I'm sorry but if you build it they still won't come: the failures of investment-led economic policy

Everyone is expecting Andy Burnham to move into Downing Street and that with a northern accent running the country our long forgotten, crumbling northern places will suddenly boom. They won't.

A typical northern view

“A cold wind was blowing from the north, and it made the trees rustle like living things.”

The space where I’m nearest to being an expert, partly from study but mostly from experience, is urban regeneration. This began when, despite my asking to be portfolio holder for housing, Margaret Eaton put me in charge, politically at least, of trying to regenerate Bradford. Some people will remember our city’s famous hole in the ground, may recall the hair-tearing efforts to rescue Manningham Mills, and the maniac scheme (in a good way) to reopen the Bradford canal. That was, in small part me:

Secured the restoration of Manningham Mills

Improvements to Manningham Park

The rescuing of Eastbrook Hall

Robert’s Park, Saltaire

Bradford International Markets Festival

City Park

Impressions Gallery & Gallery One

Refurbishment of John Street Market

Airedale greenways project

Airedale Partnership

Broadband enablement of the whole District

Improvements to Keighley market

The problem is that every person who has taken on the task of regenerating Bradford can provide a list of achievements just as long. After I stopped being the regeneration portfolio holder in 2006, I decided that I ought to learn something about regeneration and headed off to do an MSc in urban regeneration. Here I mostly discovered that nobody really knew what they were doing and that regeneration was mostly a game of chasing pots of central government or EU funding so as to give the impression of doing things to make struggling places and people better. At one point I compared the distribution of England’s poorest places in 1968 with the distribution of deprivation in 2008. The depressing discovery was that, with a few exceptions (inner south west London was no longer deprived and once fairly prosperous mining towns were) the same places that were poor in 1968 were still poor in 2008. I’d hazard a guess that the comparison will still hold in 2028.

Since everyone is expecting Andy Burnham to move into Downing Street and that with a northern accent running the country our long forgotten, crumbling northern places will, by force of Andy’s short vowel sounds, leap into life again. Every struggling place, even those struggling places near Manchester, will become boom towns like Manchester filled with shiny towers and trendy bars. We’ll be told it’s all about investment by people like Lord O’Neill from the Northern Powerhouse Partnership as if the simple act of spending money provides the catalyst for economic growth. Advocates of shiny regeneration like Sir Richard Leese and Lord Heseltine will argue that all you need to do is have the government underwrite the profit margins of developers and, bingo, off zooms the economy.

The problem is that we’ve been doing this sort of regeneration for nearly fifty years and Heseltine’s ‘field of dreams’ strategy became economic policy orthodoxy from the early 1990s. “Build it and they will come” cry the regenerators and enthusiasts for state investment. But we built it and they didn’t come. I’m not sure how much has been invested over that time in regenerating Bradford, it could run into billions. Does anyone really think it has worked? Or that similar sums spent in Hull, Sunderland, Blackburn, Barnsley and Doncaster have worked? It isn’t that what we did was bad - there are great public spaces, brilliant stadiums, fabulous concert halls - but that the investment theory has been proven wrong. We were told by the experts that these billions in regeneration funding would ‘lever in’ billions more in private investment, that paying the profit margins of developers was worth it because the next developers won’t need that guarantee. We were told that connecting places with very expensive trams and metros would be transformative and that subsidising bus fares would boost employment and retail spending. We were told that community capacity building, a focus on skills and more social housing would end deprivation.

The people who told us these things - ministers, property developers, academics, council chief executives and public transport enthusiasts - were wrong. Just investing, just spending money doesn’t work. Worse, the most successful regenerations - Manchester, Salford, Leeds and Newcastle city centres - just sucked trade and commerce away from the towns in their periphery. Bradford, Wakefield, Wigan, Oldham, Gateshead watched as the lawyers, accountants, ad men, bankers and consultants all packed up their offices in our towns and moved to Manchester, Leeds or Newcastle. Several of the biggest Leeds law firms were once headquartered in Bradford and this pattern is repeated across every part of the business services ecosystem. The effect of big city success is to strip high added value jobs from smaller towns replacing them with, at best, low value processing (soon to be replaced by AI) and at worst another half empty office block.

Yet if you were to ask for a regeneration strategy for Bradford, Sunderland or Rochdale what would come back would be a plan to invest public money in transformative schemes. Councillors and now elected regional mayors will gobble it up hoping it will bring some national funding and, at last, that scheme to boost the high street will happen. Everywhere - witness the latest round of town funds - will take their bit of investment, will announce how this will change everything and then discover just how far grant or loan funding doesn’t go in stimulating economic growth.

We’ve tried using investment by the state to stimulate economic growth hundreds of times across England. Every struggling town, challenged suburb and crumbling city centre has had millions to spend on getting that growth. And it hasn’t worked. Why on earth do we think that doing the same thing nationally will result in anything other than the same outcome? Britain has conducted a ‘field of dreams’ economic policy since the 1990s, doubled down on this approach after 2008, and now is about to boost it again via Andy Burnham, a man who appears to believe his own political mythos. Every political party in Britain, in as far as there’s any clarity in their economic thinking, has the same economic strategy, a policy approach that starts on Liverpool and London docks in the 1980s where Michael Heseltine announced the first of many schemes based on the idea that investment necessarily begets economic growth. We know now, after 45 years of testing this idea, that it nearly always fails. Quite how an economic approach so manifestly flawed became the policy orthodoxy in Britain is incredible.

21st century Manchesterism is simply a repeat of policies that don’t work. Its birth partly dates back to the aftermath of the 1996 IRA bomb in Manchester city centre but the encapsulation of the policy begins in 2012 with Michael Heseltime’s ‘No Stone Unturned’. When that was published I wrote about how Heseltine was wrong in 1982, wrong in 1992 and still wrong in 2012:

“These tired old policies are accompanied by a familiar litany of how business-style public sector management is needed, how economic development is driven by “innovation strategies” and some ridiculous obsession with “British ownership” as if that is somehow significant in our economy. What Lord Heseltine presents is simply his inevitable dirigiste, managerialist vision of how government should be organised. And it’s presented with panache and conviction.

The problem is that this agenda failed to regenerate the North when Britain was booming. Why on earth does anyone think that this agenda will regenerate the North when Britain isn’t booming? There is nothing at all in Heseltine’s prescription that will take us one inch nearer a more dynamic, entrepreneurial economy. Instead we’ll have an economy designed and run by a closed sect of business managers working hand-in-glove with a closed sect of public sector managers.

In the end these are tired old proposals from a delightful and eloquent old millionaire. They are policies that haven’t delivered regeneration when they were tried before – except for some shiny city centres. But ask yourself this. Those city centres – Manchester, Liverpool, Newcastle, Leeds – have they delivered regeneration for the wider community? Travel a few hundred yards to Newton Heath, to Harehills, to Kensington and look around you. That depressing place of high unemployment, poor education, rampant crime and unshiftable poverty wasn’t changed when Heseltine’s policies were tried before. What makes you think it will work this time?”

The definition of insanity is doing the same thing over and over again and expecting different results. And Britain has been, under the guidance of an old property developer turned politician, doing just this in its efforts to transform the struggling economies of northern towns and cities. It is time to put Lord Heseltine out to pasture, admit he was always wrong and do something different. Some thoughts about that are here and here.