If the Northern Powerhouse really is a ‘cruel deception’, then Jeremy Corbyn should set out a serious and substantial alternative

The Government’s devolution agenda has centred around the “Northern Powerhouse”, which is seeing Greater Manchester take the lead in enjoying a greater degree of autonomy from central government. Here, Paul Lakin reacts to Jeremy Corbyn’s take on the Northern Powerhouse, which he has termed a ‘cruel deception’. Lakin argues that Corbyn should set out an alternative which resists leaning on crude northern ‘industrial’ stereotypes.

Credit: Martin Lopatka, CC BY NC 2.0

‘A cruel deception’ was the pithy analysis of the Northern Powerhouse by Jeremy Corbyn.

It is clear he will have little truck with the Chancellors initiative. With the Labour Party in Westminster shrunk back to its northern and London core, metropolitan policy should be an area ripe for this new opposition to make some headway. But this is not opposition as we know it.

Ed Miliband, shortly before the last election, had asked Sir Richard Leese to attack the Northern Powerhouse initiative, his response was supposedly of the four letter variety. He could see which way the political winds were blowing. Manchester first and party considerations second, and quite right too.

It’s fair to say that the divide between the progressive Labour Council leaders in the north and the newly installed Corbyn led Labour leadership in Whitehall has never been greater. In the 1980’s Labour Party it was the Town Halls that contained the left wing firebrands with modernisers in Westminster. The opposite is true today.

One of the accusations laid at the door of Corbyn is that he has a tendency to fight the battles of yesterday. In the field of economic development and regional policy that accusation may have some resonance. His announcement of a ‘Northern Futures’ group charged with rebuilding the industrial base of the north is a case in point. It’s the term ‘industrial’ that is the principal problem. The North is no longer an ‘industrial’ region. What is left of the traditional ‘industrial’ north still appears to be in decline.

The collapse in demand from China for raw materials is having a global impact, not least in the north of England, where the proposed closure of a major Steel plant in Redcar could lead to the loss of 3,000 jobs. The challenge of maintaining industrial plants in the UK is undermined by high-costs, with comparatively high energy and labour costs.

The example of the Grangemouth petrochemical plant in Scotland is illustrative. In 2013 an industrial dispute over new terms and conditions of employment caused the owner of the Plant, Ineos, to threaten to close the site. In the end the workers accepted the poorer terms and the Plant remained open. The workers accepted these terms because looked hard into the local labour market post-Ineos and realised they had few other choices.

Ineos have also, more recently, stated that in the future for the site to remain viable over the longer-term they will require cheap and stable energy, they suggest Fracking. The challenge for Corbyn is how to engage with major industrial companies to encourage them to invest and help rebuild the north, whilst they simultaneously want to do things he hates, like cut workers wages and encourage fracking.

There are other options. Working with the advanced engineering sector, such as the aerospace and car manufacturing sectors. But these companies are doing fine without Government help. The car industry in the North is one of few UK sectors which seriously out-performs largely lousy UK productivity rates. Corbyn could offer R&D tax breaks and sector specific support, but in many ways this would simply be a rehash of an approach previously championed by the likes of Lord Mandleson and Vince Cable.

Instead of a ‘back to the future’ industrial approach Corbyn does have some alternatives, but none would count as an ‘industrial strategy’.

Corbyn must first change his narrative on the north, an industrial reference reflects a time-warped view of the north and fails to acknowledge the dynamism of parts of the northern economy. The Northern cities in particular have almost entirely diversified from their historic industrial bases. Where they need help is in competing for a greater share of the UK’s dominant service sector activity. The north has strong ‘knowledge’ assets in it’s Universities and its research centres. It also has a growing and dynamic bio-pharma, ICT, digital and media sector. There is no lack of underlying potential.

It would also help Corbyn if he were to accept that devolution is the right way in which to deliver change on the ground. There is no way that Civil Servants in London could have devised and implemented a project such as the Sharp Centre in East Manchester. As far back as the 1980’s cities like Birmingham and Manchester had begun a fight-back against a controlling and hostile Westminster. The Leaders of Manchester, Liverpool, Sheffield and Leeds have been the drivers of transformation, not Ministers of State (with the possible exception of Heseltine).

But is this broad agenda sufficiently differentiated from the ‘Northern Powerhouse’ or it’s predecessor ‘The Northern Way’ in approach?

There is a potential big differentiator. Corbyn has pledged to use a form of quantitative easing to create additional public funding. He could of course place new funds in some giant sinkholes, such as State Pensions or the NHS. But he could be smarter. He could use the additional funds to invest in infrastructure. During the Parliament he could outline a series of major rail investment schemes, identify some light-rail metropolitan expansions or new schemes and develop investment plans to transform urban bus networks.

The Government could fund a pipeline of green-energy investment projects. These could include everything from large scale tidal and solar power schemes, the creation of local power grids, the mass transfer from diesel powered public transport to electric power, the transformation of public and private buildings to sustainable energy sources. The building of new Council and Social housing would be both socially beneficial and economically literate.

Additional borrowing designed to stimulate economic activity, reduce carbon output, build new housing and simultaneously address the UK productivity shortfall could win support from the economic mainstream. Higher public investment at a time of very-low interest rates is a defensible policy. In fact Corbyn has some supporters in unusual places for a ‘People’s QE’, one of the most senior Hedge Fund Managers in the UK, Paul Marshall of Marshall Wace, argued that it could be a better alternative to the previous QE programme if used correctly.

In his opinion piece in the Financial Times, Marshall made the case that the previous QE programme had the impact of inflating asset values, and as such disproportionately benefited the wealthiest people in the Country. The scale of QE was such, it worked out at £5,800 per head of UK population, that it might have been better to simply to give those funds to each adult in the Country. But giving the population at large the funds to create wider economic stimulus would likely be only a short-term boost. The level of consumer spending on foreign holidays, flat screen TV’s and consumer electronics would see to that. The limitations of tax-cutting as a means to create stimulus is also flawed for broadly similar reasons. On the contrary, investing in new electric trains, metro-transport, green power and public housing would all deliver both short-term stimulus and longer-term productivity and fiscal benefits.

But in the context of the north it could do something else. It could keep the pressure on George Osborne to deliver on his Northern Powerhouse commitments. When Osborne cancelled the electrification of the northern rail network after the election, Corbyn could have committed to delivering the scheme, and say how he was going to pay for it.

If the Northern Powerhouse is simply a ‘cruel deception’ then Corbyn should set out a serious and substantial alternative, and in doing so must at all costs avoid a ‘back to the future’ industrial north stereotype.

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Note: This article was originally published on Paul Lakin’s Urban Policy North blog. It gives the views of the author, not the position of Democratic Audit UK, nor of the London School of Economics. Please read our comments policy before posting.

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Paul Lakin is the director of Urban Policy Associates and blogs at www.urbanpolicynorth.co.uk