Comment: ‘Corridors’ or ‘Cities’: which does the TfN Independent Economic Review really support?

Anthony Rae writes 8th March 2018  Although the TfN draft STP is a transport strategy its roots lie elsewhere: in a foundational economic proposition intended to tackle regional imbalance and the UK’s structural divide: “For the last 30 years, the North’s [GVA] has been consistently around 25% below the average for the rest of England, and 10-15% below the average for England excluding London. An economic gap persists, and closing it will require a radical change in the economy of the North. The Independent Economic Review (IER) sets out a bold vision of economic transformation for the North that will rebalance the UK economy and increase international competitiveness.” STP p.14&17pdf

Consequently to review the robustness of this transport strategy we have to start with an examination of the economic analysis that underpins it, starting with its own recognition that improved ‘connectivity’ is just one of quite a number of contributing components of economic underperformance, since the Review ‘concluded that transformational growth will require investment and improved performance in a number of critical areas, especially education, skills, innovation and inward investment, alongside transport infrastructure and services …’ STP p.8

Therefore if the ‘transformational’ scenario it promotes already understands that progress will have to be made in tackling all ‘the range of factors responsible for the performance gap’, how much weight should be attached to just the connectivity component? After all, the National Infrastructure Commission  in its report about the Northen Powerhouse has already concluded that “… the potential for transport alone to address economic disparities should not be over-estimated. Effective transport links are a necessary but not sufficient condition for improving economic performance. Transformational growth will only be achievable through significant improvement and investment on several fronts.” NIC High Speed North May 2016

This is also where the economic meets the spatial. So, in addition to getting the right emphasis between these different economic components of GVA rebalancing (of which transport is but one), there are further questions about where that transformation should best take place, and within which sectors of the economy? For the transport component in isolation there will always be choices about which mode to favour, recognising the different spatial impacts between e.g road and rail; and between connectivity present and future (digital). And there’s a final question: who across the North will be the beneficiaries: the spatial winners … and the losers?

*      *      *      *      *      *

So what might appear superficially to be quite a straightforward proposition – ‘improved transport connectivity will contribute to increased GVA – has in fact a large amount of complexity within it to disentangle. Fortunately we do have the 250 pages of the constituent reports of the IER, authored by Cambridge Econometrics and others, to help us do this and here are the conclusions of the three most important of these:

IER Performance Gap Analysis: There’s a persistent and widening gap between the Northern Economy and the rest of England in terms of GVA per capita, attributable to ‘a range of factors, among which the skills gap features strongly. But ‘while it is clear that improved transport connectivity can play an enabling role in … closing the performance gap … it’s impossible to put a figure on this. … The interplay between different factors (e.g. transport infrastructure, skills, agglomeration, governance, innovation, etc.) is too complex to capture and separate out within an empirical modelling framework.’ 5.12

IER Pan-Northern capabilities: This report assembles the analysis behind the selection of four ‘Prime’ capabilities (Advanced Manufacturing, Energy, Health Innovation and Digital) – from within 12 in total – chosen because ‘they are specialised and distinctive across the North, are nationally and internally competitive, offer export and inward opportunities, and are high productivity activities (and, so, growth in these areas should contribute towards closing the North’s productivity gap).’ 4.4  It notes that a great many of the hubs powering these ‘Primes’ are located in cities. They are supported by three other ‘Enabling’ capabilities (Financial and Professional Services, Logistics and Higher Education). This preferred Capability selection is however carefully qualified: e.g ‘Many of the relatively specialised sectors in the ‘Prime’ capabilities’ … are more limited in terms of future jobs growth’ whereas ‘much of the projected job growth in the North’s economy is in lower productivity service sectors which lack distinctiveness … or export potential, but are important job creating sectors, including at lower skills/entry levels.’ 4.8

– IER Scenarios for future growth: This builds up the analysis underpinning the ‘transformational’ scenario upon which the STP is based. ‘By 2050, GVA is projected to be some 15% higher than a ‘BAU’ projection, and productivity some 4% higher; some 850,000 additional jobs compared to the BAU and 1.56m more than in 2015.’ That performance ‘is led by a marked improvement in the North’s distinctive offer of ‘Prime’ capabilities (Advanced Manufacturing, Energy, Health Innovation and Digital), supported by the contribution of key ‘Enabling’ capabilities (Financial and Professional Services, Logistics and Higher Education). Many of the additional jobs come in city and town-based services …’ whilst ‘… pan-Northern city-centre to city-centre rail links … must be integrated with city-region local public transport networks …’ Key Findings our emphasis

You might think there’s not too much to disagree with here, as long as the qualifications and emphases carefully stated throughout these reports are not lost sight of. Productivity increases are important, but so is ‘employment for all’. And the repeated emphasis on the economic and transport role of cities is one we’re going to strongly affirm. So maybe the question we should actually be thinking about is another one: what exactly is the connection between the analysis of these IER reports on the one hand, and the proposals of the STP and its Strategic Development Corridors (SDCs) on the other? Is there one, and has it been demonstrated with evidence?

These SDCs are the crucial bridging concept between the underpinning analysis of the IER and the transport investment programmes of the STP: ‘These seven corridors represent an economic area where the evidence to date suggests most progress towards the transformational growth scenario would be made by bringing forward major, strategic rail and road investment over the lifetime of the Strategic Transport Plan especially on some of the crucial east-west corridors.’ STP p.61 But what if they’re the wrong concept?

The best way to think through this challenge is looking at it through the lens of ‘cities’. Let’s start with the table from the Scenarios report p.24 which lists all 12 of the Northern ‘capabilities’, according to their projected contribution to 2050 GVA and employment.

It’s easy to apply to it an alternative selection process that clusters together all of those capabilities that are based predominantly within major urban areas, rather than in or along the length of the SDCs: for the Primes that’s Health Innovation, and Digital, plus a lot of the Advanced Manufacturing and some of the Energy (the detailed evidence is on pages 29-38 of the Pan-Northern Capabilities report); Enablers Financial & Professional Services and Higher/Further Education;, and Other Other Business Services, Other Public Services and Consumer Services – so around 8 out of 12 capabilities, and two thirds of Northern GVA in 2015.

And on the SDC maps (best seen in the Key Messages booklet) you can see the clustering even of the Primes is predominantly around the major metropolitan areas. Whereas, along the length of many of the ‘corridors’, what you’ll observe is empty space – space not just empty of economic activity at scale, but necessarily so because it’s also full of environmental value, and protected in national parks. It’s called the Pennines.

Maybe the reason why ‘strategic development corridors’ is a problematic concept is therefore because it ignores some fundamental spatial realities: the clustering of economic activity in the existing city regions, combining beneficially with policy constraint away from those centres. The alternative concept of ‘strategic connectivity corridors’ would have been more apt, as long as it placed necessary emphasis on the urban nodes at each end of a corridor, and selected the right mode for improvement.

Of course a focus on existing urban centres is the essential prerequisite for the obtaining of agglomeration benefits, which feature prominently throughout the IER and particularly in the Scenarios report (and is then translated into the strategy’s Transforming economic performance objective p.12). It’s particularly clear that agglomeration benefits will be derived: predominantly in cities, by increasing their scale (chapter 4); are prevalent in all the capabilities with urban locations, but not particularly manufacturing (3.26-27 and 4.4); and require investment in rail rather than road connectivity. The Scenario report’s analysis on this topic is worth quoting at length:

”The scale of agglomeration effects matters not just for what might be expected for the overall rate of GVA, employment and productivity growth in the North, but also for the spatial distribution of that growth: a greater role for agglomeration-sensitive sectors would concentrate more of the increased activity and productivity in and around the larger cities (because, by definition, agglomeration effects are larger in larger cities). This has implications for the pattern of transport improvements that are required to support a stronger economic performance in the North, giving greater emphasis to improvements to inter-city, within-city and commuting infrastructure and services.” 4.15 and

 “The increase in town and city centre employment that is expected to result from growth in the knowledge-based ‘Prime’ and ‘Enabling’ capabilities, and the growth in other sectors that this will induce, cannot be accommodated through private (car) travel alone. This is because road networks into many city centres already operate at or close to their capacity in peak periods. … For employment in city centres to grow to the maximum extent and the full scale of agglomeration benefits realised, it will need to be accommodated by enhanced public transport connectivity within city regions. This will entail coherent, user-friendly joined-up networks, involving frequent rail services (including cross-city operations), light rail and bus, all supported by smart, multi-modal ticketing with simplified fares.” 6.24

To sum up: read carefully the analysis of the IER reports supports the promotion of economic activity in Capabilities predominantly located within city regions and urban centres, and also favours transport/connectivity improvements focused on those urban nodes rather than the corridors between them. The analysis does not support a strategy that places exaggerated emphasis on spatial opportunities away from those centres or on the corridors connecting them.

Finally on agglomeration benefits we should note another qualification: the independent reviewers of this bit of the IER express (Annex C) notes of caution about whether it’s demonstrable that such benefits can be obtained across a geography of the scale the Pan-Northern region, rather than smaller areas.

*      *      *      *      *      *

This ‘alternative’ re-presentation of the IER analysis – obtained not by challenging but in alignment with its core findings – is perfectly conventional. Here’s the Centre for Cities, in their Building the Northern Powerhouse report (June 2016): ”To do this, policy needs to make the most of the two great advantages of cities – their ability to support the sharing of information and generation of new ideas, and their ability to give businesses access to many skilled workers.”

And then they warn: “There is no clear policy lesson for the Northern Powerhouse from the proximity of or the links between the cities in the [Randstad and Rhine-Ruhr] areas – they just happen to be close together. Instead, the main lesson from these areas is that strong regional economies require strongly performing cities at their heart. This suggests that to improve the performance of the North, policy makers should use limited resources to prioritise supporting the growth of cities in the North. This will mean making decisions and choices that focus public investment in specific places rather than spreading it equally across the North of England.”

We agree. Why would you want to throw the weight of your strategy into increased physical connectivity across the spaces in between (the SDCs), rather than within the urban nodes where the vast majority of the GVA is being generated? (This isn’t arguing against corridor improvements but rather against their overemphasis compared to intra-urban connectivity.) Why is the TfN strategy claiming as an achievement the dispersal of the economic benefits it generates (STP map p.25), rather than their concentration in city regions? And where exactly did this concept of ‘strategic development corridors’ – fundamental to the STP and its investment programmes – come from, because it’s not in the IER?

We also asked earlier: ‘Who across the North will be the beneficiaries: the winners … and the losers – across the North?’ See now our separate article on this topic.