Occasional contributor John Blundell puts forward a suggestion as to how the economy might start to recover
Can you remember the days before COVID-19 lockdown? Boris, triumphant from his election victory, had put the devolution agenda back on the table. Not long before, budget setting councils and our city’s leaders cried blue murder as they pushed through the tenth year of government cuts to services.
We should instead focus on getting the right people the cash
Yesterday’s woes pale in comparison to the devastation COVID-19 will cause. Perhaps we should use the opportunity to sow the seeds of a true Northern Powerhouse. Why not develop a new relationship between city, state and independent business by establishing a series of regional investment banks to shore up viable businesses trying to restart?
Manchester has long argued for devolution, mainly because we, and not Whitehall, care about our area the most. Councillors and officers of local authorities know businesses in our districts intimately because the success of our city region rides on their innovation and expansion.
Something that should put us all at ease is the government’s clear plan on going hard while we stay at home. I’m a staunch Labour Party member but I can appreciate the scale of what Sunak has committed to. Promising to pay 80% of people’s wages and the support packages that were announced were not expected of a Tory Chancellor.
The UK’s debts are worth roughly 80% of its economy. This could be considered as high compared to Germany’s 60% or Norway’s 30%, but low compared France’s 100%. How much we spend is largely irrelevant and we should instead focus on getting the right people the cash.
In Russia, under communism, the consumerist instincts of the individual were snuffed out. Mathematicians and economists were employed to fathom how production and society should be organised so that the population could reap the greatest practical yield. It became apparent that the Russian state wasn’t any good at this, individuals were much better and so communism folded.
The question therefore is how does the government efficiently get capital to the people who will generate the most output, re-employ perfectly hard working people while not bankrupting Her Majesty’s Treasury? It shouldn’t attempt to do it centrally, but locally.
In Greater Manchester’s case, the government should consider accessing capital and giving it to the GMCA to offer to companies - not as additional loans, or even as grants, but as investment for equity in their business.
Greater Manchester has a long history of owning businesses that contribute to our councils’ coffers. Manchester Airport Group (MAG) is a shining beacon of public-private partnership. OK, COVID-19 has hit the aviation industry hard, but it will rebound and one of the most successful majority state owned companies will bounce back and contribute once more.
What has been essential to the success of MAG is the common goal of its board and the city region’s policy makers. The interwoven incentive to operate within a thriving economy, together with the state owning part of the company in shares, ensured that MAG operates for the public good.
The capital investment of Manchester’s airport, for example, is in line with the company’s view that the long term good of its airports is rooted in our region’s prosperity.
In return, the airport’s dividend has been most welcome, as GM has tried to shield itself from relentless austerity. Anybody who has encountered local government finance will know that a new approach to funding is needed if we are to encourage councils to become self-sustaining and not penniless.
Greater Manchester’s Evergreen Funding is another example of how the local city state has proved able to handle significant volumes of public cash and generate output and revenues. Municipal entrepreneurialism can work and Greater Manchester is actually good at it.
The most effective way of shoring up the economy will be through councils and the local knowledge they possess. The government should borrow the money, pass us the cash and allow us to pave the way for a levelling up of the northern economy that has always been promised but never delivered on.
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About the author
Occasional contributor John Blundell is a Labour councillor for Smallbridge and Firgrove, and the Cabinet Member for Regeneration, Business, Skills & Employment on Rochdale Council. He is also a non-executive director of Manchester Airport Group (MAG).