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By Tim Leunig & James Swaffield. Edited by Dr Oliver Marc Hartwich. A decade of regeneration policies has failed to stop the inequality of opportunity between towns and cities in the North and those in the South East increasing. In their third report in the series on regeneration in the UK, Cities Unlimited, Tim Leunig and James Swaffield recommend a series of radical proposals that would reverse the trend and inject a much needed momentum back into regeneration policy. The key recommendations from the report are to increase the size of London by allowing landowners the right to convert industrial land into residential land in areas of above average employment; expand Oxford and Cambridge dramatically, just as Liverpool and Manchester expanded in the 19th century and for the Government to roll up current regeneration funding streams and allocate the money direct to local authorities.

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  • Cities UnlimitedMaking urban regeneration work

    Tim Leunig and James Swaffield

    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, 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 with respon-sibility for economic competitive- ness. Hewas born in 1975 and studied BusinessAdministration and Economics at BochumUniversity (Germany). After graduatingwith a Masters Degree, he completed aPhD in Law at the universities of Bochumand Sydney (Australia) while working as aResearcher at the Institute of CommercialLaw of Bonn University (Germany). Havingpublished his award winning thesis withHerbert Utz Verlag (Munich) in March2004, he moved to London to support LordMatthew Oakeshott of Seagrove Bay duringthe process of the Pensions Bill.

    The authors have previously workedtogether for Policy Exchange on Cities lim-ited, a report on urban policy in the UKand Success and the City.

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    Policy Exchange 2007

    Published byPolicy Exchange, Clutha House, 10 Storeys Gate, London SW1P 3AYwwwwww..ppoolliiccyyeexxcchhaannggee..oorrgg..uukk

    ISBN: 978-1-906097-28-8

    Printed by Heron, Dawson and SawyerDesigned by John Schwartz, john@soapboxcommunications.co.uk

  • Contents

    Acknowledgements 4Executive Summary 5

    1 Introduction 62 Cities Limited 83 Success and the city 114 Reactions to our work 145 Things will only get worse 176 We cannot accept this 217 What can we do? 228 Expanding London 309 It will not just be London 3710 Economic geography outside of the South East 4111 Setting cities free 4512 What would cities do? 4813 Coping with population decline 5314 Improving governance 5715 Conclusion 60

    www.policyexchange.org.uk 3

  • Acknowledgements

    Policy Exchange would like to thankNatalie Evans, Sam Freedman, PhilippaIngram, Max Nathan and Nick Tiratsoo.

    ir

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  • Executive Summary

    Cities limited, the first of three reports,demonstrated that attempts to regenerateBritish cities over the past ten, twenty oreven fifty years have failed. The gapbetween struggling and average cities, letalone between struggling and affluentcities, has continued to grow. Geographicalinequality is growing. Our second report,Success and the City, examined experienceabroad and the lessons other countries canteach British policymakers. This finalreport, Cities unlimited, uses the evidencethat we have gathered so far about what ispossible and what is not, about what worksand what does not, to offer new policy pro-posals for regenerating Britains cities.

    Many of the forces that make life toughfor struggling cities will continue. Asdemand for more highly qualified workersgrows, the lower skill levels associated withregeneration towns will make it even hard-er for them to catch up not least becausetheir brightest and best educated leave forLondon after graduation. Nor is a changeof government likely to continue support-ing regeneration policy. Ministers in thecurrent Labour Cabinet overwhelminglyrepresent inner city areas. A futureCabinet, perhaps more representative ofsuburbs and the wealthy South East, maynot have the same commitment to highlevels of regeneration funding, particularlyif economic circumstances demand asqueeze on public spending.

    But if we are honest about the con-straints and realistic about the opportuni-ties then we can make progress. We need toaccept above all that we cannot guaranteeto regenerate every town and every city inBritain that has fallen behind. Just as wecan't buck the market, so we cant buckeconomic geography either. Places thatenjoyed the conditions for creating wealthin the coal-powered 19th-century often donot do so today. Port cities had an advantage

    in an era when exporting manufacturedgoods by sea was a vital source of prosper-ity; today the sea is a barrier to their poten-tial for expansion and they are cut off fromthe main road transport routes. More gen-erally, the economic pull of Europe hasboosted the South East at the expense ofthe North, Wales and Scotland. Luck hasalso played its part: in 1900 London hadfinance and Manchester had cotton.Finance has since prospered and cottoncollapsed, reinforcing geographicalchanges.

    There is no realistic prospect that ourregeneration towns and cities can convergewith London and the South East. There is,however, a very real prospect of encourag-ing significant numbers of people to movefrom those towns to London and theSouth East. We know that the capital andits region are economic powerhouses thatcan grow and create new high-skilled,high-wage service sector hubs. At the sametime market mechanisms can be used toinduce some firms to move out of theSouth East.

    We propose a significant liberalisationof land use in London and the SouthEast. At present local councils ignore mar-ket signals and zone land for industrialrather than residential use. There are over2,500 hectares of industrial land inLondon alone, and 10,000 hectares inLondon and the South East together. Ifonly half of it were used for housing, itwould create 25 billion in value andallow half a million people to move to anarea that offers much better prospectsthan where they live now. Such a market-led policy would prompt many industrialfirms that are based in London to relocateto where land is cheaper. So some peoplewill leave regeneration cities; some jobswill move to regeneration cities. Both aredesirable outcomes.

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  • We should go further. No one likesurban sprawl per se, but suburbs offer ahigh quality of life to those who live inthem and create the economic bulk thatmakes cities both prosperous and vibrant.Increasing the size of London so that ittakes an extra minutes journey to reach theedge of town would make room for anoth-er million people, increasing their oppor-tunities.

    We know that the South East offers thegreatest agglomeration potential, so itmakes sense to think seriously about hav-ing more than one large city in the SouthEast, where London has dominated for solong. We also know that cities based onhighly skilled workers are the most dynam-ic. Oxford and Cambridge are unambigu-ously Britains leading research universitiesoutside London and both are well locatedeconomically. We should consider expand-ing both dramatically, just as Liverpool andManchester expanded in the 19th century.Dynamic economies require dynamic eco-nomic geography.

    Of course there are successful high-techclusters outside the South East and it isright that they should build on theirstrengths. But in many cases that does notimply huge expansion. Manchester, Leedsand Newcastle, for example, all have decid-ed strengths, but they are not successfulenough to deliver prosperity to neighbour-ing towns, such as Rochdale, Bradford andSunderland, in the way that London is ableto support relatively poor communities inNorth Kent and South Essex.

    It is important to recognise the con-straints that face many communities. Theirresidents are certainly aware of them: ourregeneration towns share of the popula-tion continues to fall as people get on theirbikes and move to places that offer betterprospects. Liverpools population is littleover half its peak level.

    There is no doubt that Britain starts at adisadvantage compared with, say,Germany or the Netherlands because its

    cities of the industrial revolution are geo-graphically more peripheral than theirs.The relative weakness of local governmenthere has compounded this disadvantage;our studies of cities around the world inGermany and the Netherlands, in Poland,Canada and Hong Kong demonstratethat local communities manage theiraffairs better than a distant central govern-ment can ever do.

    Devolution has many advantages. Itleads to diversity, and diversity creates evi-dence as to what works and what does not.Anyone who believes in evidence-basedpolicymaking should support large-scaledevolution. We propose that theGovernment should roll up current regen-eration funding streams and allocate themoney to local authorities according to asimple formula based on the inverse oftheir average income levels. Central fund-ing would be available for a handful ofexceptional circumstances, such a