their evidence strongly suggestspolicies have been mainly trying to pushwater uphill.

There are, however, encouraging signsout there. The successor department to theDETR/ODPM has an Analytical Divisionand is taking the analysis of the sources ofspatial problems seriously. There is no hopefor useful policies unless there is first a seri-ous effort to diagnosis causes based on aclear understanding of what cities con-tribute and how they work. There is, equal-ly, in a system of government which is spa-tially representative, an inevitable tendencyto overvalue apparent spatial equity. TheAmericans talk about ‘pork barrel politics’.We like to dignify it with a nicer name but


“ There are hopeful signs, however, and this paper is

not just one of the signs but a source of hope”

we still end up building Humber bridgesand subsidising cultural follies in decliningeconomies. And unlike the Americans oursocial housing and land use planning systemeffectively nail people in place and the poor-er they are, the more firmly are they nailed.

Nor is it clear that policy makers havefully absorbed the lessons of the failedattempts to direct industry in the 1950sand 1960s. Successful employers wantingto expand in prosperous places may nolonger have to apply for an IndustrialDevelopment Certificate; but they do haveto apply for planning permission and that– as the experience of Vodafone or theWellcome Trust Genome Campus testifies– is much harder to get in prosperous

places than it is in declining ones. Evenmore alarming is that while one cannot seethe present government ignoring agglom-eration economies and forcing, say, RollsRoyce to relocate to Sunderland that is nottrue with organisations within governmentcontrol. Why should it not be just as eco-nomically damaging to force the BBC togo to Manchester and forego, perhapsundermine, the obvious media industryagglomeration economies in London? Orforce the ONS to go to South Wales andrupture its links with its highly skilled staff,its service suppliers and its customers?

There are hopeful signs, however, andthis paper is not just one of the signs but asource of hope.

Cities limited

6

Executive Summary

As the first nation to make the transitionfrom being overwhelmingly rural to over-whelmingly urban, Britain has a uniqueurban history. The location and to a largeextent the size of our cities were deter-mined by the Industrial Revolution andour 19th-century heyday as the workshopof the world. Liverpool is where it is, andthe size it is, because of ship-based tradewith the Americas. Our towns and citiesare disproportionately based in coal pro-ducing areas, because these had the greatestnatural advantages at the time.

In the 20th century, with the rise of theservice sector, road and air transport grewat the expense of rail and coastal shipping;being located close to the motorway net-work that runs down the spine of thecountry has the advantage now. AndBritain’s economic centre of gravity movedSouth as economic ties with Europe grewstronger; Heathrow, not Liverpool, is ourmost important port.

Deindustrialisation hit many industrialcities hard, particularly in the North. Sincethe war governments have tried a variety ofpolicies to persuade and cajole firms tomove to areas such as Merseyside.Beginning in late 1940s, firms wanting toexpand in areas of low unemploymentrequired permission to do so. In the early1960s over 20 per cent of applicationsfrom firms wanting to expand in the SouthEast were refused.

Such draconian policies were accompa-nied by grants to firms that opened newfactories or expanded existing ones indepressed areas, usually ones in which aprevious industry was in unavoidabledecline. The use of grants was matched bytax breaks in the 1980s, a decade that alsosaw the Conservative Governmentbypass local councils, which it consid-ered inimical to private sector redevelop-ment.

The Labour Government elected in1997 was committed to urban renewal.But however well-intentioned, the sheernumber of initiatives it introduced has ledto great complexity. Lord Rooker, theregeneration minister, himself describedpolicy as “a bowl of spaghetti”. Someaspects, such as grants to firms, represent-ed continuity with the past, while others,such as the New Deal for Communitiesthat concentrated on boosting small, well-defined pockets of poverty, were quitenew.

This paper does not assess any one par-ticular policy, but poses the most basicquestion: has urban policy, in any shape orform, managed to turn around the for-tunes of our declining cities?

We answer it by studying 18 towns andcities that have been recipients of signifi-cant urban policy intervention, particular-ly in the past ten years. Our group includeslarge cities such as Sheffield, as well assmaller towns such as Hastings andBlackburn, Stoke and Bradford; it covers abroad swathe of Britain, from MerthyrTydfil in the West to Hull in the East, fromGlasgow in the North to Southampton inthe South.

We compare the performance of each ofthese towns or cities on a range of outcomemeasures: gross value added – the equiva-lent of national income at local level; levelsof personal incomes and whether peoplehave got richer over time; and levels ofunemployment. And we look at whetherpeople want to live in these areas: are they


“ Has urban policy, in any shape or form, managed

to turn around the fortunes of our declining cities?”

moving in or out and are house pricesmoving up or down?

In no case do we look at the absolutevalues. Incomes have risen across Britain inthe past ten years, as they have done inevery decade since the start of theIndustrial Revolution. Instead we judgethe success of urban policy by two yard-sticks: how does the performance of theseareas compare with that of the nation as awhole? And how does that performancecompare with a sample of successful towns,such as Edinburgh, Bristol or MiltonKeynes?

The picture is gloomy. Relative to thenational average and the performance ofour group of successful towns, our set of“urban policy towns” performed poorly.The single most important indicator isGross Value Added (GVA), which meas-ures the ability of an area to generatewealth. On this measure the shortfallbetween our urban regeneration sampleand the national average has doubled since1997, from a gap of 7 per cent to one of 14per cent. In contrast our sample of success-ful towns has increased its lead, from 29per cent to 46 per cent above the nationalaverage. Successful towns are becomingmore successful, poorer towns are beingless successful.

We find the same picture for personalincomes: rich towns have become richer,poor towns have become poorer.Although unemployment has fallenacross the UK as a whole, your chancesof being unemployed today are 40 percent higher in our sample of strugglingtowns – the same situation which existed

in 1997. The status quo has been rein-forced, not removed, in the last 10 yearsin these cities.

The result is inevitable: people want toleave our sample of urban policy towns.While house prices have gone up every-where in Britain, they have gone up less inthese towns than across Britain as a whole,and significantly less than in our successfultowns. Between 1994 and 2005, the peri-od for which we have data, the averagehouse in our urban policy sample has risenin value by £82,000, whereas the averageprice rise for our sample of successfultowns is £125,000, that is to say: houseprices rises have been over 50 per centgreater in one group than the other. It hasnever been harder to leave a strugglingtown than it is today. Yet despite that, theirpopulation is falling, as some people man-age to break away, in search of the betteropportunities that they rightly realise existelsewhere.

Across all of our indicators, citieswhich have received significant urbanpolicy intervention and funding, notonly failed to converge with other UKcities, but they slipped farther behind.In this respect our findings bear outthose of many other authors who haverecently drawn attention to this issue.The relative gap in living standardsbetween the nation as a whole and peo-ple living in these towns is growing. Weconclude that the prospects for those liv-ing in areas that have received significantlevels of assistance from urban policyprogrammes have not been transformedin the last decade.

Cities limited

8

Introduction

This paper is the first of a series of three. Itdescribes the legacy of Britain's early indus-trialisation and summarises the urban poli-cies of successive governments since 1945. Itsets out to establish the facts and shows thaturban policy has failed to improve theprospects of declining towns. The secondpaper will look at experience in Europe,Asia and North America and discuss whatcan be learnt from their successes and fail-ures. In the third paper we will set out ourrecommendations. These will be compre-hensive and radical, offering a new visionfor people living in cities that are underper-forming. Needless to say there are no easysolutions, and all of the policies that we pro-pose will have disadvantages. But we believethat continuing as we are now, repeating themistakes that we have made before andwatching many towns and cities slowlydeteriorate, is the worse outcome. Let usinstead try policies that work.


1The role of cities

Cities as symbols of successSuccessful cities have always been symbolsof successful nations. The classical civilisa-tions of Greece and Rome were, by con-temporary standards, remarkably urbanised.Rome, at its peak, had more than a millionresidents. Nor is this phenomenon partic-ularly European: we think of Alexandriaand Carthage in Africa, Antioch and Ur inAngkor Wat and Varnasi in South Asia,and Manchu Picchu, Caral and Cusco inLatin America. Advanced societies havealways been characterised by great cities.These were places of effective and wide-ranging government, merchants and trade,learning and scholarship.1

As Europe went into decline in the post-Roman era, its cities declined as well.Rome became a shadow of its former selfand many of the towns that the Romanshad built across Europe all but disap-peared. For many years, historians referredto this era, when civilisation appeared togo into retreat, as the Dark Ages.

As the world entered the modern era,cities began to resume their importance.The Italian city states and the HanseaticLeague in Germany are the best knownexamples. Unsurprisingly, there was also astrong link between city development andeconomic growth. The most advanced

nation was always the most urbanised: theDutch in 1600, the British by 1800.2

Others followed in Britain’s footsteps,making the transition from rural agricul-tural economies to urban industrial and,later, urban service-based economies. Inthe 20th century cities such as New Yorkheld iconic status as symbols of economicprosperity, a magnet for many within theUnited States and around the world. TheStatue of Liberty’s implicit promise to theworld’s "huddled masses, yearning to befree" is the more meaningful because itstands at the entrance to a great city.

Today the world is looking east, and inShanghai we have a symbol of the newChina: urban, affluent and taking greatleaps forward. There is nothing new inwhat we see there: Shanghai today is simi-lar to Tokyo a generation ago, New York acentury ago and Rome two millenniumsago: proof that a nation is on the move andthat its peoples have new opportunities,economic, social and cultural.

Cities as sources of successCities are not only symbols of a nation’s suc-cess; they are sources of that success andhave always been so. The evidence is simplebut compelling: wages in urban areas arehigher than those in non-urban areas, eventaking into account the different types ofindustries and skill levels in different places.3

Since urban firms pay higher wages (and,for that matter, higher rents) the only way inwhich they can survive against competitionfrom non-urban firms is by being more pro-ductive. The biggest cities pay the highest

10

1. Soja E, Postmetropolis:

Critical Studies of Cities and

Regions, Chapter 2, pp 50-67,

Blackwell, 2000

2. Wrigley E A, Poverty,

Progress, and Population, p 88

CUP, 2004

3. Glaeser E L, ‘Urban Colossus:

Why is New York America’s

largest city?’, Harvard Institute

of Economic Research

Discussion Paper No 2073, Fig

7, p38, 2005; Glaeser E L, and

Mare D C, ‘Cities and Skills’,

Journal of Labor Economics,

19(2): 316-342, 2001

“ Cities are not only symbols of a nation’s success;

they are sources of that success and have always

been so”

wages and have the highest rates of produc-tivity. In short, cities work.

The greatest economists have alwaysbeen interested in the sources of cities’ eco-nomic advantages. Adam Smith wrote atlength in the Wealth of Nations of the roleof cities in facilitating the division oflabour, ideas developed a little over a cen-tury later by Alfred Marshall.4 Today thenew economic geography offers rigorousmathematical tools to analyse both urbanand regional issues.5 This literature haslooked at, among other things, the role ofdistance as a barrier to economic interac-tion and development. It has demonstratedthat the spatial concentration of produc-tion leads to agglomeration benefitsthrough increased internal and/or externaleconomies of scale.6 Firms may gain fromproximity to their suppliers and/or cus-tomers, from increasing plant size and apool of suitably skilled workers.7

Cities raise productivity because peopletalk to each other.8 Firms learn more easilywhat their customers want and what theirsuppliers can offer. They watch their com-petitors and individual workers watch eachother. Their “know-what, know-how andknow-whom” are all increased. As the neo-classical economist Alfred Marshall put it:“The mysteries of the trade become nomysteries; but are as it were in the air.”9 Itis no surprise that film-making is concen-trated in one place, although that it is innorthern Los Angeles has at least an ele-ment of chance. Proximity to customers isusually defined as “market potential”, theproportion of national or even internation-al GDP that is close by. Here cities scorehighly, especially those with good connec-tions to other cities. London businessesbenefit from the non-stop services to manydestinations from the capital’s airports, aswell as the number of flights a day on coreroutes such as London-New York.10 Evenwhen your customers are spread all overthe world, you can reach them more quick-ly from a well-connected city.

Transport lies at the heart of the contin-ued success of many other cities. New Yorkgrew on the back of its port facilities andits access to the Great Lakes, becoming thetransport hub for manufacturing on theeast coast of America. This not onlybrought in large flows of trade and money,but also people. Banks, insurance compa-nies and other financial institutions devel-oped alongside. Glaeser suggests that citiesexcel in delivering services because theyeliminate physical distance between peopleand firms.11 As both London and NewYork prove, industries that have relativelystrong linkages with customers andor/suppliers have become increasingly con-centrated in areas of prosperity.12

As every employer knows, cities andtowns can often meet the demand forskilled staff. This is especially true in thosethat have strong specialisations. A centuryago, Burnley in Lancashire had more than15,000 weavers, probably the greatest con-centration of weavers in any town in theworld.13 A new mill owner setting up inBurnley could be confident that he couldattract, say, a hundred weavers simply bypaying the going wage rate. Today we seethe same pattern in London, but infinance. A foreign investment bank canopen in London safe in the knowledge thatit will be able to hire a large number ofhigh quality investment bankers withouthaving to pay a premium. The ability toattract staff draws firms in. The availabilityof jobs means that people wanting to workin the sector move to the town, and thecycle becomes self-reinforcing.14

These patterns suggest a role for publicpolicy. If local or national government can,in some way, “kick start” this process ofagglomeration, then it has the potential tobecome self-fulfilling. And once a cityreaches a certain size, issues of infrastructurethat almost inevitably involve governmentbecome important. A huge gridlocked cityhas very low market potential because peo-ple cannot meet and talk easily; a city with


The role of cities

4. Marshall A, Principles of

Economics, 8th edition, 1920

5. Glaeser E L, Kallal H D,

Scheinkman J A, Shleifer A,

‘Growth in Cities’ The Journal of

Political Economy, 100(6): 1126-

1152, 1992; Glaeser E L

‘Learning in Cities’, NBER

Working Paper, No W6271,

1997; Scott J, Global City

Regions, OUP, 2001; and Evans

A, Economics and Land-Use

Planning, Blackwell, 2004

6. Venables A J, ‘Equilibrum

Locations of Vertically Linked

Industries’, International

Economic Review, 37(2): 341-

360, 1996

7. Duranton G and Puga D,

‘Micro Foundations of Urban

Agglomeration Economies’,

NBER Working Paper No 9931,

2003

8. Storper M and Venables A J,

‘Buzz: Face-to-face contact and

the urban economy’, Journal of

Economic Geography, 4(4): 351-

370, 2004

9. Marshall A, op cit, p 271

10. Ormerod P, Cook W and

Rosewell, B ‘Why Distance

Doesn’t Die: Agglomeration and

its benefits’, GLA Economics

Working Paper 17, 2006

11. Glaeser E L, ‘Urban

Colossus: Why is New York

America’s largest city?’, Harvard

Institute of Economic Research

Discussion Paper No 2073, 2005

12. Feldman M, ‘Location and

innovation: the new economic

geography’, in Clark G L,

Feldman, M and Gertler M S,

The Oxford Handbook of

Economic Geography, pp373-

94, OUP, 2000; Patel P, and

Pavitt K, ‘Large Firms in the

Production of the World’s

Technology: an important case

of non-globalisation’, Journal of

International Business Studies,

1st Quarter: 1-2, 1991

13. Board of Trade, Report of an

Enquiry by the Board of Trade

into Earnings and the Labour of

Working People in the UK. I –

Textile Industry in 1906, London,

1909, p 47

14. Cushman & Wakefield, UK

Cities Monitor 2007, September

2007

fast and comprehensive transport allows theinteractions that are the foundation ofagglomeration economies. Gover nmentinvestment in public infrastructure canraise the rate of return to private sectorinvestment “crowding in” rather than“crowding out” entrepreneurial activity, andso raising economic growth.15 Of course,we must be careful: additional taxes tofund infrastructure can have negative effects.

Cities are large enough to support com-peting firms in many sectors. Consumersbenefit because prices fall, and the moreefficient firms take market share from theless efficient. That process in turn increas-es the incentive for all firms to be innova-tive, raising the level of economic growth.The electronics cluster in Silicon Valleyand the biotech cluster in Boston areexamples of this sort of success, which hasbeen called “endogenous innovation”.16

Finally, cities provide a greater variety ofways to spend time and money. Broda andWeinstein estimated that American con-sumers valued the increased choice of con-sumer goods from increased imports between1972 and 2001 at $260 billion, demonstrat-ing that the gains to consumers from varietyare significant.17 Services – especially culturalservices, such as ballet and art, are almostalways more plentiful in cities, the musicscene is livelier and heterogeneous tastes bet-ter catered for. City living also offers a greaterchoice of neighbours and neighbourhoods:from gritty urban to family-oriented subur-bia, from penthouses to detached homes.

The vulnerability of citiesUntil recently, cities were invariably asso-ciated with higher mortality. In 1841, life

expectancy at birth in Manchester wasjust 25 years, little more than half thenational average.18 Even for those who sur-vived to adulthood the downsides of citylife were serious. In 1833, a factory com-missioner wrote: “I believe most travellersare struck by the lowness of stature, theleanness and paleness which present them-selves so commonly to the eye atManchester.”19 Diseases, such as choleraand tuberculosis, were easily transmittedin the crowded conditions of 19th-centu-ry cities.

Even today, cities are more vulnerablethan rural areas to many disasters.Pandemics can be expected to spreadmore easily and more quickly in denselypacked urban areas. When the economicorder collapses, cities suffer first: if thetransport system breaks down the citystarves, while the countryside may havesurplus food. This vulnerability is part ofthe reason why cities have always been themain sources of riot and rebellion. Inaddition, their role as intellectual centresmakes them more prone to revolutioneven when economic conditions arefavourable. We can think back to massmeetings of the working class in citiessuch as Manchester in the industrial revo-lution, the Russian Revolution whichbegan in St Petersburg, les événements inParis in May 1968, repeated recently inthe bidonvilles, or the riots in Toxteth andBrixton a generation ago. As Glaeser andSacerdote note, factors such as the face-to-face contact with a wide number ofpeople that make cities perform so well asknowledge hubs also make them highlysuited to criminality.20

Potential roles of government in citiesCan the State generate economic successand prevent economic collapse? We notedearlier the very real benefits of clusteringthat many cities have experienced over theyears, in Britain and elsewhere. Spillovers

Cities limited

12

15. Barro R J and Sala-i-Martin

X, ‘Technological Diffusion,

Convergence and Growth’,

NBER Working Paper, No 5131,

1997

16. Aghion P, Bloom N, Blundell

R, Griffith R and Howitt, P

‘Competition and Innovation: an

inverted U relationship, NBER

Working Paper, No 9269, 2002;

Aghion P and Howitt P,

‘Endogenous Growth Theory’,

MIT Press, 1998

17. Broda C and Weinstein D,

‘Globalization and the Gains

from Variety’, NBER Working

Paper No 10314, 2004

18. Voth H-J, ‘Living standards

and the Urban Environment’, pp

268-294, in Floud R and

Johnson P (ed) The Cambridge

Economic History of Modern

Britain, Volume 3:

Industrialisation, 1700-1860,

CUP, 2004, Fig 10, p 285

19. Floud R, Watchter K W, and

Gregory A, Height, Health and

History: Nutritional status in the

United Kingdom, 1750-1980,

CUP, 1990, p 1

20 Glaeser E L and Sacerdote B,

‘Why Is There More Crime in

Cities?’, NBER Working Paper,

No 5430,1996

“ Until recently, cities were invariably associated with

higher mortality”

from firm to firm can raise productivitywithin a city and then throughout theeconomy, so increasing tax revenues. Theycan raise employment and encourage bothpeople and firms to invest in acquiringskills and new technologies. Such spill -overs are classic examples of what econo-mists term “positive externalities”, and pro-vide a clear theoretical rationale for stateintervention. After all, firm A will notinclude the benefits to firm B of their co-location, but government can use policyto ensure that firms locate near together,so that each gains from its proximity tothe other.

Today urban policy is not – in the main– about urban areas per se; it is about thoseurban areas in trouble. Urban policy doesnot mean taking the most prosperous smalltowns and seeing whether we can make aprosperous small town into a prosperouslarge town. We do not, for example, see thepossibility of high-skill-based spillovers inthe Cambridge area leading government orurban policy specialists to talk about howwe can make Cambridge a vibrant high-skill, high-wage, high-employment city ofhalf a million, one million, or two million

people. Making successful cities bigger,perhaps much bigger, is not what we meanby urban policy today.

Instead we mean looking at, and tryingto look after, cities and urban areas that aremissing out on the prosperity that we seeelsewhere: places such as Liverpool,Glasgow, Hull and Merthyr Tydfil, notCambridge, Chester and Edinburgh. Thesame is true elsewhere: in the US urban pol-icy concentrates on trying to revive citiessuch as Cleveland and Baltimore, not onbuilding up Phoenix, while in Italy it emph -asises Bari and Palermo, not wealthy Milan.

Some cities seem to prosper for a verylong time, even forever. London, Oxfordand Edinburgh, have always been richerthan Britain as a whole, just as New York,Boston and San Francisco have always beenricher than the average place in the UnitedStates. But other towns have not been so for-tunate, most obviously manufacturing citiessuch as Oldham in Lancashire or Detr oit inMichigan. Can urban policy prevent thissort of decline? If so, which policies are effec-tive? Or are we postponing – at great expense– the inevi table? These are the hardest ques-tions of all.


The role of cities

2History of Britishurbanisation

A precocious beginningIn 1600 Britain was, like every other nationin the world except the Netherlands, pro-foundly rural. Only 8 per cent of its popula-tion lived in towns of 5,000 people or more.Indeed, given the low levels of travel in thisera, we can safely conclude that a majoritywould never have visited a city in their life-time. That changed markedly between 1600and 1800, during which time British urbangrowth accounted for more than half of allEuropean urbanisation. One prominenteconomic historian has described the phe-nomenon as being of “truly exceptionalcharacter”.21 In the 19th century Britain wastransformed even more dramatically from astill primarily rural society to one in whichliving in cities and towns became the domi-nant way of life. As early as 1841 around halfthe British population lived in towns, thisfigure rose to two thirds by 1871, to threequarters by 1891 and to about four fifths bythe outbreak of the First World War.22

In this Britain was precocious, in twosenses. As the world’s first industrialisingnation, it inevitably became the world’sfirst urban nation. But there is more to itthan that: 19th-century Britain was muchmore urban than we would have expectedgiven its level of income. In 1890, we findthat three quarters of people living inBritain lived in towns, but when otherEuropean countries reached the same levelof income, only half their populationslived in towns. Throughout the 19th cen-tury Britain was around 50 per cent moreurbanised than we would have predictedfrom its stage of development.23

This early move to industrialisation ismore than a historical curiosity because itdetermined the location of cities and theirorganisation far earlier than happened else-where. Britain is essentially unique in havingurbanised before the invention of the carand, given the levels of urbanisation in 1840,even before the invention of the train.24 Laterdeveloping nations and cities have not had totackle the legacy of unsuitable location andorganisation inherited by some of our earlyurban developments. Further, by industrialis-ing at such very low levels of income, Britainalso created low quality cities, built for theliving standards of the 19th century. Theproblems of our city centre water supply anddrainage systems are not simply that they areold, but also that we use and dispose of farmore water than could ever have been imag-ined a century and a half ago.

High levels of urbanisation in Britain weredriven by Britain’s early move away fromagriculture, itself a product of our commit-ment to free trade in agricultural goods,exemplified by the repeal of the Corn Lawsin 1846. Remarkably, it was not until afterthe Second World War that agriculturalemployment in France and Germany fellto levels that Britain had reached in 1840.25

Postwar Europe saw a massive transfer oflabour directly from agriculture to service-based urban employment, and urban areaswere designed around this transition.Britain, in contrast, moved populationfrom agriculture to ind us trial urban centresin the 19th century, and then had to trans-form them into post-industrial service sec-tors after 1945.

14

21. Wrigley E A, Poverty,

Progress, and Population, p 89,

CUP, 2004

22. Crafts, N F R, British Growth

during the Industrial Revolution,

pp 57-62 OUP, 1985

23. Ibid

24. Crafts N F R, and Mulata A,

‘What Explains the Location of

Industry in Britain, 1871-1931?,

Journal of Economic Geography,

5(4): 499-518, 2005

25. Ibid

What determined the location ofBritish cities?Nineteenth-century Britain was driven bycoal, a relatively heavy and bulky commod-ity for the amount of energy it contains.When compounded by very low levels ofboiler efficiency, it meant that a lot of coalwas used for any given amount of econom-ic output. This provided a huge incentive tolocate factories, and so towns, close to thecoalfields or, failing that, close to the portsand canals that transported the coal. Thepopulation living in the coalfield regionsquadrupled from 1.3 million to 5.3 millionbetween 1841 and 1911.26

As the world’s leading proponent of freetrade, international trade was also moreimp or tant in Britain than elsewhere: itsratio of mer chandise trade to GDP wasdouble that of France, and quadruple thatof the United States between 1870 and1913.27 And since exports and importsmoved exclusively by ship, Britain’s citieswere particularly likely to be located eitheron the coast or in places well-connected toit by canal.

20th century changes: technologyand marketsBritain entered the 20th century with apopulation living in cities whose locationswere often a function of their past relianceon coal, manufactured exports and ship-ping. That world has disappeared.Factories no longer burn coal, manufactur-ing employment has fallen by 70 per cent28

and the rise in air and road transportmeans that shipping is no longer as impor-tant for international trade as it was in the19th century, and has become negligiblefor internal trade. In general, transportcosts declined dramatically over the 20thcentury, freeing many firms from having tolocate near to raw materials and allowingthem to locate nearer to markets instead.29

Today the main sources of energy – oil, gasand electricity – are essentially geographi-cally neutral.

The move from coastal shipping and railto transport by lorry and van has not onlyremoved the advantage once enjoyed bycoastal areas, but has given it to inlandareas. When coastal shipping was an


History of British urbanisation

26. Baines D and Woods W,

‘Population and Regional

Development, 1840–1940’, in

Floud R (ed) The Cambridge


Britain, Volume 2: Economic

Maturity, 1860-1939, CUP, 2004

27. Findlay R and O’Rourke, K

H, ‘Commodity Market

Integration’, NBER Working

Paper No 8579, 2001

28. As a share of the labour force

cf, Guthrie J, ‘The quiet rebirth of

the manufacturer’, Financial

Times, 26/07/2007,

www.ft.com/cms/s/69e7d9d6-

3b26-11dc-8f9e-

0000779fd2ac.html; Crafts, N F R,

British Growth during the Industrial

Revolution, p58 OUP, 1985

29. Glaeser E L, and Kohlhase J,

‘Cities, Regions and the Decline

of Transport Costs’, Papers in

Regional Science, 83(1): 197-

228, 2003

Tesco

LivingstoneDoncasterMiddlewichMagorMilton KeynesThurrock

Asda

WashingtonBrackmillsDartfordBedfordLutterworth

Sainsbury

CorbyBasingstokeCharltonElstreeHams HillHaydockNew RyeParkWaltham Point

Lipton

LondonGlasgowLiverpool

Figure 1: Major grocery distribution centres 1900 and 2007

important form of transport, Liverpoolwas an attractive place in which to locate awarehouse. Once roads took over,Liverpool found that its coastal locationhad become a disadvantage since it wasnow more isolated than inland areas. Incontrast, a town such as Daventry inNorthamptonshire, which would be undergreat disadvantage as a distribution centrein a water-transport era is very desirable asa location today: close to the M1, M6 andM40, as well as to the A14 trunk road toFelixstowe. We can see this in practice:Lipton’s, Britain’s biggest grocer in 1900,had three warehouses, in London,Liverpool and Glasgow, all major ports.30

Today Tesco, Britain’s largest supermarketretailer has its biggest warehouse at MiltonKeynes, far from the coast but in the mid-dle of the motorway network. The ware-houses for Britain’s supermarkets are over-whelmingly located along the M1-M6 cor-ridor from London to Leeds-Manchester(Figure 1).

A change in the location of demand hasalso worked against the North, particularlysince Britain joined the EEC in 1973.Between 1972 and 1992 the combinedshares of Dover and Felixstowe in Britishmerchandise exports rose from 10 per centto 29 per cent, with Heathrow accountingfor another 17 per cent, while Liverpool’sshare fell from 11 per cent to 3 per cent.31

Regression analysis confirms that employ-ment in manufacturing is enhanced by

proximity to export ports and that themean distance of manufacturing employ-ment from Dover fell sharply after themid-1980s.32 Similarly Head and Mayernote the strong tendency of Japanese for-eign direct investment (FDI) into Europeto prefer to locate in areas of high marketpotential.33 They estimate that from 1984to 1995, a region whose market potentialwas 10 per cent higher would have a 10 percent greater probability of attractingJapanese FDI. The data indicates that bothagglomeration effects and proximity todemand were part of the picture.

We can see the increasing desirability oflocating in the South East more formallywhen we look at market potential, whichincludes the level of income in an area, butalso gives weight to income outside thearea, taking into account transport costs.34

There have always been big differences inthe market potential of different regions.Table 1 shows that in 1911, the marketpotential of Scotland was just 56 per centthat of London and the South East. By1985 (the latest year for which figures areavailable), the figure had dropped to 38 percent. The overwhelming reason for this,further analysis shows, was that changes totransport systems disproportionately bene-fited the South East: had a modern trans-port system existed in 1911 Scotland’s mar-ket potential would have been 37 per centthat of the South East, a figure almost iden-tical to that of today. The story is much the

Cities limited

16

30. Crafts N F R and Leunig T,

‘The Historical Significance of

Transport for Economic Growth

and Productivity’, Research

Annex 1.1, Eddington Transport

Review, 2005

31. Overman H G and Winters A

L, ‘The Geography of UK

International Trade’, Environment

and Planning A, 37(10): 1751-

1768, 2005

32. Ibid

33. Head K and Mayer T,

‘Market Potential and the

Location of Japanese

Investment in the European

Union’, The Review of

Economics and Statistics, 86(4):

959-972, 2004

34. Ormerod P, Cook W and





35. Ibid, Table 7

Table 1: Market Potential 35

% of London and South 1911 1985 Effect of transport Effect of otherand South East values changes changes

Scotland 56.1 37.5 -19.5 +0.9

Wales 69.1 53.6 -19.9 +4.4

North 62.0 47.5 -15.7 +1.2

West Midlands 61.3 71.5 +1.9 +8.3

same for the North and for Wales: moderntransport systems have brought advantagesto the South East relative to other areas.The only exception is the Midlands, whichhas benefited along with the South Eastfrom the transition to road transport. AsCrafts notes, “as the world moved from railand ship to road and ferry, the ‘peripherali-ty’ of the North, Wales and Scotland wasseriously accentuated”.36

The effects of transport on peripheralitywere not the result of policy decisions; poli-cymakers did not decide to build ports inthe North in the 19th century and roads inthe South in the 20th century. Instead, thegeography of different places made themmore or less able to take advantage of thetransport technologies that emerged as theeconomy developed. This will continue tobe the case. If the giant Airbus A380 offersthe lowest operating costs per mile then thatwill reinforce the role of the biggest airports,which can generate enough demand to fillsuch aircraft. That, in turn, would increasethe relative market potential of the Londonarea. If Boeing’s smaller 787 offers loweroperating costs per seat mile then it willenable airlines to offer non-stop servicesfrom London to secondary cities around theworld, and from provincial cities withinBritain to primary cities around the world.

Connectivity would increase throughoutthe country, though the magnitude of theeffects is unclear.

Where are we now?Urban policy faces challenges that shouldnot be underestimated. Once we were amaritime economy looking to a globalempire, now we are a road-based economylooking much more towards Europe.There is no reason to think that towns andcities whose origins were determined bythe need for access to seaborne coal andcotton, for example, will be well placed forthe challenges of the service-dominated21st century. Those areas of Britain thatare farther away from London – includingalmost all Britain’s towns of significant size– have been unlucky because changes intransport technology and changes in thedestination of our exports have workedagainst them. In addition, improvementsin urban transport and communications,combined with increasing skill levels,appear to have raised the optimal size ofcities over the last one hundred years,implying that many of Britain’s largertowns and smaller cities are not only inthe wrong place, but are also of the wrongsize.


History of British urbanisation

36. Crafts N, ‘Market Potential in

British Regions, 1871-1931’,

Regional Studies, 39(9): 1159-

1166, 2005, p. 1164

3A history of urban policy

19th century origins, 19th centurysuccess: public healthPolicies directed at specific urban areashave a long history in Britain, eventhough the phrase “urban policy“ datesonly from the 1960s. In the 19th centu-ry, both national and local governmentplayed important roles in developingand changing the nature of cities.

By the turn of the century infrastruc-ture investment at local level was bigbusiness. Even if we exclude housing,investment in local infrastructure in1900 was almost as large as total invest-ment in manufacturing, notwithstandingBritain’s role as the workshop of theworld.37 Although some of this invest-ment was privately financed in the hopeof commercial return, the majority wasfunded by local authorities; the first sub-stantial expression of urban policy. Thiswas recognised in the 1870s when gov-ernment set up the Local GovernmentBoard, which required local authoritiesto report on what they had been doing toimprove their areas.

Much of early urban policy was relatedto public health and the consequences ofliving in far closer proximity than before.The construction of sewers, waterworksand street improvements (many needed for

drainage) were extremely expensive andamounted to half of all urban policy expen-diture.38 It was effective: life expectancy inlarge towns increased about twice as rapidlyas for the country as a whole between the1840s and the First World War.39

Slum clearance followed. The Artisansand Labourers Dwelling Act 1875 was des -igned to improve working-class living stan -dards through wholesale demolition and re -build ing. The various Acts that allowed rail-way companies to route lines through denseurban areas in order to reach the centre oftowns also insisted that any working-classhous ing demolished in the process bereplaced.

More and better housing was a regularfeature of urban policy over the past century.Christopher Addison, the President of theLocal Government Board, had to imple-ment Lloyd George’s 1919 pledge of “homesfit for heroes”, which introduced large-scalesocial housing. The Housing Act 1930(Greenwood Act) gave grants to localauthorities for widespread replacement ofthe existing housing stock: 90,000 houseswere demolished in 1938. The Town andCountry Planning Act 1944 (better knownas the “Blitz and Blight“ Act) also envisagedthat many of the properties damaged in thewar would be replaced rather than repaired.Yet as late as 1963 a survey found that over5,000 homes in Oxford were still without afixed bath.40 Many older city centre homeswere torn down in the postwar years, withthe residents offered new housing on theoutskirts of town. Demolition peaked in the1960s, when around 100,000 homes were

18

37. Millward R, ‘Urban

Government, Finance and Public

Health in Victorian Britain’, pp

47-68 in Morris R , and Trainor

R, Urban Governance: Britain

and beyond since 1750, 2000

38. Ibid, p 56

39. Baines D and Woods W,

‘Population and Regional

Development, 1840–1940’, p 37

in Floud R (ed) The Cambridge


Britain, Volume 2: Economic

Maturity, 1860-1939, CUP, 2004,

40. Sladen C, ‘H2Oxford’,

Oxford Today, 19(2), Hilary,

2007, p 26

“ Demolition peaked in the 1960s, when around 100,000

homes were demolished each year”

demolished each year, overwhelmingly inurban areas. Since 1982, demolition hasbecome remarkably rare.41

Today urban policy has much less to dowith those two great obsessions of 19th andearly 20th century policy for urban areas.Life expectancy is no longer 40 per centlower in Manchester than in Britain as awhole, as it was in 1841.42 In that senseurban policy – in the Victorian sense of theword – has been extremely successful.

Today’s housing problems are not partic-ularly urban: they are either the consequenceof general supply problems,43 or of socialexclusion, that is, of people being left out ofmainstream society.44 The huge strides thatthe Government has made in ensuring thatsocial housing meets its Decent HomesStandard has not been matched by a rise inresidents’ satisfaction levels,45 suggesting lim-its to how far improving the physical stock ofhousing is an effective use of public money.

Urban policy as regional policy:Intellectual originsUrban policy today concentrates on areasthat are falling behind economically. It is theexpression of regional policy in an urbanisedcountry. As such its intellectual origins goback to the 1945 post-war settlement, whichtransformed economic policy. The unem-ployment of the interwar years had becomesimply unacceptable and politicians believedthat they had the power to prevent it. Thecommitment to full employment was part ofthe Government’s support for the 1944Beveridge Report, which laid the founda-tions of the welfare state and set out tocounter the five giants: Want, Ignorance,Disease, Squalor and Idleness.

Regional policy, whether applied to largeareas or to individual towns, was part of thatshift away from a free-market economy andtowards one with larger elements of govern-ment intervention. According to neoclassicaleconomics if employment in a town falls,wages will fall (slightly). That will be suffi-

cient to prompt local people to migrate tothose areas that offer better prospects, and tolead firms from other areas to migrate to thearea in which labour costs are lower. As aresult, depressed towns and cities will notremain depressed for very long: neitherwages nor employment will fall markedly inresponse to adverse shocks.

We know that this model bears littleresemblance to reality. Wages and employ-ment have fallen and remained low in areaswhose core industries have declined.Migration of workers and firms is not at allfluid. In the 1980s, only about 0.5 per centof skilled workers and under 0.3 per centof unskilled workers moved region. Norwas migration of unskilled workers, onbalance, from declining areas to ones withbetter prospects. In short, and for reasonsthat we will return to later, workers do notmove to the work. Firms are equally reluc-tant to move. They are concerned aboutretaining existing employees, whose experi-ence will be hard to replace. Currentattempts by the Office of NationalStatistics to persuade staff to move fromcentral London to Newport, in SouthWales, suggest that this concern is wellfounded. If they do relocate, firms aremore likely to go to equivalent cities whereother firms in their sector are alreadybased, rather than to other cities whichmay offer cost savings. Ormerod et al sug-gest that financial firms that are priced outof London are far more likely to relocate toFrankfurt, a financial centre, than to Leeds.46

There may also be good social reasonsfor not wanting labour migration withinBritain to be too fluid. Such migrationrequires large amounts of new housing aswell as appropriate levels of public and pri-vate services. Although people can move,the facilities on which they depend areessentially fixed: you can’t supply extrahouses, shops or schools at all easily. Witha stable population it appears wasteful toabandon a town’s perfectly good capitalinfrastructure, such as houses, roads and


A history of urban policy

41. Hills J, Ends and Means: The

future roles of social housing in

England, Fig 4.3, p 30,

CASEreport 34, 2007

42. Voth H-J, ‘Living Standards

and the Urban Environment’,

Fig. 10.4 pp 268-294, in Floud R

and Johnson P (ed) The

Cambridge Economic History of

Modern Britain, Volume 3:

Industrialisation, 1700-1860,

CUP, 2004,

43. Barker K, Barker Review of

Land Use Planning, 2006; Evans

A and Hartwich O M,

Unaffordable Housing, Policy

Exchange, 2005; Leunig T, In My

Backyard: unlocking the planning

system? CentreForum, 2007



England, CASEreport 34, 2007

45. Ibid

46. Ormerod P, Cook W,





hospitals, simply because its industry is indecline. Indeed, this is a classic example ofa “negative externality” – the growing firmdoes not take into account the cost of pro-viding new infrastructure in the expandingarea when it makes its location decision. Intheory, therefore, there is a clear case forgovernment to intervene to raise welfare:by persuading the firm to expand in thearea that already has all the necessary facil-ities, society as a whole can save the cost ofdemolishing them in place A, only torebuild them in place B.

Policy in a brave new worldThe 1940 Royal Commission onDistribution of the Industrial Populationtook the approach set out above. Its reportcalled for a new independent body to reg-ulate the geographical distribution ofindustry and to encourage a reasonablebalance of industrial development. It wasto be given the right to refuse to allow fur-ther development in London and the SouthEast, unless it could be proved to be uneco-nomic elsewhere. A minority report felt thatthese conclusions were too weak, and arguedthat government should have greater directcontrols over the location of industry.47

In the postwar world, therefore, govern-ment set out to persuade work to move tothe workers. In doing so it was implicitlysubscribing to what is termed the “struc-tural” view of regional differences.According to this view the problems in,say, Bolton are to do with the (inevitable)decline in the cotton spinning industrythat once dominated the town. So long asanother employer can be persuaded to

move to Bolton, all will be well; regionaland urban policy has great potential totransform areas of decline into areas of self-sustaining economic success. By implicitlyaccepting the structural view, governmentwas rejecting the “locational” view, whichsees the problems of Bolton not so muchin terms of the decline in cotton spinning,but in terms of its geographical location.Today, the locational view is the more pre-dominant, reflecting both developments ineconomic theory and our experience ofregional and urban policy. It is importantto appreciate, however, that the attempts ofsuccessive governments to take work to theworkers were based on what appeared to besensible theories with potentially attractiveoutcomes. As the first country to deal withthe shift of workers from manufacturingindustry to services, we could not learnfrom others, and had to find our own way.Inevitably, mistakes were made.

Early attempts at regional and urbanpolicy could be very interventionist. Thevery title of the Distribution of IndustryAct 1945 says it all: it was for government,not the market, to determine where a firmshould locate. As with the Special AreasAct 1934, which had designated a handfulof small, very depressed areas for assistance,the Government offered the carrot of state-provided industrial estates but, perhapssurprisingly to a modern audience, it sup-plemented this carrot with a very big stick.Wartime building licence controls, codi-fied in the 1947 requirement of anIndustrial Development Certificate (IDC)meant that a firm could only open a newfactory, or expand an existing one, if theBoard of Trade agreed that the location wasconsistent with “the proper distribution ofindustry”. These controls were used to alterthe location of industry significantly:between 1945 and 1947 designated devel-opment areas, which included only 16 percent of Britain’s population, received overhalf the building permits issued.48 Thestick was used to try to move industry to

Cities limited

20

47. Royal Commission on the

Distribution of the Industrial

Population, Cmd 6153, HMSO,

1940

48. Scott P, ‘British Regional

Policy 1945-51: A Lost

Opportunity’, Twentieth Century

British History, 8(3): 358-382,

1997, p. 345

“ Government offered the carrot of state-provided industrial

estates but, perhaps surprisingly to a modern audience, it

supplemented this carrot with a very big stick”

the locations that the Government felt tobe in Britain’s best interests.

Into the 1950sPolicy changed somewhat in the 1950sunder the long-lived Conservative admin-istration. Although it is possible to see thisas an ideological change, it is probablymore accurate to view it as a pragmaticone: unemployment was low across thecountry and the need for urban and region-al policy did not seem as pressing. The dra-conian framework was retained rather thanabolished and IDCs were still required fornew factories. What did change was imple-mentation: only 2 per cent of IDC applica-tions (weighted by employment) for facto-ry building in the Midlands and SouthEast in 1956 were refused, compared tomore than 20 per cent in 1950.49 Gover -nment kept the stick, but it put it away.

Government spending on new factoriesand other inducements to move declined

sharply, falling by two thirds in real terms.Indeed, if anything, policy returned to theearlier idea of moving workers to the work.This was manifest in the emphasis onbuilding new houses in the South East andparticularly in the New Towns Movement.50

As regional unemployment rosetowards the end of the 1950s, theConservative Government returned toactive policies to persuade industry torelocate to the struggling towns andregions of Britain. Government spendingon factory building, and especially ongrants and loans to firms, quadrupled totheir highest ever level in real terms. IDCsbecome a more serious constraint onindustry: over 20 per cent of IDC applica-tions (weighted by employment) in theMidlands and South East were refused inthe early 1960s. Rather than looking atregions as a whole, the Government beganto target much smaller, generally moreurban areas: regional policy was becomingurban policy. The 1961 Census, which



49. Ibid, figure 13.3, p 359

50. Atkinson R and Moon K,

Urban Policy in Britain: The city,

the state and the market,

Macmillan, 1994

Case study 1: The New Towns Movement

As the name suggests, the New Towns Act 1946 led to the construction of a number of wholly new

towns in Britain after the Second World War. And many existing towns were expanded on what might

be termed New Town principles. As well as ensuring that those who had lost their homes in the war

were rehoused, the Act was intended to ensure that the quality of housing and the built environment

improved. Eight of the first ten New Towns were located near London, with the remaining two in

County Durham. The idea of building New Towns in the South East was not to encourage migration

to the South, but rather to allow for population to move out of London itself, in line with Abercrombie’s

influential 1944 Greater London Plan.

The New Towns drew inspiration from the Garden City movement, founded by Ebenezer Howard,

which envisaged areas of both local employment and substantial amounts of green space. Two such

towns were built – Letchworth Garden City at the start of the century, and Welwyn Garden City

between the wars.

The postwar New Towns Movement was conceived on a much larger scale, and almost a million

houses constructed from 1945 to 1951 alone. Although they gained an early reputation for poor build-

ing standards and dislocated communities, many have matured and become popular places to live.

They may have been designed to minimise commuting, but those in the South East are now dormito-

ry towns for workers in London.

Both the Garden Cities and the New Towns are being used to illustrate the potential and pitfalls of

the Government’s proposed “eco-towns”.

produced local level data for the first time,highlighted the existence of localisedpockets of deprivation in a way that hadnot been possible before.

Government direction of industry couldlead to some very odd decisions. In 1957,for example, there were plans to buildBritain’s fourth steel strip mill. Colvilles, aprivate sector firm wanted to build the millat Ravenscraig in Scotland, while RichardThomas, a state-owned firm, wanted tobuild it near Newport in South Wales.Rather than reject one plan, theGovernment ordered the construction oftwo, technically and economically sub-scale plants, one in each place. One com-mentator described this as HaroldMacmillan’s “judgment of Solomon”,which rather overlooks that King Solomonshowed his wisdom by threatening to cutthe baby in half, not by actually doing so.51

Another writer commented that economicadvantage had been “sacrificed deliberatelyin the interests of immediate social com-fort and convenience”.52

Equally, the Government forced firmsthat relied on a strong local skill base toexpand not where the skilled workers were,but in depressed areas. The Rootes car firm(which eventually became part of Peugeot)wanted to expand its Ryton plant nearCoventry at the end of the 1950s. This wasnot permitted, and Rootes instead built aplant in Linwood, on the outskirts ofGlasgow. The plant, opened in 1963, wasnot successful and was closed in 1981despite having had three owners and repeat-ed injections of government finance. TheRyton plant, which had been unable toexpand in the early 1960s, was itself shutdown in 2006. Rootes was not alone inbeing forced to open car plants in areaswith no experience of mass producing cars:two of Merseyside’s three car plants, GMEllesmere Port and the Standard-TriumphSpeke factory (closed 1978) were the resultof government policy, not managementdecisions.

Knowing that the Government wantedsuch firms to move to depressed areas gavethem an incentive to solicit grants on falsepretences. Ford, for example, realised thatits existing Dagenham plant was too con-gested to expand and had decided to locateits new plant on Merseyside. Nevertheless,Ford stated that it wished to expandDagenham and, failing that, would like toopen its plant in the nearby booming newtown of Basildon, in the knowledge thatthese options would be rejected and thatthey would be in a correspondingly betterposition to receive financial assistance.53

Urban Policy under Wilson: experi-mentation and realityJohnstone and Whitehead write: “In theautumn of 1968 Harold Wilson’s Labourgovernment initiated the first distincturban policy framework in Britain. Thebirth of this explicitly urban branch of pol-icy occurred with the launch of an urbanprogramme of expenditure mainly on edu-cation, housing, health and welfare in areasof special social need”.54 Urban policy wasto be holistic, but in essence it looked atthe physical infrastructure (includinghousing, the environment and the sense ofplace), the social fabric and economic con-ditions, often with a special emphasis onemployment levels.

This commitment to revitalising urbanareas and to revitalising depressed regionsmore generally, was backed with real money.Spending, already at an all time high whenWilson came to office, was increased seven-fold, to more than £2 billion at today’sprices. Within this enlarged budget, therewas a much greater focus on grants to firms,rather than direct provision of land andbuildings. The increasing availability of car-rots was matched by increasing use of thestick: in 1966, 30 per cent of IDC applica-tions in the Midlands and South East wererefused. And the IDC policy was expandedto cover new office building first in London

Cities limited

22

51. Owen G, From Empire to

Europe: the decline and revival

of British industry since the

Second World War, p128

HarperCollins, 1999

52. Burn D, The Economic

History of Steelmaking, 1867-

1939: a study in competition, p.

656, Cambridge University

Press, 1961

53. Tolliday S, ‘The Rise of Ford

in Britain: from sales agency to

market leader, 1904-1980’ in

Bonin H, Lung Y and Tolliday S

(eds) Ford:the European History,

1903-2003, 2, pp 73-150, Paris,

Plage, 2003

54. Johnstone C and Whitehead

M, ‘Horizons and Barriers in

British Urban Policy’, pp 3-24, in

Johnstone C and Whitehead M

(ed), New Horizons in British

Urban Policy: perspectives on

New Labour’s urban

renaissance, p 3, Ashgate, 2004

and later in other areas of the South andMidlands. These policies continued for adecade, with spending rising until the mid-1970s, at which point it amounted to morethan £3 billion in today’s money.

Despite the significant sums of moneyspent and the significant powers that govern-ments had at their disposal, it proved veryhard to persuade firms to relocate. In short,the draconian policies of state direction ofindustry did not work. The effect of the IDCpolicy is relatively straightforward to assess:we have a clear set of projects that govern-ment refused to allow to go ahead in themanner that firms wanted. If we find thatthey all moved to depressed towns and cities,and survived and prospered in those places,then we can say that the policy was success-ful. But an analysis of what happened to proj-ects refused between 1958 and 1971 showshow ineffective the policy was: only 18 percent went ahead in an area approved by gov-ernment. Even then, many moved within theSouth East, rather than to Newcastle,Liverpool or another town in a developmentdistrict. In contrast, 50 per cent went aheadin the original location but scaled down theirplans so that IDC approval was not neces-sary; 18 per cent led to closure or reorganisa-tion of production; 13 per cent were simplyabandoned; and 1 per cent went abroad.55

This tells us two things: first, the cost tosociety of trying to compel firms to move isvery high, with the cost born by sharehold-ers and other workers and, ultimately, bysociety as a whole. Since 82 per cent ofexpansion plans that were not given IDCswere reduced in size, abandoned, led to firmclosures or reorganisations or to jobs movingabroad, we can say that, at first approxima-tion, the cost of moving 18 jobs was 82 jobsdestroyed. IDCs were not ineffective, theywere positively harmful. This almost certain-ly understates the cost of moving jobs todepressed areas by government diktat. Hadgovernment insisted on the jobs moving todepressed towns rather than to other areas ofthe South East, the successful number (18)

would have shrunk further, and the cost-benefit ratio could have looked even worse.In addition the 82 out of 100 firms whoseplans were adversely affected by governmentwere left with smaller and less well designedfactories than those they would have chosenthemselves. Not only were jobs not created,but the jobs of those already working for thecompany were endangered by the firm beingforced to use premises that were not as well-suited to their needs as they could have been– as was the case with Rootes and the Rytonplant. Finally, the existence of IDCs, and theknowledge that certain types of applicationwould not be approved, almost certainlydeterred some firms from even planning toexpand. What, after all, is the point ofspending management time and effort devis-ing expansion plans when you expect gov-ernment to say no?

The failure of the IDC system to fosterlarge-scale migration of industry todepressed towns also suggests that the loca-tional view of urban problems is muchmore likely to be correct than the structur-al view. After all, if the structural view iscorrect, firms should have been relativelyhappy to move location. That 82 per centof refusals led to no movement away fromthe hotspot in which the firm wanted toexpand tells us that firms were stronglycommitted to remaining in that place. Thisin turn should alter our expectations of thelikely effectiveness of policies that requirefirms to move.

As well as IDCs, the Wilson Govern -ment introduced another policy that seemsunthinkable today: the Regional Employ -ment Premium (REP). Noting that most



55. Wettman R W and Nicol W

R, Deglomeration Policies in the

European Community: a report

of a comparative study by the

International Institute of

Management, Office for Official

Publications of the European

Communities, 1981

“ Despite the significant sums of money spent and the

significant powers that governments had at their disposal,

it proved very hard to persuade firms to relocate”

subsidies to firms moving to depressedcities were for the purchase of capitalequipment, the REP tried to do the samefor labour. In essence, REP knocked about7 per cent off the cost of employing peoplein unemployment black spots. Labour wereproud of this scheme when in office, withTony Benn boasting of its benefits in aparty election broadcast on 26th September1974. But again, the analysis suggests thatthe policy was largely ineffective, indeed, itappears to have been the least effective ofthe different subsidy schemes during the1970s, with a cost per job of around£200,000 in today’s money.56

Government has learned from these mis-takes. Today it is unthinkable that it wouldrequire successful employers wanting toexpand to apply for permission to do so,although of course the planning system doescreate constraints for many firms. Equallyno one has suggested altering tax rates onemployment by place as a way of persuad-ing firms to move to struggling cities.

After the oil crises: urban policy in anera of rapid deindustrialisationThe publication of the White Paper Policyfor the Inner Cities in 1977 heralded a for-mal change in urban policy. As had hap-pened at different times from 1945onwards, politicians realised that the prob-lems of a region were often the problems ofits principal cities, and that the problemsof its cities were often the problems of par-ticular areas within the city. This alsorecognised that successful cities – mostobviously London – could contain signifi-cant areas of poverty which, it wasbelieved, urban policy was well-placed toaddress. As the White Paper noted, “toolittle attention has been paid to the eco-nomic wellbeing and to the communitylife of the inner areas“.57 It wanted cities toimprove their physical conditions, alleviatesocial problems and increase their popula-tions. Local authorities were vital, but were

expected to work with private and volun-tary sectors. The service sector was nowconsidered at least as important to regener-ation as manufacturing. The earlier UrbanProgramme funding streams were dramati-cally enlarged, although this was largely atthe expense of cuts in areas such as REP.

The inner city riots, starting with StPaul’s in Bristol in 1980, and continuing in1981 in Brixton in south London,Handsworth in Birmingham and Toxtethin Liverpool among other places, were suf-ficiently serious to involve the first use ofCS gas on protestors on the British main-land, and to force the Prime Minster,Margaret Thatcher, to cancel a visit toToxteth on safety grounds. They gaveadded impetus to urban policy.

The size of the city, not the extent of itspoverty, was the better predictor of thelikelihood of riots taking place. Nor werethe disturbances city wide, but ratherinvolved youths from concentrated pocketsof poverty, where relations between thelocal community (predominantly black)and local police (predominantly white)were antagonistic. Struggling medium size,predominantly white towns experiencedmuch smaller disturbances or remainedcalm. The resulting policies had a strongpolitical, as well as economic, dimension.Michael Heseltine was named “Ministerfor Liverpool”, and there was a prevailingsense that “something had to be done”.58

Two policies stand out as emblematic ofregeneration under the Conservativeadministrations of this era: UrbanDevelopment Corporations (UDCs) andEnterprise Zones (EZs). The creation ofboth needs to be understood in the politi-cal context of the early 1980s: a fairly ide-ological Conservative government was inpower nationally, but equally ideologicalLabour councils dominated by militanttendencies controlled many of the biggestcities. Derek Hatton’s time as deputyleader of Liverpool council is perhaps thebest remembered. Put simply, the

Cities limited

24





1997, p 361, uprated using

Officer, Lawrence H, ‘Five Ways

to Compute the Relative Value of

a UK Pound Amount, 1830-

2005‘ MeasuringWorth.Com,

2006

57. Policy for the Inner Cities:

White Paper, p 1, HMSO, 1977,

CMND 6845

58. A Different Reality: Minority

Struggle in British Cities

www.warwick.ac.uk/CRER/differ

entreality/timeline.html

Government believed that the solution toinner city problems involved a greater rolefor the market, and did not believe thatlocal government would be an effectivepartner in such a policy. Both UDCs andEZs were designed, at least in part, tobypass local councils.

Urban Development Corporations(UDCs) were public bodies establishedunder the Local Government, Planningand Land Act 1980.59 They were limited intheir life and given broad aims, and match-ing powers. The first two covered theLondon Docklands and Merseyside. Allwere wound up by the mid-1990s,although a second generation of UDCs hasbeen created more recently. The role of theUDC was primarily physical: they soughtto create suitable land and buildings fordevelopment by, for example, taking overderelict industrial land and transforming iteither for light industrial or for service sec-tor use. In many ways UDCs represent areturn to the earliest forms of postwarurban practice, in which governments pre-pared infrastructure and built factories.This, once more, was property-led devel-opment.

Taken as a whole, UDCs were unsuc-cessful in regenerating the areas that theycovered.60 Indeed, as Professor StephenHall notes, the main legacy of the UDCexperience “appears to have been to dis-credit property development as a vehiclefor urban regeneration”.61 Of all theUDCs, the London DocklandsDevelopment Corporation (LDDC)stands out as the most successful: the rede-velopment of the Isle of Dogs has beenremarkable. But even here we need to becautious: although the Isle of Dogs hasbeen regenerated, the more distant RoyalDocks proved a harder challenge. This hastwo implications. First, if one corporationcan be successful in A but not B, evenwhen the places are as close together as theIsle of Dogs and the Royal Docks, the casefor the locational interpretation of the rise

and fall of towns and cities is considerablystrengthened. Second, if we accept thestrength of the locational argument, itwarns us to be careful in assigning praiseor blame to those involved in regenera-tion. It is inconceivable that LDDC putmore skilled workers into projects on theIsle of Dogs, or that LDDC staff trying toregenerate the Royal Docks were slackers.These were different areas, with differentpossibilities for renewal. If that can be sobetween two places so close together, it iseven more important that we remember itwhen trying to interpret the failure ofUDCs to regenerate areas such as Tyneand Wear.

The other emblematic policy of the1980s was the creation of EnterpriseZones, described by the ConservativeChancellor Geoffrey Howe as “my hobbyhorse”.62 They were part of an attempt toroll back the frontiers of the State, and par-ticularly the frontiers of local government.EZs gave notable tax breaks, including 100per cent capital allowances for commercialand industrial buildings, and exemptionfrom business rates for ten years. In addi-tion, planning permission procedures weresimplified and other red tape reduced.Such zones are common in developingcountries trying to attract footloose inter-national firms, and in the United States.63

The experience of EZs mirrors that of IDCcontrols a generation before: it is relativelyeasy to persuade firms to move short dis-tances, but few firms find it at all desirableto move significant distances.64 Again, thisfits with locational but not structuralapproaches to decline. Given that depressedtowns are generally surrounded by areasthat, although not as depressed, are still aspoor, there is a danger that the gains to onepoor area are bought at the expense of aneighbouring area that is also struggling.The House of Commons SelectCommittee on Education and Employmentmade exactly this point in its fourthreport.65



59. The standard history and

analysis of UDCs can be found

in Imrie R and Thomas H (eds),

British Urban Policy and the

Urban Development

Corporations, Paul Chapman

Publishing, 1993

60. Ibid

61 Hall S, ‘Review: British Urban

Policy: An evaluation of the

Urban Development

Corporations, 2nd edition, Rob

Imrie and Huw Thomas (eds)

1999’, Journal of Housing and

the Built Environment, 6(1): 115-

117, 2001

62. Howe G, Conflict of Loyalty,

p. 174, 2nd edition, 1995

63. Peters AH and Fishers PS,

State Enterprise Zone Programs:

Have They Worked? 2002, Urban

Institute

64. Potter J and Moore B, ‘UK

Enterprise Zones and the

Attraction of Inward Investment’,

Urban Studies, 37(8): 1279-1312,

2000

65. House of Commons, Select

Committee on Education and

Employment, 4th Report, para

64, 2000

By the time the Conservatives leftoffice in 1997, many policy approacheshad been tried over the previous half cen-tury. Governments had tried using sticksto persuade firms to relocate. They hadtried to use carrots, in the form of grantsfor capital or through the REP foremployment. They had tried targetinglarge areas and small ones. They had triedworking through local authorities andbypassing them altogether. Many of thesepolicies had involved substantial levels ofpublic expenditure, or tax revenues for-gone. For example, Scott estimates thatcore urban policy funding in the early1970s amounted to £3.4bn in today’smoney.66

Given the intellectual climate of thetimes these policies were perfectly reason-

able. They represented the political andpolicymaking classes’ best guess as to whatwould work. Where possible they werebased on evidence, and there is evidencethat policy changed as new ideas appearedand lessons were learned.

Of course, it was always possible todemonstrate that a particular firm had bene -fited from a particular grant, or that a pro-gramme had led to results that could bethought conducive to urban renewal. Butwhat was clear by 1997 was that Britainwas a significantly divided nation. Citiesoutside the South East were, almost uni-formly, decidedly poorer than those locat-ed closer to London. The capital was man-ifestly the most economically successful partof the country, even though it also con-tained some sizeable pockets of poverty.

Cities limited

26





1997, p. 350, uprated using

Lawrence H. Officer, ‘Five Ways

to Compute the Relative Value of

a UK Pound Amount, 1830 -

2005‘ MeasuringWorth.Com,

2006

Case Study 2: Canary Wharf

Canary Wharf was a thriving 19th-century port, famous as the place in which goods from the Canary

Islands were unloaded. Widespread bomb damage during the Second World War and the move towards

containerisation and large ships in the 1970s meant that employment in the docks declined dramati-

cally, and closed in 1980. Around 150,000 jobs were lost in Docklands between 1967 and 1977.

Redevelopment began in 1981 with the formation of the London Docklands Development

Corporation and the Docklands Enterprise Zone. The initial aim was to attract light industry to the area,

in the manner that light industry had moved to West London areas such as Park Royal earlier in the

century. However, the City of London’s deregulatory “Big Bang” in 1986 led to a demand for a large

open plan offices that were hard to find in the City of London. Following the example of Citibank’s suc-

cessful move from Wall Street to Manhattan’s midtown, Credit Suisse First Boston and Morgan Stanley

agreed to take space in a new tower block in Canary Wharf.

Construction was not straightforward. There was much local opposition. Many residents thought

that they would not benefit from such a development, and the construction company, Olympia and

York, went bankrupt in 1992 as part of the general property recession of the early 1990s.

But, ultimately, few can doubt that Canary Wharf, and Docklands as a whole, have been anything

other than a success. Today the area has 33 office blocks, over 14 million sq ft of office space, and

more than 90,000 people are employed there on any given day. It has allowed the massive expansion

of London as a financial centre, raising average wages and producing significant amounts of tax rev-

enue for the Government.

Two lessons stand out. First, it will always be easier to revitalise an area that adjoins a prosperous

place with considerable potential for expansion. Second, although many people from the local area

are now employed in the financial sector, it would be wrong to claim that prospects for those who lost

their jobs in the docks have been transformed.

4Urban regenerationsince 1997

A real commitmentThe Labour Government elected in 1997 wasgenuinely committed to reviving dep ressedurban areas. Many of the new Cabinet’s con-stituencies were in urban areas withsignificantly lower than average in come levels(John Prescott in Hull, Jack Straw inBlackburn, Margaret Beckett in Derby,Donald Dewar in Glasgow, Mo Mow lem inRedcar, David Blunkett in Sheffield, RonDavies in Caerphilly, Nick Brown inNewcastle, Clare Short in Birmingham, AnnTaylor in Dewsbury, Frank Dobson, HarrietHarman and Chris Smith in Inner London).This was a Cabinet that knew the reality of lifein urban areas that were relatively poor, and itis poorer urban areas that provide the bedrockof Labour support: in 1997 David Blunkettwon 73.5 per cent of the vote in SheffieldBrightside, receiving five times as many votesas the Liberal Democrat runner-up.

Tony Blair chose the Aylesbury Estate inSouthwark as the site for his first speech as

Prime Minister. It was a wide-ranging speechthat included his aspirations for deprivedurban areas: “We should engage the interestand commitment of the whole of the com-munity to tackle the desperate need for urbanregeneration,” he said.67 Not long afterwardsthe responsibility for urban policy was givento John Prescott, as part of his role as Secretaryof State for the Department of the Environ -ment, Transport and the Regions (DETR).

A new visionOne of John Prescott’s first actions was tocommission the acclaimed architect LordRogers of Riverside to chair the Urban TaskForce. In 1999 it produced a powerful report,Towards an Urban Renaissance, which waswidely welcomed by bodies as varied asFriends of the Earth,68 the Civic Trust,69 andthe Local Government Asso ciation – the lat-ter described it as “a landmark in the evolu-tion of urban policy“.70 Anatol Lieven, writ-


67. Blair T, Aylesbury Estate,

London Speech, 2nd June 1997

68. Kirby A, ‘New life for the

cities’ BBC, 13th January 1999

69. Civic Trust Response,

Towards a Strong Urban

Renaissance

70. LGA Briefing, 29 June 1999

‘Towards and Urban

Renaissance’ www.lga.gov.uk

Case Study 3: Lord Rogers and an Architect’s policy

After the 1997 election, the Deputy Prime Minister John Prescott asked the award-winning architect

Lord Rogers of Riverside, whose signature buildings include the Pompidou Centre in Paris and the

Lloyds Building in London, to lead the Urban Task Force. It presented its findings in 1999 in Towards

an Urban Renaissance, which has set the tone for the last eight years of urban policy. The document

is very much the work of an architect, with a heavy emphasis on the built environment. The panel did

not include any economists, nor do any appear to have been consulted. It has a strong emphasis on

the urban core, the need for density and use of brownfield sites. It also argued that local people should

be more heavily involved in creating a vision for their area. This is a document that those who like city

centres will find appealing, but which suburbanites, for whom sprawl is a price worth paying for gar-

dens and private space, will not.

ing in Prospect magazine, was perhaps themost fulsome, describing it as “one of themost intelligent and decent documents pub-lished by an official body in recent decades”.71

Others were more sceptical, however.Professor Paul Cheshire remarked with somejustification: “Architects and designers arenot social scientists and have little or no ana-lytical training in understanding how citieswork.”72 Six years later in Lord Rogers’ follow-up report, Towards a Strong UrbanRenaissance, one of the members of the taskforce, Sir Peter Hall, argued against its origi-nal proposals for high-density developmenton brownfield sites, the substance of chapter3. However well-intentioned, he felt that thiswould “deepen the well-documented hous-ing crisis that faces us and our government”.73

On that point, at the very least, the criticshave been proven right.

In 2000, the Government published thefirst formal White Paper on urban renewalfor 23 years: Our Towns and Cities: the Future– Delivering an Urban Renaissance which wasa clear response to the Rogers report.Although broadly favourable to its analysis,the Government did not implement the pro-posals en bloc, but instead selected some ofthe 106 recommendations to implement.74

Confusion, continuity and changeA result of this flowering of new ideas, onlysome of which have been taken up, is thaturban policy since 1997 has been both con-servative – almost all of the policies have clearhistorical precedents, as Figure 2 shows – andincoherent. One academic author was damn-ing: “The urban policy White Paper mayperhaps be best understood as a policy ‘col-lage’, drawing bits of social democratic rhet-oric from parts of the New Labour policyvocabulary, pasted in alon g side a physicalisturban design view of cities, an old set of ideasabout containing urban sprawl, economicconceptions of the value of ‘attractive cities’,and specific sectoral policy agendas … Itlacks not just a well-developed concept of

urban dynamics, but shows little of the com-plex, overlapping, intersecting and conflict-ing social worlds of urban life.”75

The sheer range of initiatives make thepolicies of this era appear deeply incoherent.The editors of one book admit: “As a conse-quence of the considerable changes in thenature, form, content and delivery of Britishurban policy that have taken place underNew Labour, it has been very difficult forpractitioners, academics and urban residentsthemselves to keep up with what has beenhappening.”76

Such proliferation is not simply untidy, italso makes it difficult to assess their effective-ness. This has always been a concern to thosewho study policy outcomes: in 1989 theAudit Commission complained that the exis-tence of 14 different policies meant thaturban policy had become a “patchworkquilt”.77 By 2003 the regeneration minister,Lord Rooker, described its ever greater com-plexity as “a bowl of spaghetti”;78 theGuardian newspaper identified 46 differenturban policy funding streams. Some, such asthe New Deal for Communities and SingleRegeneration Budget, were big programmes,whereas others, such as the CapitalModernisation Fund (Small Retailers) werevery small indeed. Some projects had verygeneral names, such as Fair Share, PositiveFutures and Step Up while others were morespecific, the Drug Action Teams and YouthMusic Action Zones. Only a few years on itcan be hard to remember the distinctionbetween the Early Years Development andChildcare Partnerships and theNeighbourhood Nursery Centres, betweenthe Crime Reduction Programme and theSafer Communities Initiative, betweenSpaces for Sport and the Arts and SportsAction Zones.79 Nor was it the case that therewere many programmes at national level, butonly one in any given locality. As Figure 3 onpage 28 shows, an area such as Liverpoolcould be the focus of a plethora of initiatives.

This chapter cannot possibly cover allof the “monumental complexity”80 of pol-

Cities limited

28

71. Lieven A, ‘Tale of Two Cities’,

Prospect Magazine, August

1999, no 44 www.prospect-

maga-

zine.co.uk/article_details.php?id

=3868

72. Cheshire P. ‘Resurgent

Cities, Urban Myths and Policy

Hubris: What we Need to Know’,

Urban Studies, 43 (8): 1231-

1246, 2006

73. Rogers et al, Towards a

Strong Urban Renaissance: An

independent report by members

of the Urban Task Force, p 19

74. BBC, ‘Rogers: Put cities

first’, BBC News, 30th June

2000

75. Healey P, ‘Towards a “Social

Democratic“ Policy Agenda for

Cities‘, pp 159-171, in

Johnstone, C and Whitehead, M

(eds) New Horizons in British

Urban Policy: Perspectives on

New Labour’s urban

renaissance, pp 165-166

Ashgate, 2004







New Labour’s Urban

Renaissance, p 4,Ashgate, 2004

77. Ibid, p 5

78. Ibid, p 5

79. Ibid, p 6

80. Ibid, p 13

icy since 1997. Instead, as in chapter 3, welook in detail at two policies that are, insome sense, emblematic of the approachesthat have been tried since 1997.

An emphasis on the poorestneighbourhoodsA distinctive aspect of post-1997 policyhas been an emphasis not on the region or

even the city, but on pockets of deprivationwithin particular towns and cities. Thisarose from a Social Exclusion Unit report,Bringing Britain Together: a national strat-egy for neighbourhood renewal,81 whichargued that urban policy had failed toaffect the lives of the poorest areas in thetowns it targeted. If anything, the concen-tration of poverty had increased overtime, with growing polarisation, particu-


Urban regeneration since 1997

Artisans Dwelling Act, 1896

Addison Act,1919

Greenwood Act,1930

Housing Act,1935

Town and Country Planning Act,1944

Comprehensive Development Areas, 1947

Housing: The Next Step, 1953

Housing Act, 1969

Housing Action Areas, 1974

Local Government & Planning Act, 1980

Urban Renewal Unit, 1985; City Action Team,1985

Urban Regeneration Grant, 1987

Action for Cities, 1988 (City Grant)

Local Gov’t and Housing Act, Renewal Areas (RAs), 1989

City Challenge, 1991

Single Regeneration Budget, 1993; English Partnerships, 1993

Regional Development Agencies, 1997

New Deal for Communities, Neighbourhood Renewal Fund, 1998

Towards an Urban Renaissance, 1999

Business Improvement Districts, 2000; City Growth, 2000

Local Development Framework, 2004

Local Government Act, Section II, 1966

Urban Programme, 1968

Local Government Grant Act, 1969

Policy for the Inner Cities,1977

Inner Urban Areas Act, 1978

Urban Development Corporations & Enterprise Zones, 1980

Urban Development Grant, 1982

Estate Action, 1987

Housing Action Teams, 1989

Housing Grants, Construction & Regeneration Act, 1996

Housing Investment Programme, 1998

HMR Pathfinder, 2000

Local Communities Strategy, 2003; Sustainable Communities, 2003

Key

Economic

Social

Both economic and social

Note: Genealogy represents, a)major urban regeneration policies,

ed or enabled urban policy, c)White Papers on urban issues,between 1896 and 2006. It

pendently by Scotland, Wales andNorthern Ireland, European policies,and other UK policies that impact

sified as urban policy.

Figure 2: Urban Policy Genealogy

81. Social Exclusion Unit,

Bringing Britain Together: a

national strategy for neigh-

bourhood renewal, Stationery

Office, 1998

Cities Limited

30

82. Adapted from Webber C and

Marshall A, ‘Bridging the Gap:

Delivering infrastructure invest-

ment in Britain’s cities’, Journal

of Urban Regeneration and

Renewal, 1(1): 7-21, 2007, p 10



England, CASEreport 34, 2007

84. Cheshire P and Sheppard S,

‘The Introduction of Price

Signals into Land Use Planning

Decision-making: a proposal’,

Urban Studies 42 (4), 647-663,

2005







New Labour’s Urban

Renaissance, p 3 Ashgate, 2004

86. Lawless P, ‘Area-based

Urban Interventions: rationale

and outcomes: The NDC

Programme in England’, Urban

Studies, 43(11):1991-2001, 2006

L i v e r p o o l 30 + Ar ea Ba sed In itiatives <£300 mil lion p.a. budget

D f T Local Transport Plan

Homezones

DW P Action Team for Jobs

Employment Action Zones Welfare to Work

D C F S EAZ x 6

Surestart x 10 Children’s Fund

Special Education Needs and Disability Aim Higher

Extended Schools Building School for the Future

Neighbourhood Nurseries

T r e a s u r y Capital modernisation

LEGI LABGI

L o t te r y Heritage Lottery Big Lottery

Sports England Arts Council of England

E u r o p e a n U n i o n ESF

ERDF Interreg

URBACT Non-Structural

D C M S Sports Action Zones Positive Futures x 2

Capital of Culture UNESCO World Heritage Site

Youth Music Zone

D C L G Neighbourhood Renewal Fund

Single Regeneration Budget Learning in Deprived Communities

Single Community Settlement LAAs

LSPA 1 & 2 HMR Pathfinder

NDC (Kensington) SSC Neighbourhood Element

N W D A Northern Way

Single Pot New Approaches

Mersey Waterfront Land Reclamation Programme

Liverpool Economic Programme

D e p a r tm e n t o f H e a l th Health Action Zones

Healthy Schools Programme Surestart Plus

E n g l i s h H e r i ta g e Townscape Heritage Initiative

U R C Liverpool Vision

Liverpool Land Development Company

D T I Greater Merseyside Enterprise

City Growth Strategy Entrepreneur Commission

E n g l i s h P a r tn e r s h i p s ECF

Figure 3: Urban Regeneration Funding Streams in Liverpool82

larly in the social housing sector.83 (It isnot clear whether such concentrationsare harmful either to the poor or tosociety more generally, or whether theyare simply the spatial manifestation ofany given level of economy-wideinequality in an urban setting. Cheshireand Sheppard and Hills provide con-trasting approaches and conclusions tothis question.)84 The primary meansthrough which the Government tried totarget resources at very local levels wasthe New Deal for Communities(NDC). Launched by both the PrimeMinister and the deputy PrimeMinister, at the Holly Street Estate inHackney in 1998, it was an attempt tomake real the promise Tony Blair hadmade the previous year on theAylesbury Estate.85

The NDC thus represented anextreme case of so-called area-based ini-

tiatives and of “worst-first”, that is, try-ing to boost the worst areas, rather thanimproving the somewhat better ones inthe hope or expectation that the benefitswould spillover to all. The programmecovered a total of 39 places, with fund-ing averaging about £5 million a year forten years.86 The average area covered bya NDC was around 10,000 people.87

The efficacy of area-based initiativeshad already been questioned, both inthe Department for the Environment’s1994 report, Assessing the Impact ofUrban Policy and by academicresearchers, such as Shaw andRobinson.88 But NDCs were to be dif-ferent in a number of ways. First, thelocal council was neither to be givenoverall responsibility, nor to bebypassed. Instead it was to be one ofmany groups who were to work togeth-er. Most innovatively, the bodies in

charge of NDC money included directrepresentatives of the community itself.Indeed, on 24 of the 39 NDCs local res-idents made up a majority of the board.89

This, the DETR argued, was vital tomaking the NDC work better than previ-ous area-based initiatives: “The very localfocus will allow communities to identifyclosely with the programme and beactively involved.”90 NDCs, it was envis-aged would galvanise other, wider areaprogrammes, which would adapt theirdelivery in NDC areas in line with localpreferences. This however can produceconflict when the wider programme hasto meet national targets that are differentto those favoured by the local communi-ty. Over time the emphasis on local deci-sion making seems to have declined, withlocal boards being relegated to organisa-tions responsible for delivery.

Evidence for this transition can be seenon the Aylesbury Estate, scene of Blair’soriginal speech, and one of the first NDCareas. Local residents rejected initial plansto demolish and rebuild much of theestate because this involved transferringthe estate to a housing association. Despitethat, the sell-off is going ahead; the coun-cil states that all other options are too exp -en sive. The estate, already fairly dense at 97houses per hectare, will be rebuilt at 172houses per hectare. The additional houseswill be private, and their construction willrefinance the rebuilding. It is possible thatthe new, more diverse estate will be well-integrated, and economically and sociallysuccessful. But it is equally possible thatthe current community will remain as pooras ever, only now will be more cramped.One thing that is clear, however, is thatwhen the national expert views clashedwith those of local people, the nationalview prevailed. The localism of NDCs wasvery limited.

More generally, it is hard to assesswhether the NDC has been effective. Aswe will argue in the next chapter, there

may be better ways of approaching thequestion of efficacy than by looking indetail at individual programmes. Evalua -tions of NDC programmes suffer fromtwo main flaws. First, the baseline datafor areas as small as these are often non-existent. As Cheshire notes more generally:“The basic research has not been doneand the Government has not fundedit.”91 On the good side, people living inNDC areas are more likely to tell sur-veys that their area has improved.Against that, they still don’t like theirareas much, and the objective data paintsa bleak picture. When we compare peo-ple’s attitudes in 2002 and 2004, we finda 6 per cent drop in the number of peo-ple living in NDCs who felt unsafe afterdark, but that still left 49 per cent feelingunsafe after dark. Similarly, 10 per centless were worried about being mugged,but 48 per cent still worried about it.Clearly, an area in which half the popula-tion worries about burglary, mugging,car crime and so on still needs muchimprovement.92

New approaches to developmentWhen the Government persuaded Rootesto open a plant at Linwood, the regenera-tion model was clear. Linwood would pro-duce cars that would be sold throughoutBritain and perhaps more widely. As aresult money would flow from outsideBritain as a whole to Linwood, andLinwood would become richer. Therewould then be multiplier effects as the peo-ple of Linwood spent some of their newwages locally. If we apply that manufactur-ing model to the service industries of



87. Ibid

88. Shaw K and Robinson F,

‘Learning from experience:

reflections on two decades of

British urban policy’, Town

Planning Review, 69(1), 1998

89. Lawless, P, ‘Area-based




Studies, 43(11):1991-2001, 2006

90. Department for the

Environment, Transport and the

Regions, Guidance on Area-

Based Initiatives, p 5 June 1998

91. Cheshire P, ‘Resurgent

Cities, Urban Myths and Policy

Hubris: What we need to know’,

Urban Studies, 43(8): 1231-1246,

2006

92. Lawless, P, Area-based




Studies, 43(11):1991-2001,

2006, Table 1

“ If anything, the concentration of poverty had increased

over time, with growing polarisation, particularly in the

social housing sector”

today, it becomes apparent that for servic-es to lead to regeneration they must bringin new money to the area. If a new shopopens and sells only to local people, all it isdoing, in effect, is replacing an existingshop. In contrast, if that shop becomes adestination for people from more affluentareas outside the town, then new moneycan enter the town. We can see instantlywhy services can be a difficult basis forregeneration: although people are happy topurchase a car built hundreds or thousandsof miles away, we often prefer to consumeservices locally. There are exceptions: serv-ices that are embodied in manufacturedproducts – such as the design of a car, forexample. Equally, there are some servicesthat can be located anywhere, such as callcentres and help lines.

There are two other ways in which serv-ices can revitalise an area. First, providing amissing service can stop money flowingout of the local community. For example,the first shop on an estate can keep the

shop wages on the estate, if it employs localstaff. This can be useful for micro-regener-ation, but is unlikely to be material at thelevel of the town as a whole. Secondly,attracting high end service sector firms canlead to an influx of more skilled, higherpaid residents. This can have knock-oneffects for people already living there,although those effects can be ambiguous.On the one hand, more money in the areacan create jobs locally, as the new arrivalspurchase services locally. On the other, thenew arrivals can outbid existing residentsfor some services, notably housing, a com-mon experience in gentrifying areas ofLondon.

Cultural services are often identified ashaving the potential for regeneration.Fifty-six places in England now have for-mal “cultural quarters” as part of theirregeneration efforts. This started withSheffield, Leamington Spa andSouthwark in the nineties, since when thenumber has steadily increased. Such quar-

Cities limited

32

93. Robinson F, ‘Regenerating

the West End of Newcastle:

What Went Wrong?’ Northern

Economic Review, 36, 15-41,

Summer 2005, p. 15

94. http://www.newcastlendc.

com/page/glossary.cfm

95. Robinson F, op cit, p.34

Case Study 4: The West End of Newcastle upon Tyne

Newcastle’s West End has seen many attempts at regeneration. Some of its low quality Victorian

housing was cleared and replaced by council estates in the 1960s and 1970s. A combination of

few local jobs, very low skill levels and incomes and poor public transport means that there is a

sense in which the West End is in a world of its own. Forty-four per cent of the population have

no qualifications, 61 per cent of households have no access to a car and unemployment is two

thirds higher than the Newcastle average. When the Government announced £73 million for the

Newcastle and Gateshead Housing Market Renewal Pathfinder – whose prime focus is the West

End, Professor Fred Robinson wrote: “So, here we go again. Another new regeneration pro-

gramme, the latest in a long line of policy initiatives, is to be targeted on the West End of

Newcastle.”93

Its problems are certainly not the result of the absence of urban policy. The area was the recipient

of Urban Aid in the 1960s, Estate Action and Inner City Partnerships in the 1970s, City Challenge and

Enterprise Zones in the 1980s, the Single Regeneration Budget in the 1990s, and New Deal for

Communities and Housing Market Renewal Pathfinder funding in the 2000s. The New Deal for

Communities alone is expected to spend £55 million.94

Many of those who could leave have left: the population has fallen by a third in 20 years. In the

words of one West End resident: "There’s been no regeneration, just lots of demolition and people

moving out." We can argue over whether urban policy has been a failure or merely insufficient, but no

one could claim it as a success. 95

ters vary tremendously – St Helens is basedaround a small transport museum,although there are also ambitions for a gar-den on the scale of Kew or the EdenProject.96 Leicester’s cultural quarter isbased around a performing arts centre,97

while Middlesbrough Quarter offers allforms of dancing – including Morris danc-ing.98

There are good reasons to be sceptical ofthe long-term benefits of regenerationthrough cultural centres. There is no doubtthat they improve the aesthetics of an area.Many, such as Leicester, involve theemployment of big name architects todesign remarkable buildings. Others, suchas St Helens, involve giving significantsums of public money to property ownersto redevelop buildings. In Sheffield, theNational Centre for Popular Music wasoriginally planned to cost no more than £6million, and was expected to attract400,000 visitors a year. When it openedDavid Blunkett, the local MP, said: “Therecruitment programme offers hope tounemployed people and new opportunities

for Sheffield.”99 In fact the building cost£15 million and attracted only 65,000 pay-ing visitors in the first six months. Itbecame a nightclub, and was later sold for£1.5 million to Sheffield Hallam Universityfor use as a student union. Creditors lost 90pence in the pound. In the words of oneacademic commentator: “The centre wasan unmitigated disaster.”100

Two lessons stand out. First, the initialpredictions were little more than wishfulthinking. Worse, there were incentives forwishful thinking: as one director noted “Ibelieved that there were incentives toinflate the [likely visitor] number to get themoney.”101 This is a particular danger whenpeople are not spending their own moneyand do not have to bear the costs of mis-takes. Although some cultural ventures aresuccessful, it is not easy to predict whichwill be successful. Even apparently similarvenues can fare very differently: witness thesuccess of the Eden Project and the failureof National Garden of Wales in its originalincarnation. Secondly, the cost of regener-ation through culture can be extremely



96. St Helens Council, ‘St

Helens First’, St Helens

Community Magazine: Budget

Special, Winter 2003

97. FOCUS, Culture Leading the

Way in Leicester’s Regeneration,

[16/08/07]

98. www.middlesbroughquarter.

co.uk/

99. Kam, J ‘Success in Failure:

The National Centre for Popular

Music‘, Prometheus, Vol 22 No

2, June 2004

100. Ibid

101. Ibid

Case Study 5: Lace Market, Nottingham – successful cultural quarter

Nottingham’s lace market district was the centre of the world’s lace-making industry in Britain’s indus-

trial heyday. It has left a remarkably useful legacy: the highest concentration of listed industrial build-

ings in England – tall Victorian warehouses and factories built of brick facing on to narrow streets.

Unlike some larger factories, these buildings are relatively easy to convert into highly desirable flats as

they have large rectangular windows originally designed to let in the maximum amount of light for intri-

cate weaving work.

The physical characteristics of the area were always well-suited to artisan production, and

Nottingham Council has developed the lace market district into such an area. It contains 450 firms,

more than half focused on fashion design and production, and more than three-quarters being either

cultural or consumer businesses. The presence of a large university brings in lots of students, adding

to the sense that this is a young and dynamic area, with many bars and cafes.

The regeneration began with both private and public funds, including grants from the European

Regional Development Fund, English Partnerships, Urban Development Grants and the Heritage

Lottery Fund.

Two factors essential to its success were that the redevelopment process was started locally,

as Nottingham’s vision for Nottingham and that the area offered an intrinsically strong basis for

development.

high. Blunkett hoped that the NationalCentre for Popular Music would offer jobsto the unemployed in Sheffield. But evenat its peak it employed only 79 people –which, with a £15 million cost, means thateach job cost £190,000. Today the LeicesterPerfor ming Arts centre states that it is aim-ing to create 134 jobs – with a project costof £50 million, this would be £373,000 ajob.102

Culture, in short, is no sure-fire routeto regeneration. If it is to be successful itneeds to attract visitors from consider-

able distances, on a regular basis. It is farfrom clear that St Helens transport muse-um, or Leicester’s performing arts centrewill achieve that. The same could be saidfor many of the other cultural quartersthat have been created, or are proposed.Even if they do not go into liquidation,as the Sheffield centre did, the cost perjob appears to be very high. If, in fact,they are old-style physical regenerationprojects then they should be judged assuch, using standard value-for-moneycriteria.

Cities limited

34

102. www.leicesterpac.co.uk

5Evaluating urban policy

MethodologyThere are, broadly speaking, two ways toevaluate urban policy: micro and macro. Themicro approach investigates each policy insome detail. It starts by looking at the aimsand objectives of the policy and judges itssuccess against those criteria. Governmentfavours the micro method since it usuallywants to evaluate the success of a specific pol-icy, rather than the policy approach as awhole. It is the approach taken by theDepartment of Communities and LocalGovernment (DCLG), the Office of theDeputy Prime Minster (ODPM), theNational Audit Office (NAO) and theDepartment of Environment, Transport andthe Regions (DETR) in the past.103 It is alsothe approach used by many academic studiesundertaking similar analysis, such as Ball andMaginn,104 Rhodes et al,105 and Lawless.106

Such analysis usually starts by looking atthe outputs of the programme. One thatpledges to decontaminate 20 hectares of landand build a business park on it will be judgedby whether it decontaminates 20 hectares ofland and builds a business park on it. That isright and proper, not least because it is essen-tial in ensuring that agencies and organisa-tions are neither corrupt nor incompetent.Despite the case of John Poulson and morerecent events in Doncaster, British urbanregeneration policy is not characterised bycorruption or incompetence on theground.107 The overwhelming majority of themoney is spent as it should be, and achieves– in output terms – broadly what it says itwill achieve.108 Those who are implementingthe policy are capable and do a fine job.

We do not seek to repeat those evalua-tions here. Given the number of urbanregeneration programmes that have existed,in a wide range of places and contexts, sucha project would take a lifetime. Nor do weseek to review the strengths and weakness ofthe evaluations. Such work will always con-tain assumptions that could legitimately bequestioned, but these evaluations have beenprofessionally carried out to high standards.

Our aim is broader. We do not seek tolearn whether programme A worked betterin place X or Y in 2001, or whether pro-gramme B was more effective than pro-gramme C in place Z in 2002-4. Instead wewant to ask the big question: what has hap-pened to places that have had significant lev-els of urban policy intervention in the pastten years?

We do so for two reasons. First, thebiggest difficulty in studies of specific pro-grammes is what is termed “additionality“.It is usually easy to show that the pro-gramme has achieved certain things: a roadhas been built, some training undertaken,a new business assisted.109 But the real ques-tion is what would have happened withoutthe programme. Maybe the road builderswould have sat at home twiddling theirthumbs, with their building equipmentstanding idle. Maybe the person who wastrained would have sat in the park, doingnothing. Maybe that new business wouldhave failed and the entrepreneur leftunemployed. If so, the benefits of the pro-gramme have been correctly assessed. Butof course it is likely that at least some of theroad building equipment would have been


103. Comptroller and Auditor

General ‘An Early Progress

Report on the New Deal for

Communities Programme:

English Regions’, London:

Stationery Office, 2004; Office of

the Deputy Prime Minister

‘Turning Areas Around – The

Impact of SRB on Final

Outcomes’, Urban Research

Summary, 2002; Department for

the Environment, Transport and

the Regions, City Challenge -

final national evaluation, 2000;

National Audit Office, The

Achievements of the Second

and Third Generation Urban

Development Corporations,

1993b; Office of the Deputy

Prime Minister, Evaluation of the

National Strategy for

Neighbourhood Renewal, 2005

104. Ball M and Maginn P, ‘The

Contradictions of Urban Policy:

the case of the SRB in London’,

Environment and Planning C:

Government & Policy, 22: 739-

65, 2004

105. Rhodes, J et al, ‘Lessons

and Evaluation Evidence from

Ten Single Regeneration Budget

Case Studies‘’, DETR Annex,

2002

106. Lawless P, Area-based




Studies, 43(11):1991-2001, 2006

107. Fitzwalter, R and Taylor, D,

Web of Corruption: The full story

of John Poulson and T. Dan

Smith, Granada, London 1981;

Wainwright M, ‘Donnygate scan-

dal ends in jail terms’, Guardian,

13 March 2002

108. Office of the Deputy Prime

Minister, Assessing the Impacts

of Spatial Interventions, 2004;

National Audit Office,

Regenerating the Inner Cities,

1993a

109. For more on this see the

Parable of the Broken Window

by Frédéric Bastiat and his gen-

eral theory put forward in Ce

qu’on voit et ce qu’on ne voit

pas,1850, http://bastiat.org/en/

twisatwins.html

used to build other roads in the area or else-where. The person who was trained mighthave been trained anyway or, even withouttraining, may well have been in work. Thebusiness that was successful may have beensuccessful without the advice of the urbanregeneration agency, or, conversely, its (sub-sidised) success may have been at theexpense of another (equally good) local firm.The programme’s real effect is the amountthat is additional, that is, the total amountthat has been achieved, less that whichwould have been achieved anyhow, and lessany negative side-effects (and, for that mat-ter, plus any positive side-effects). Goodevaluations try to include measures of dead-weight (what would have happened any-how) and displacement (other firms losingout to subsidised competitors), as well aslooking for side-effects, positive and nega-tive. But all of these are very difficult to doand, however well done, the resulting num-bers have wide margins of error. A top-downstudy can help to get around this to someextent, by looking at the town as a whole.Thus, rather than looking at the number ofnew firms helped by urban regenerationprojects, we looked at the number of newfirms created in the town over time. If theurban regeneration project helps manyfirms, but those firms would have been cre-ated anyway, then our measure will show nochange: new firm creation has been unaffect-ed, and our results are a better measure bywhich to evaluate the policy.

There is, however, a second, more impor-tant reason why our approach is the mostuseful in the context of what we are trying todo. We are not ultimately aiming to say thatpolicy A is better than policy B, but rather to

ask whether policies A and B together areeffective. We want to know whether placesthat gain significant amounts of regenerationfunding go on to sparkle with success. Theonly way to do that is to look at the townsand cities concerned, and not at the individ-ual programmes.

Even then, evaluation is not straightfor-ward. It is sometimes easier to walk around acity and sense whether it is doing well. Is itthe sort of place that we would be happy tolive in, to see our children grow up in? Werecognise success when we see it, but it is notalways straightforward to encapsulate in aseries of numbers, a table or a graph.Nevertheless, we can point to urban areasthat are successful: Windsor or Edinburgh,for example. We know that these townsenjoy successful local economies and all thatthis implies. We can confidently predict thatthey will have higher than average disposableincomes, and the associated benefits, such aslonger life expectancy, higher employmentrates and higher school standards. We alsoexpect them to have lower rates of poverty,fewer people out of work and fewer peopleleaving school with no qualifications thanelsewhere. And, of course, such areas willrarely have urban regeneration programmesbecause they do not need them.

SampleIn order to proceed with a top-down analy-sis we need to construct a sample of townsand cities that have received significant levelsof urban policy intervention. The sampleshould be broad enough that the results can-not be swayed through exogenous shocks,such as the closing of a military base or thecoming of the Olympics. The failure of theformer area or the success of the latter wouldnot be sufficient to show the failure or suc-cess of urban policy more broadly: these arerare events, and policy needs to be deter-mined by the broader experience.

There is no “correct“ way to constructsuch a sample, but rather lots of reasonable

Cities limited

36

“ We want to know whether places that gain significant

amounts of regeneration funding go on to sparkle with

success”

ways to do so. We constructed a sample of18 urban areas that is balanced in a num-ber of ways. First, it covers a wide geo-graphical range, from Glasgow in theNorth to Southampton in the South, fromMerthyr Tydfil in the West to Hull in theEast. This reduces the chance that ourresults are biased because of the changingeconomic geography of Britain – althoughthe interaction of geography and urbanpolicy is something we will return to later.Our sample contains places of differentsizes, from towns with under 100,000 peo-ple (Merthyr Tydfil and Hastings),through medium-size places (Stoke andWolverhampton), each with around aquarter of a million, to larger cities ofover half a million (Sheffield andGlasgow).

But what is most important about oursample is not that it is geographically rep-resentative or in terms of the size distribu-tion, vital though these characteristics are,but that it is a sample of towns and citiesthat have received significant assistancefrom urban regeneration programmes. Wecan easily imagine that former textiletowns such as Blackburn, former coal min-ing areas like Merthyr Tydfil, or the bigtranscontinental ports of Liverpool andHull have received significant levels of

funding over the years. Table 2 demon-strates that it is the case. We identifiedeight key funding streams for urban renew-al over the past decade, and asked the sim-ple question: did the town or city benefitfrom that funding stream? As Table 2makes clear the towns in our sample didindeed benefit from significant levels offunding: the average score is 6.4 per centout of a possible 8 per cent, that is, onaverage our sample of towns benefitedfrom 80 per cent of the urban policy fund-ing mechanisms listed in the table. Two,Wigan and Sunderland, received supportunder all eight funding streams.

In addition to assembling a sample, weneeded to decide the criteria against whichto judge the success that urban policy hashad in revitalising these towns. That condi-tions improve over time is not sufficient todeem policy successful: when the economyas a whole is growing, we would expect alltowns and cities to see an improvement inconditions over time. We argue that evi-dence showing that these towns and citieswere closing the gap between their ownand national average gross value added(GVA) scores would be good evidence ofsuccess. It is unrealistic to expect full con-vergence: there will be persistence in per-formance over time, not least because skill


Evaluating urban policy

<100 100-250 250-500 >500

9

8

7

6

5

4

3

2

1

0

Population in thousands

Num

ber

of

tow

ns

Figure 4: City Distribution by Population, 2007

formation (whether through schooling orthrough migration) and company loca-tions are both slow processes. But were weto find that our areas started off 10 percent behind, and end up 10 per centbehind, we would begin to question morestrongly the success and therefore the roleof urban policy.

As well as looking at our sample ofurban policy towns and the national aver-age, we also include a small sample of suc-cessful towns, Edinburgh, Windsor-Maidenhead, Peterborough, Bristol,Milton Keynes and Swindon. These aretowns we would expect to rank above aver-age on most measures of success. Clearly,not all towns can be above average, but wecan look to see whether Britain as a whole,

and/or our sample of urban policy towns,appear to be converging to these successstories. Although affluent, these towns arenot extreme examples of success: we havenot included the City of London, orChelsea, or similar areas. Instead we havepicked more typical places. We includethese towns in order to get some sense ofthe dynamics of the modern economy. Afinding that these places are getting furtherahead of the UK average would offer sup-port for the locational theories of city riseand decline. It would suggest that theseplaces have something special that is miss-ing not only in places that are struggling,but in the UK more generally. If even theaverage is not catching up with the best, wewould have to wonder whether policy can

Cities limited

38

Table 2: Urban Regeneration Policy: 1994-2007110

110. Data for Merthyr Tydfil and

Glasgow are not available on a

comparable basis as funding

mechanisms are different in the

Scotland and Wales

Sin

gle

Reg

ener

atio

nB

udge

t

Eng

lish

Par

tner

ship

City

Cha

lleng

e

Coa

lfiel

d A

reas

Fund

/ C

oalfi

eld

Ent

erpr

ise

Fund

New

Dea

l for

Com

mun

ities

Nei

ghbo

urho

odR

enew

al F

und

ER

DF

/ E

SF

UR

BA

N

Saf

er, S

tron

ger

Com

mun

ities

Fun

d

Sco

re (0

-8)

Sheffield

Liverpool

Blackburn

Hull

Wigan

Southampton

Coventry

Sunderland

Bradford

Stoke

Leicester

Hastings

Blackpool

Stockton-on-Tees

Warrington

Walsall

� � � � � � 6

� � � � � � � 7

� � � � � � � 6

� � � � � 5

� � � � � � � � 8

� � � � � 5

� � � � � � � 7

� � � � � � � � 8

� � � � � � � 7

� � � � � � � 7

� � � � � � � 7

� � � � � � 6

� � � � � � 6

� � � � � � 6

� � � � 4

� � � � � � � 7

make the struggling catch up with the best.Were we to find that the average does closethe gap on the best it becomes more likelythat places can learn from each other suffi-ciently to make urban policy an effectivetool of regeneration.

Measures & findingsThe core measures of success or failuremust be concerned with income. First,income is an important measure in and ofitself. Secondly, it is reasonably well-corre-lated with many other important aspects ofthe standard of living, including schoolstandards and mortality. Thirdly, income isone of the key variables used to assess eligi-bility for urban regeneration funding: ifyour area’s income remains low, you willend up receiving permanent regenerationfunding. In such a case regeneration wouldhave failed: like all aid programmes, thebest result is for the regeneration funds tocease to be needed.

There are many ways in which a town’saverage income can increase, and not all

are equally valuable in terms of judgingwhether it is “on the up“. For example,average income will rise in a town withhigh unemployment if the governmentraises unemployment benefits or if morepeople find work. Clearly the latter is amuch more desirable outcome if we aretrying to assess the degree to which thetown is improving its situation. Equally,those in low-paid work become richer ifin-work benefits, such as tax credits, areincreased or if they get promoted. Butagain, the latter could be seen as evidenceof regeneration, the former cannot.

Gross Value AddedFor these reasons the best measure ofregeneration is gross value added (GVA)per head, which measures the contributionthat people are making to the economy.111

It captures both private and public sectorwork, but does not include transfer pay-ments, such as pensions or tax credits. Ahigh level of GVA is the best basis for eco-nomically sustainable prosperity: it means



111. Gross Value Added (GVA)

measures the contribution to the

economy of each individual pro-

ducer, industry, sector or area in

the UK. The GVA generated by

any area or unit engaged in pro-

duction activity can be calculat-

ed as the residual of the unit’s

total output less intermediate

consumption (that is, good and

services used up in the process

of producing the output), or as

the sum of the factor incomes

generated by the production

process. GVA plus taxes on

products less subsidies on prod-

ucts equals GDP. In spatial

terms, GVA is calculated by

workplace, which can underesti-

mate the economic returns of

areas characterised as com-

muter belts. GVA per head is

total area GVA divided by total

area population at particular

time. http://www.statistics.

gov.uk/cci/nugget.asp?id=254

Sheffield Liverpool

Blackburn

Hull

Wigan

Southampton

Coventry

Sunderland

Bradford

Stoke

Leicester

Hastings

Blackpool

Stockton

Warrington

Walsall

Merthyr Tydfil

Glasgow

Figure 5: Geographical location of sample set

that people are doing jobs for which thereis high demand and for which they arequalified. GVA is not a perfect measure,however, and we highlight two potentialissues. The first is that GVA is allocated byplace of work and not by place of resi-dence. Thus it measures the value forworkers in the town, rather than for theresidents of the town. This is pertinent forareas with significant levels of commuting.It would be wrong to condemn an areawith a low GVA but from which peoplecan and do commute to well-paid jobsnearby. Equally we would need to questionthe success of a place with a high GVA iflarge numbers of commuters are maskinghigh levels of local unemployment.Second, it is very hard to calculate GVA forinternal transactions within large multi-location firms. If Toyota produces theengines for its cars in Deeside and assem-bles the car bodies in Burnaston, it is notstraightforward to decide how much of thecar’s final value has been added in eachplace – or, for that matter, in the placewhere Toyota designed the car, the placewhere Toyota administers back-office func-tions, and so on. Although statisticianshave developed methods to correct for this– which also apply at national and interna-tional level – none are perfect. We have

taken two steps to avoid the problem.First, we look at a sample of many placesrather than just at one, since difficultiesarising in individual places are more likelyto cancel each other out as the sample sizeincreases. Secondly, we looked not onlyat GVA, but also at other entirely inde-pendent measures, to see if they present-ed a similar picture across Britain andover time.

Examining GVA over time, we can seethat far from converging to the UK aver-age, our urban policy sample divergedfrom the national average. In 1997 theurban policy group were on average 9 percent behind, by 2004 the gap hadincreased to 13 per cent. The ratio fellsteadily from 1995 to 2001, before stabil-ising at between 83-84 per cent of thenational figure. In contrast the successfultowns increased their lead. Already 39per cent above the national average in1997, they were 46 per cent ahead by2004. The gap between the two sampleshad widened, with the urban policy groupslipping from 66 per cent of the successfultowns’ average in 1997 to 60 per cent by2004. Urban policy does not appear to bedelivering economically vibrant areaswith the standards of living available else-where.

Cities limited

40

112. Data for Stockton includes

Hartlepool, Warrington includes

Halton, and Blackburn includes

Darwen, source: ONS

Figure 6: GVA relative change against UK average between 1995 and 2004112

80%

90%

100%

110%

120%

130%

140%

150%

1995 1996 1997 1998 1999 2000 2001 2002 2003 200455%

60%

65%

70%

75%

Per

cent

of U

K a

vera

ge v

alue

s

Rat

io u

rban

pol

icy

to s

ucce

ssfu

l tow

ns

Urban Policy Sample Successful Town Sample Ratio (right hand axis)

Personal IncomesSince measuring GVA by local area isfraught with difficulty and since the figuresfor any one place are prone to error, it isimportant to compare these findings withevidence from similar, but independentsources. The most obvious source is theseries on personal incomes constructedfrom HM Revenue and Customs data.Unlike GVA, this is based on residence,not place of work. A town that is home tosignificant numbers of commuters will dobetter on this measure than on GVA.Again, the series is not perfect: it capturesonly the income of those who pay tax, sothat if those with lower paid jobs becomeunemployed they drop out of the calcula-tion and the area appears to become richer.In addition, the statistics are based on asample of taxpayers, rather than all taxpay-ers. These drawbacks can be reduced bylooking not at individual places, but at theaverage of our sample.

Figure 7 shows a fairly similar althoughnot as pronounced a pattern as Figure 6.Our urban policy sample began 17 percent behind the UK average in 1997 andended 18 per cent behind in 2005: itslipped slightly backwards until 2001,since when there has been no materialchange. Conversely our successful town

sample started off 7 per cent ahead andended up 9 per cent ahead. In 1997 tax-payers in the successful towns were justunder 30 per cent richer than those in thegroup warranting urban policy interven-tions, by 2005 they had become 33 percent better off, a small but noticeableincrease in inequality.

UnemploymentThe obvious complement to these InlandRevenue derived statistics would be a serieson those too poor to pay tax. After all, forthose in work two areas could have thesame average incomes, but if one area hada lower proportion of people in work itwould be less successful. Therefore we alsolooked at unemployment. High unem-ployment is clear and unambiguous evi-dence of an unsuccessful local economy,since there is no reason to believe that thepeople in any one town are more or less“work-shy“ than those in another. Further,high unemployment often understates thetrue level of the problem; we find what aretermed “discouraged“ workers in placeswhere jobs are scarce. These are peoplewho are not looking for work, althoughthey are capable of it, because they perceivethat work is hard to come by in their area.



113. Inland Revenue did not col-

lect data for 1998 or 1999. Data

availability means that Merthyr

Tydfil is included only from 2000,

Swindon only from 1997, source:

HMRC

Figure 7: Personal income change relative to UK average, 1994 to 2005113

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

120.0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

70.0%

75.0%

80.0%

85.0%


Per

cent

of U

K a

vera

ge v

alue

s

Rat

io u

rban

pol

icy

to s

ucce

ssfu

l tow

ns

Cities limited

42

The successful British film The Full Montytold the story of a group of men, somewith considerable entrepreneurial spirit,who were unable to find reasonable regularjobs after the local steel works closed. Weshould accept that at least some discour-aged workers have made the rationalchoice: job hunting in their area, at theirage and skill level, is not a worthwhile wayto spend their time.

Figure 8 shows a more complex patternthan our earlier indicators. First, the prin-cipal axis is reversed, that is, a fall in unem-ployment leads the line to rise. This is astandard device and makes the graph com-parable with earlier ones: rising lines aregood news. When we look at the graph, wesee that unemployment in the urban poli-cy areas became significantly worsebetween 1997 and 1999, before improvingsteadily until 2005, at which point it wasonly the smallest fraction below its initiallevel. Conversely, our sample of successfultowns saw unemployment rise relative tothe national average from 1997 to 2000,then improving to 2005, at which point itwas only the smallest fraction above its ini-tial level. As a result of these swings, theratio of unemployment in the two sampleshas changed fairly dramatically over thepast ten years. Unemployment in the

urban policy sample exceeded that in thesuccessful town sample by between 36 percent and 76 per cent, and ended up backwhere it was in 1997.

Overall, there has been no improvementin unemployment levels in our urban poli-cy sample since 1997, relative either to thenational average or to the sample of suc-cessful towns. Secondly, the successfultowns do not have markedly better unem-ployment rates than the national average.This tells us that Britain does not have aneconomy-wide unemployment problem,but rather quite marked pockets of unem-ployment in some big cities, a conclusionreinforced by looking at the actual unem-ployment rates. Nationally, unemploymentfell from 7.1 per cent to 4.6 per cent inLabour’s first term, after which it hasremained essentially unaltered. A similarpattern is true for both the urban policysample, where unemployment fell from10.2 per cent to 6.6 per cent in 2001 butonly to 6.2 per cent since, and in the suc-cessful areas, where unemployment fellfrom 6.3 per cent to 4.1 per cent, beforeremaining broadly level. In each case,therefore, unemployment appears to havefallen to some “equilibrium” level, at whichpoint it has effectively remained constant.Unfortunately the equilibrium level

114. Source: ONS, model based

estimates

Figure 8: Unemployment rates relative to UK average, 1996 to 2005114

80%

90%

100%

110%

120%

130%

140%

150%

160%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

55%

60%

65%

70%

75%

Per

cent

of U

K a

vera

ge v

alue

s

Rat

io u

rban

pol

icy

to s

ucce

ssfu

l tow

ns


appears to be almost 50 per cent higher inour urban policy sample than elsewhere.

We have, then, three measures by whichto judge the outcomes of urban policy:gross value added, personal incomes andunemployment levels. Although there aredifferences in emphasis between the three,the big picture is the same whichever meas-ure we use: the urban policy towns are notconverging to the UK average, if anythingthey are slipping farther behind; the townsthat are ahead remain ahead, and if any-thing are widening their lead. Divergenceappears here to stay.

Where do people want to live?So far we have a gloomy picture. Ofcourse, statistics such as these can nevercapture the whole situation, and we needto ask whether people’s choices as to whereto live are consistent with the picture thatwe are painting. Do people want to moveto these cities or do they want to leavethem? In many countries (and in 19th-cen-tury Britain) we could answer this questionby looking at migration statistics. Butmigration is very limited in Britain today.Social housing is based primarily on localwaiting lists, making it very hard for socialhousing tenants to move from one town to

another in search of work. Only 3 per centof those moving within the social housingsector do so for job related reasons com-pared to 12 per cent of house movesnationally and social tenants are only halfas likely to move as those in othertenures.115 More generally, very low rates ofhouse building mean that it is not possibleto migrate from A to B if B has no sparehouses and cannot or will not build anymore. In these circumstances the desire tomigrate but the lack of ability to do so willexpress itself in house price differentials:lots of people want to move to from A toB, and so the houses in B are effectivelyauctioned to the highest bidders, with thedifference in the price of housing in A andB reflecting the extent to which peoplewould like to move from A to B, but can-not. We include, therefore, two measures:the change in proportion of the UK popu-lation who live in our sample towns andchanges in the level of house prices in theseareas relative to overall UK levels.

This figure shows, above all, the remark-ably slow rate at which Britain builds hous-es in areas of economic success: on average,the population of our sample of successfultowns has increased by just 0.05 per cent ayear more than the national rise in popula-tion. To put that another way, each suc-



115 Hills J, Ends and Means:

The future roles of social hous-

ing in England, CASEreport 34,

2007, p. 107-109

116. Sources: Halifax House

Price Index and ONS

Figure 9: House Prices and Migration Rates, 1994 to 2005116

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200591%

92%

93%

94%

95%

96%

97%

98%

99%

100%

101%

House prices: Urban Policy Sample House prices: Successful Town Sample

Migration: Urban Policy Sample (RHS) Migration: Successful Town Sample (RHS)

Rel

ativ

e to

nat

iona

l ave

rage

% o

f 199

4 va

ules

Cities limited

44

cessful town (average population,250,000) grew by about one additionalhousehold per week. In contrast, the urbanpolicy towns are losing population share,not rapidly – the housing system makesthat difficult – but steadily.

In 1997 house prices were about 30 percent lower in our urban policy samplethan in the successful towns, and were30 per cent lower at the end of the peri-od too. Judging by the evidence onwhere people want to live, urban policyhas not succeeded in turning round thetowns and cities that it is targeting. Onthe contrary, these places are in prettymuch the same relative position as theywere in 1997.

Other indicatorsThere are plenty of other indicators thatwould show much the same picture. VATregistrations per head, for example,remained between 71 per cent and 76 percent of the national average in our urbanpolicy sample, and between 113 per centand 125 per cent in the successful townsample. On average, a person in an urbanpolicy town was 38 per cent less likely toregister a new business than someone inour successful town sample. The ratio isconverging slightly, but 93 per cent of theconvergence was the result of falls in VATregistration in our successful towns, andonly 7 per cent was driven by rises in VATregistration in urban policy areas. The gapin life expectancy has remained constant aswell: it was 20 months in 1997, and 20months in 2005; the difference is higherthan in the early 1990s. Educationalattainment (measured as the proportion ofstudents getting five GCSEs at grade C orabove, or equivalent) shows a similar story:students in our urban policy towns were 13per cent less likely to meet this target thanstudents from the affluent town sample in2000, the first year for which data is read-ily available, and they were 12 per cent less

likely to achieve it in 2005. Equally, peoplein the urban policy towns were 50 per centmore likely to have no qualifications at allthan those in our successful town samplein 2000, by 2005 the gap had widened to60 per cent.

ConclusionsOn the whole, the prospects for those liv-ing in areas that have received significantlevels of assistance from urban policy pro-grammes have not been transformed in thepast decade. That is not to say that the pic-ture has been perfectly homogenous: somestruggling areas have developed faster,while others have fallen even more behind.And of course, there are always lessons tobe learnt from looking in detail at individ-ual programmes. But nothing can takeaway the overall finding that, on average,areas that have been assisted by urban pol-icy have not made good any of their short-fall. In gross value added terms, still thebest single measure of a town’s success,these areas are 10 per cent behind thenational average and 40 per cent behindmore successful towns. Furthermore, theyare slipping slowly farther behind, whilethe group of successful towns move fartherahead. The people of Swindon are notintrinsically cleverer or harder workingthan the people of Warrington, althoughtheir populations have different skills. Thekey difference is that the people ofSwindon live in Swindon, and the peopleof Warrington live in Warrington.Examining the lack of success of urbanpolicies over the past decade and over thepast half century, we find increasing evi-dence that the locational theory of city suc-cess and failure is correct. This conclusionmay be depressing but that does not makeit wrong. What would be wrong would beto fail to face up to it and so permit anoth-er generation to remain significantly belowthe standards of living prevailing elsewherein Britain.


6Discussion

Our analysis is unambiguous: urban policyhas not worked. It is always possible for itsdefenders to point to examples of success, butthese are the exception not the rule. As wehave made very clear, failure is not the resultof lack of commitment or expertise at eithernational or at local level. No one shoulddoubt the dedication of national and localpoliticians to improving the lives of those inBritain’s many struggling towns and cities, orthe talents of those involved in the urbanregeneration industry.

Our research uses new data and covers adifferent time period to other studies, but isone of a long line of reports whose conclu-sions point in the same direction.

Joseph Rowntree Foundation/University of Sheffield reportOne of the best recent independent reports onthe longevity of decline is Poverty, Wealth and

Place in Britain, 1968 to 2005 by academics atthe University of Sheffield and funded by theJoseph Rowntree Foundation. They foundthat “wealth and poverty each demonstratesimilar geographical patterns in every timeperiod”,117 areas that were rich in 1968 wererich in 2005, and the areas that were poor in1968 were poor in 2005. If anything the dif-ferences have become more pronounced:“Areas already wealthy have tended to becomedisproportionately wealthier, and we are seeingsome evidence of increasing polarisation. Inparticular there are now areas in some of ourcities where over half of all households arebreadline poor.”118 This conclusion is based ondetailed statistical evidence, which shows thatplaces that already had high levels of poorhouseholds saw their numbers increase duringthe 1980s and 1990s.

Figure 10 shows that “more and morepeople became concentrated in enclaves ofhigh poverty”.120 Nor is it the case that each

117. Dorling D, Rigby J, Wheeler

B, Ballas D, Thomas B, Fahmy

E, Gordon D and Lupton R,

Poverty, Wealth and Place in

Britain, 1968 to 2005, p xiii,

Joseph Rowntree Foundation,

2007

118. Ibid, p xiv

119. Ibid, Figure 5. We are grate-

ful to the authors for allowing us

to reprint this figure

120. Ibid, p 31

Figure 10: Spatial polarisation of the population by tract breadline povertydensity during the 1990s119

Cha

nge

in p

ove

rty

1990

-200

0

Low Initial extent of poverty High

Incr

easi

ngD

ecre

asin

g

city had a mix of rich and poor areas. Onthe contrary, the authors found that, interms of affluence and poverty, places weregenerally similar to those nearby, and thatthe degree of similarity had not changedover time.121 Not only did they find thatpoor areas were clustered together, but alsothat they are clustered together todayalmost exactly where they were a genera-tion ago.122

They found that the inner areas ofLondon, Birmingham, Liverpool, Man -chester, Tyneside, urban south Yorkshire asa whole, and “much of“ Glasgow-Clyde allhad less than 30 per cent of their popula-tions in poverty in 1980. All these areashave been the target of many urban policyactions since then. The most recent figuresshow that six of those seven areas now havemore than 40 per cent of their populationin poverty, with the least bad performer –Tyneside – having 38 per cent in poverty.On average, their poverty levels haveincreased by more than half. As Figure 11shows, urban poverty has increased relent-lessly since 1980. Nor is there any reason tobelieve that conditions have changed morerecently. For the period after 2000, theauthors note: “the greatest income increaseswere in the least poor constituencies, whilethe poorer constituencies tended to experi-ence quite substantial decreases in averageincome.”

Taking a 30-year perspective, therefore,the University of Sheffield researchersfound that urban policy has not trans-formed depressed urban areas and, insofaras their data allows them to judge, no evi-dence that urban policy has become moreeffective recently.

Institute for Public Policy ResearchfindingsIn July 2007 the Centre for Cities at theInstitute for Public Policy Research (IPPR)published a discussion paper, Two-TrackCities, which began “the nation’s cities aredivided – into those that have achieveddynamic economic growth over the pastten years, and those that have not”.124 Thefive lowest performers in its dataset,Newcastle, Sunderland, Birmingham,Middlesbrough and Liverpool, are allplaces that have received much supportfrom urban policy programmes, and yetthey ranked bottom on the IPPR’s per-formance matrix.125 That report also sug-gested that many of our towns and citiesare just too small for the modern economy,noting that some medium-size cities “donot have the economies of scale or theagglomeration economies … to have signif-icant ‘reach’ into international markets”.126

Government commissioned researchIn 2000 the Government’s SocialExclusion Unit commissioned a reportfrom a team at the University of Oxfordand the London School of Economics onwhether “inequalities between deprivedand non-deprived areas in terms ofincome, employment and long-term ill-ness/disability increased during the1990s“.127 They found that geographicallocation was one of the two key determi-nants of whether income deprivationimproved over time (the other being theage-structure). “In geographical termsareas in London and the South East

46

Cities limited

121. Ibid, p 37. More formally

they find that Moran’s I statistic

is over 0.5 for all years 1970-

2000. Moran’s statistic takes a

value of between -1 and +1,

where 0 means that rich and

poor neighbourhoods are ran-

domly located, a negative num-

ber means that a poor area was

more likely to be near a rich

area, and a positive number

means that poor areas are clus-

tered together, and rich areas

clustered together elsewhere.

122. Ibid, pp 38-9, map 6

123. Ibid, p 41, weighted by city

size. City sample: inner London,

central Birmingham, inner

Liverpool, central Manchester,

urban South Yorkshire, inner

Tyneside, much of

Glasgow/Clyde

124. Athey G, Lucci P, and

Webber C, Two-Track Cities: The

challenge of sustaining growth

and building opportunity, p1,

IPPR, 2007

125. Ibid, p 4

126. Ibid, p 7

127. Office of the Deputy Prime

Minister, Changing Fortunes:

geographic patterns of income

deprivation in the late 1990s,

p 5, 2006

Figure 11: Urban Poverty Levels in Seven Large Cities123

1980 1990 2000

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Per

cent

age

in p

over

ty


regions tended to have a greater drop inclaiming rates than those in the North Eastand Merseyside, even where unemploy-ment rates were similar in 1995.”128 All 20of the highest ranked districts for incomesupport, job seeker’s allowance and invalid-ity benefit claimant rates in 1995 wereurban: twelve in London, eight in the restof the country (London is over-representedbecause individual London boroughs arecounted separately).

Two things stand out from the experi-ence of these areas. First, between 1995 and1998, the period covered by the report, 19of these councils remained in the top 20(only Waltham Forest dropped out). Urbanproblems are persistent, even when theeconomy as a whole is doing well. Secondly,even within this group, geography is a rea-sonable predictor of which areas will dowell and which badly. For England as awhole, the number of people claiming thesebenefits fell by 16.3 per cent. The picture inLondon was mixed, with seven of thetwelve boroughs doing better than this, andfive doing worse. Overall, therefore, thedeprived boroughs of London were doingas well as the country as a whole. Not so thenon-London deprived boroughs. All eight– Birmingham, Hull, Knowsley, Liverpool,Manchester, Middles brough, Nottinghamand South Tyneside – performed below theUK average.129 The location of cities mat-ters: poor cities, or parts of cities, outside ofLondon are struggling.

In November 2006 the Department forCommunities and Local Government pub-lished a report that it had commissionedfrom academics at Oxford BrookesUniversity and elsewhere. State of theEnglish Cities: The competitive economic per-formance of English cities showed onceagain that location matters. Of the 56

cities in Britain, only one town (York)outside the South East region had a grossdisposable household income above thenational average in either 1995 or 2003.On that measure twenty-one places in thegreater South East region were in the tophalf and seven outside it. Five cities werein the bottom half and twenty-three out-side it.130 The authors also studied changesin gross value added per capita 1995-2002,and found that eight of the nine citieswhose GVA rise was 10 per cent or moreabove the national average were in theSouth of England. Conversely, all but threeof the fifteen places whose GVA per capitarise was 10 per cent or more below thenational average were outside the SouthEast.

In four of those cities – Telford, Stoke,Middlesbrough and Blackburn – rises inGVA were less than half the English aver-age.131 The authors commented: “Grossdisposable household income, gross valueadded per capita, visible exports, produc-tivity and average earnings all divergedover the periods for which we have timeseries data.”132 Those areas that were indecline tended to decline further overtime. The report was also sceptical thatregeneration spending was effective; itwas “open to question whether such poli-cies as physical urban renaissance andphysical regeneration will pay large divi-dends in terms of improved competitive-ness”.133

Discussion

128. Ibid, p. 4

129 Ibid, pp 11-13, Table 2

130 Department for

Communities and Local

Government, State of the

English Cities: The competitive

economic performance of

English cities, p 68, 2006

131 Ibid, p 74

132 Ibid, p 224

133 Ibid, p 228

“ The location of cities matters: poor cities, or parts of

cities, outside of London, are struggling”

7Conclusions

The economic locus of Britain hasmoved SouthThe only conclusion consistent with thefacts is that the locational theory of the riseand decline of cities is broadly correct. Inthe 19th century the Lancashire cottonindustry boomed, and people moved toLancashire to take advantage of the oppor-tunities that were available. To have movedsome of the cotton factories to Dorset,Suffolk and so on would have destroyedthe advantages of agglomeration thatLancashire enjoyed. Today London isbooming on the back of Britain’s successfulspecialisation in finance. We cannot moveJP Morgan’s offices to Blackburn,Goldman Sachs to Hull or Deutsche Bankto Stoke-on-Trent any more than we couldhave moved cotton factories a century ago.As the history of Industrial DevelopmentCertificates shows, such attempts are atbest ineffective and at worst not only pre-vent new jobs being created, but alsodestroy those that exist already.

Of course, the picture is more complexthan that, and it would be quite wrong tosuggest that only London and the SouthEast are booming. There are successfulplaces dotted throughout Britain, and inmany cases they are located entirelyserendipitously. Derby, for example, is luck-ier than Blackburn or Sheffield, for while

Blackburn’s weaving industry and Sheffield’ssteel industry have fallen victim to changesin technology and trade patterns, Derby’smanufacturing base in engineering – initial-ly railways and now aerospace engines and,to a lesser extent, cars – has been longer-lived and shows no signs whatsoever ofdeclining. Derby is twice lucky: the sectorsin which it specialises have been successful,and the companies it has attracted, such asRolls-Royce and Toyota, are undisputedworld leaders.

Size mattersLarger urban areas appear to be doing bet-ter than medium-size ones. London is themost obvious example, but it is not theonly one. Within regions more distantfrom the capital, some large cities are doingbetter than the smaller towns aroundthem. We can see this by looking at thepressure on land. In the North West, landfor housing is worth £5.75 million ahectare in Manchester, more than doublethe value of land in nearby Blackburn,Rochdale and Bolton. In the North East,land in Newcastle is worth £3.1 million,almost double the value of land inMiddlesbrough. What is true for theEnglish regions is also true for Scotlandand Wales. Land in Glasgow at £2.75 mil-lion is worth much more than land innearby Motherwell, and land in Cardiff at£4.9 million is worth almost four times thevalue of land in Merthyr Tydfil. Big citiescan be successful even when they are notclose to London. That said, we should notget too carried away by the perception that

48

“ Big cities can be successful even when they are not

close to London”


these places are booming: the same hectareof land would be worth £8 million inOxford or Cambridge, £12 million inCamden and £14 million in South wark.134

What next?We should not continue simply as we are,spending large sums and failing to achieveany noticeable degree of convergence. Thatis a waste of money and, more important-ly, fails to offer opportunity to peopleunlucky enough to have been born in thewrong place. But nor should we give up onurban policy, still less on urban areas.

If, as we argue, the locational theory is cor-rect, Britain needs to consider policies thatwill make it easier for people to work inplaces that have high productivity and there-fore offer high wages. This can be achieved bysome combination of migration and com-muting. Much of this discussion willinevitably, and rightly, concentrate on issuesto do with London, but as we have seen thereare other areas of economic success in Britain,particularly, but not only, in larger towns.

We need to accept that if the optimalsize and location of cities have changed,then some of our cities are likely to growand others shrink. Urban policy should,first of all, provide towns and cities withincentives to grow. Secondly, it should pre-vent towns that get smaller from becomingghost towns, full of empty properties.Instead they must be enabled to contract inways that work for local people in areduced context. Thirdly, we need to givetowns and cities considerably more free-dom to decide how to use regenerationmoney. In a society where almost 90 percent of the population is urban,135 such asin Britain, there will always be a role forurban policy. We need to make sure that itis the right role, for the communitiesaffected and for Britain as a whole.

In the next volume we will explore howother countries have coped with urbanchange and try to draw out lessons forBritain. The third volume will suggestnew policies, aiming above all to offersolutions for those who are living intowns that offer few prospects.

Conclusions

134. Valuation Office Agency,

Property Market Report, January

2007. Residential housing bulk

sites. Other series give similar

results

135. Population Division of

Economic and Social Affairs of

the United Nations Secretariat,

World Population Prospects: The

2004 Revision, and World

Urbanisation Prospects, the

2005 Revision, http://esa.un.org/

unup

Bibliography

Aghion P, Bloom N, Blundell R, GriffithR, Howitt, P ‘Competition andInnovation: an inverted U relationship’,NBER Working Paper No 9269, 2002

Aghion P and Howitt P, EndogenousGrowth Theory, MIT Press, 1998

Athey G, Lucci P, and Webber C, Two-Track Cities: The challenge of sustaininggrowth and building opportunity, IPPR,2007

Atkinson R and Moon K, Urban Policy inBritain: The city, the state and the mar-ket, Macmillan, 1994

Baines D and Woods W, ‘Population andRegional Development, 1840–1940’,in Floud R (ed) The CambridgeEconomic History of Modern Britain,Volume 2: Economic Maturity, 1860-1939, CUP, 2004

Ball M and Maginn P, ‘The contradic-tions of urban policy: the case of theSRB in London’, Environment andPlanning C: Government & Policy, 22:739-65, 2004

Barker K, Barker Review of Land UsePlanning, Stationery Office, 2006

Barro R J and Sala-i-Martin X,‘Technological diffusion, convergenceand growth’, NBER Working Paper No5131, 1997

Bastiat F, Ce qu’on voit at ce qu’on ne voitpas (That which is seen and that whichis not seen), 1850,http://bastiat.org/en/twisatwins.html

BBC, ‘Rogers: Put cities first’, BBC News,30th June 2000,http://news.bbc.co.uk/1/hi/uk/812675.stm

Blair, T, Aylesbury Estate, LondonSpeech, 2nd June 1997,http://archive.cabinetoffice.gov.uk/seu/newsa52f.html?id=400

Board of Trade, Report of an Enquiry bythe Board of Trade into Earnings and

the Labour of Working People in theUK. I – Textile Industry in 1906,London, 1909

Broda C and Weinstein D, ‘Globalizationand the Gains from Variety’, NBERWorking Paper No 10314, 2004

Burn D, The Economic History ofSteelmaking, 1867-1939: a study incompetition, CUP, 1961

Cheshire P, ‘Resurgent Cities, UrbanMyths and Policy Hubris: What weneed to know’, Urban Studies, 43(8):1231-1246, 2006

Cheshire P and Sheppard S, ‘TheIntroduction of Price Signals into LandUse Planning Decision-making: a pro-posal’, Urban Studies 42 (4), 647-663,2005

Comptroller and Auditor General, AnEarly Progress Report on the New Dealfor Communities Programme: EnglishRegions, Stationery Office, 2004

Crafts N, British Growth During theIndustrial Revolution, OUP, 1985

Crafts N, ‘Market Potential in BritishRegions, 1871-1931’, Regional Studies,39(9): 1159-1166, 2005

Crafts N, and Leunig T, ‘The HistoricalSignificance of Transport for EconomicGrowth and Productivity’, Research Annex1.1, Eddington Transport Review, 2005

Crafts N and Mulata A, ‘What Explainsthe Location of Industry in Britain,1871-1931? Journal of EconomicGeography, 5(4): 499-518, 2005

Cushman & Wakefield, UK CitiesMonitor 2007, Septemebr 2007

Department for Communities and LocalGovernment, State of the English Cities:The competitive economic performance ofEnglish cities, 2006

Department for the Environment,Assessing the Impact of Urban Policy,HMSO, 1994

50

Department for the Environment,Transport and the Regions, Guidanceon Area-Based Initiatives, June 1998

Department for the Environment,Transport and the Regions, Towards anUrban Renaissance, June 1999 (A reportof the Urban Task Force under LordRogers of Riverside)

Department for the Environment,Transport and the Regions, CityChallenge - final national evaluation,2000

Dorling D, Rigby J, Wheeler B, Ballas D,Thomas B, Fahry E, Gordon D, LuptonR, Poverty, Wealth and Place in Britain,1968 to 2005, Joseph RowntreeFoundation, 2007

Duranton G and Puga D, ‘MicroFoundations of Urban AgglomerationEconomies’, NBER Working Paper No9931, 2003

Evans A, Economics and Land-UsePlanning, Blackwell, 2004

Evans A and Hartwich O, UnaffordableHousing, Policy Exchange, 2005

Feldman, M ‘Location and Innovation:the new economic geography’, in ClarkG L, Feldman M, and Gertler M (eds),Oxford Handbook of EconomicGeography, pp 373-94, OUP, 2000

Findlay R and O’Rourke K, ‘CommodityMarket Integration’, NBER WorkingPaper No 8579, 2001

Fitzwalter R and Taylor D, Web ofCorruption: The Full Story of JohnPoulson and T. Dan Smith, Granada,1981

Floud R, Watchter K W, and Gregory AHeight, Health and History: Nutritionalstatus in the United Kingdom, 1750-1980, CUP, 1990

FOCUS, Culture Leading the Way inLeicester’s Regeneration, 16th August2007, www.focus-consult-ants.co.uk/Focus%20News-PAC.html

Glaeser E, ‘Learning in Cities’, NBERWorking Paper No W6271, 1997

Glaeser E, ‘Urban Colossus: Why is New

York America’s largest city?’, HarvardInstitute of Economic Research,Discussion Paper 2073, 2005

Glaeser E et al, ‘Growth in Cities’ TheJournal of Political Economy, 100(6):1126-1152, 1992

Glaeser E and Kohlhase J, ‘Cities, Regionsand the Decline of Transport Costs’,Papers in Regional Science, 83(1): 197-228, 2003

Glaeser E and Sacerdote B, ‘Why Is ThereMore Crime in Cities?’, NBERWorking Paper No 5430, 1996

Glaeser E and Mare D, ‘Cities and Skills’,Journal of Labor Economics, 19(2): 316-342, 2001

Guthrie J, ‘The quiet rebirth of the man-ufacturer’, Financial Times, 26th July2007, www.ft.com/cms/s/69e7d9d6-3b26-11dc-8f9e-0000779fd2ac.html

Hall S, Book Review ‘British UrbanPolicy: An Evaluation of the UrbanDevelopment Corporations‘ 2nd edi-tion, in Imrie R and Thomas H (eds)1999’, Journal of Housing and the BuiltEnvironment, 6(1): 115-117, 2001

Head K and Mayer T, ‘Market Potentialand the Location of JapaneseInvestment in the European Union’,The Review of Economics and Statistics,86(4): 959-972, 2004

Healey P, ‘Towards a “Social Democratic“Policy Agenda for Cities‘, pp 159-171,in Johnstone, C and Whitehead, M(eds) New Horizons in British UrbanPolicy: Perspectives on New Labour’sUrban Renaissance, Ashgate, 2004

Hills J, Ends and Means: The future rolesof social housing in England,CASEreport 34, 2007

House of Commons Select Committee onEducation and Employment, 4thReport, 2000, www.parliament.the-sta-tionery-office.co.uk/pa/cm199900/cmselect/cmeduemp/60/6010.htm

Howe G, Conflict of Loyalty, 2nd edition,1995


Bibliography

Johnstone C and Whitehead M,‘Horizons and Barriers in British UrbanPolicy’, pp 3-24, in Johnstone C andWhitehead M (eds), New Horizons inBritish Urban Policy: Perspectives onNew Labour’s Urban Renaissance,Ashgate, 2004

Kam J, ‘Success in Failure: The NationalCentre for Popular Music’, Prometheus22(2), 2004

Kirby A, ‘New Life for the Cities’ BBC,13th January 1999,www.news.bbc.co.uk/1/hi/uk/254463.stm

Imrie R and Thomas H (eds), BritishUrban Policy and the UrbanDevelopment Corporations, PaulChapman Publishing, 1993

Lawless P, ‘Area-based UrbanInterventions: rationale and outcomes:The NDC programme in England’,Urban Studies, 43(11):1991-2001,2006

Leunig T, In My Backyard: unlocking theplanning system? CentreForum, 2007

Lieven A, ‘Tale of Two Cities’, Prospect,44, August 1999

Local Government Association, ‘Towardsan Urban Renaissance’, LGA Briefing,29th June 1999

Marshall A, Principles of Economics, 8thedition, 1920

National Audit Office, Regenerating theInner Cities, 1993

National Audit Office, The Achievementsof the Second and Third GenerationUrban Development Corporations, 1993

Office of the Deputy Prime Minister‘Turning Areas Around – The Impactof SRB on Final Outcomes’, UrbanResearch Summary, 2002

Office of the Deputy Prime MinisterAssessing the Impacts of SpatialInterventions, 2004

Office of the Deputy Prime MinisterEvaluation of the National Strategy forNeighbourhood Renewal, 2005

Office of the Deputy Prime Minister,Changing Fortunes: geographic patterns

of income deprivation in the late 1990s,2006,www.communities.gov.uk/embedded_object.asp?id=1506922

Ormerod P, Cook W, Rosewell B ‘WhyDistance Doesn’t Die: Agglomerationand its benefits’, GLA EconomicsWorking Paper 17, 2006

Overman H, and Winters A, ‘TheGeography of UK International Trade’,Environment & Planning A,37(10): 1751-1768, 2005

Owen G, From Empire to Europe: thedecline and revival of British industrysince the Second World War,HarperCollins, 1999

Patel P and Pavitt K ‘Large Firms in theProduction of the World’s Technology:an important case of non-globalisation’,Journal of International Business Studies,1st Quarter: 1-2, 1991

Peters AH and Fishers PS, State EnterpriseZone Programs: Have They Worked?2002, Urban Institute

Policy for the Inner Cities, White Paper,HMSO, 1977

Potter J and Moore B, ‘UK EnterpriseZones and the Attraction of InwardInvestment’, Urban Studies, 37(8):1279-1312, 2000

Rhodes J et al, ‘Lessons and EvaluationEvidence from Ten Single RegenerationBudget Case Studies‘, DETR Annex,2002; Royal Commission on theDistribution of the IndustrialPopulation, Cmd 6153, HMSO, 1940,www.bopcris.ac.uk/bopall/ref9099.html

Robinson F, ‘Regenerating the West Endof Newcastle: What Went Wrong?’Northern Economic Review, 36, 15-41,Summer 2005

Scott J, Global City Regions, OUP, 2001Scott P, ‘British Regional Policy 1945-

51: A lost opportunity’, TwentiethCentury British History, 8(3): 358-382,1997

Scott P, ‘Regional development and poli-cy’ in Floud R and Johnson P (eds) The

52

Cities limited

Cambridge Economic History ofModern Britain Volume III: StructuralChange and Growth, 1939-2000,CUP, 2004

Scott P, Triumph of the South: A regionaleconomic history of early twentieth centu-ry Britain, Ashgate, 2007

Shaw K and Robinson F, ‘Learning fromExperience: Reflections on two decadesof British urban policy’, Town PlanningReview, 69(1), 1998

Sladen C, ‘H2Oxford’, Oxford Today,19(2), Hilary, 2007

Social Exclusion Unit, Bringing BritainTogether: a national strategy for neigh-bourhood renewal Stationery Office,1998

Soja E, Postmetropolis: Critical Studies ofCities and Regions, Blackwell, 2000

St Helens Council, ‘St Helens First’, StHelens Community Magazine: BudgetSpecial, Winter 2003,http://212.248.225.145:8080/publications/Winter2003.pdf

Storper M and Venables A, ‘Buzz: Face-to-face contact and the urban econo-my’, Journal of Economic Geography,4(4): 351-370, 2004

Tolliday S, ‘The Rise of Ford in Britain:from Sales Agency to Market Leader,1904-1980’, pp 7-72 in Bonin H,Lung Y, and Tolliday S (eds), Ford,1903-2003: The European History,Volume 2 Paris: Plage, 2003

Urban Task Force Towards a Strong UrbanRenaissance: An independent report bymembers of the Urban Task Force chairedby Lord Rogers of Riverside, November2005

Valuation Office Agency, PropertyMarket Report, January 2007,www.voa.gov.uk

Venables A, ‘Equilibrium Locations ofVertically Linked Industries’,International Economic Review, 37(2):341-360, 1996

Voth H-J, ‘Living standards and theUrban Environment’, pp 268-294, inFloud R and Johnson P (eds) TheCambridge Economic History of ModernBritain, Volume 3: Industrialisation,1700-1860, CUP, 2004

Wainwright M, ‘Donnygate scandal endsin jail terms’, Guardian, 13th March2002

Webber C, and Marshall A, ‘Bridging theGap: Delivering infrastructure invest-ment in Britain’s cities’, Journal ofUrban Regeneration and Renewal, 1(1):7-21, 2007

Wettman R, and Nicol W,Deglomeration Policies in the EuropeanCommunity, Office for OfficialPublications of the European UnionCommunities, 1981

Wrigley E, Poverty, Progress, andPopulation, CUP, 2004


Bibliography

Cities limited


edited by Oliver Marc Hartwich

Cities lim

ited

Tim

Leunig and

James S

waffield

Po

licy Exchang

e

£10.00

ISBN: 978-1-906097-09-7

Policy ExchangeClutha House

10 Storey’s GateLondon SW1P 3AY

www.policyexchange.org.uk

Britain has been an almost uniquely urban nation for twohundred and fifty years. Great cities such as Manchester andLiverpool defined a rich and confident nineteenth century Britainto the world. Yet the last fifty years have seen some of our oncegreat cities struggle. Governments have recognised this, andurban policy has been a feature of all administrations for morethan a generation.

Cities limited sets out some of the policy approaches that havebeen used and, more importantly, asks the critical question:have urban regeneration schemes regenerated urban areas? Toanswer this question we do not look in detail at particularpolicies, but instead look at the changing fortunes of eighteentowns that have been the focus of urban regeneration policiesover the last ten years. We look at gross value added, the localequivalent of national income, at personal incomes, and atunemployment. We look at whether people want to live in theseareas, as measured by migration and house prices.

The picture proves to be a bleak one. Far from catching up, mostmeasures show that the majority of these cities are slippingbehind both the national average and more successful cities.Urban regeneration has not worked, and the prospects forpeople living in these towns have been far from transformed.

Think Tank of the Year 2006/2007

px urban cover1-HDS.qxp 16/10/07 20:35 Page 1

Cities Limited

Documents

policy experience

policy development

andurban policy

cities limitedtim leunig

px urban

urban areas

urban nation

successful cities