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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer, an FT contributing editor, is a former chief economist at the Bank of England
It has been a big week for Andys — or at least for two of them, Andy Burnham and Andy Street. The first, controversially, was blocked from standing as a member of parliament by the Labour Party’s National Executive Committee. The second, also controversially, announced the formation of a new centre-right political movement, Prosper UK. (Less controversially, this Andy has largely been inert this week.)
Although drawn from different points on the political spectrum, the two Andys share more than a name. Both are, or were, mayors of large regional combined authorities in England, Greater Manchester and the West Midlands. Both led them with distinction. And, crucially, both these regional success stories contain important lessons for how this government, or its successor, could stimulate growth.
Listening to ministers speak, you’d often be forgiven for thinking the economy was a gigantic rowing machine. By pulling harder on the levers of power, it is suggested, greater economic energy can be created. Or, as the prime minister put it at the end of last year, the failure to get growth going was down to the levers being jammed by vested interests and ineffective officials.
This is a story, familiar from governments past, of the political spirit being willing but the delivery flesh being weak. It is borne of a top-down, trickle-down view of how the economy works and a centralist, instrumentalist view of how economic policy affects it. As a model of growth, neither has merit. Indeed, the holding of these views is itself a key factor in holding growth back.
The only route to sustainable national growth is from the bottom up. Growth begins from the grassroots, in people and places. This is true arithmetically: national growth cannot fly on a single regional cylinder. It is true economically: income percolates up (person to place to nation) rather than trickling down. And it is true as a matter of social justice: what is the point of growth if its fruits are not felt by most people and places?
That bottom-up view of growth calls for a very different policy approach. Instead of central control, we should prioritise the empowerment of, and investment in, local people and places. Economic energy comes not from muscularity at the centre but from the co-ordinated actions of empowered local government, business and civil society. The role of central government is not as single-scull rower but as cox, providing strategic direction through touches on the tiller and vocal encouragement.
On this view, the broken growth machine is not a problem of defective central levers. Rather it derives from the inability of successive UK governments to devolve the enormous central power of the state and, unlike a venture capitalist, invest it sufficiently in high-return projects in the regions and nations, enabling growth to percolate upwards and outwards. In its efforts so far, this government has fallen into the same trap.
On empowering places, the current plan for devolution is a world away from the devolution revolution that Labour promised. They have handed mayors one oar — an expanded but still limited set of spending powers. To generate sustained local growth, local leaders need a full suite of powers, not only over spending but over its financing through local taxes and borrowing. Rowing with a single oar generates circling, not speed.
On investing in people, the government’s plans for education and skills lack scale, imagination and ambition. Crucially, they are largely detached from local growth plans and industrial strategy. It is only by fusing together top-down sectoral strategies with bottom-up skills plans that local ladders of opportunity for local people can be created. Without them, national growth will remain a chimera.
This is where the Andys come in. Between them, they have more experience in running something successfully than the entire Cabinet and Shadow Cabinet. In their leadership of rejuvenated regions, fusing of local businesses and skills, coxing and coordinating of local actors and championing of greater powers and investment, they have demonstrated the bottom-up model of growth by deed as well as word.
So here, suitably scaled, is an oven-ready model of national renewal. Yet their respective parties appear to be turning a deaf ear both to the experience of the Andys and a proven model of growth success. This might be clever near-term politics. But if local people and places remain underpowered, national growth will (like me) remain inert and, with it, the political fortunes of both main parties.
