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City Deals

Volume 547: debated on Thursday 5 July 2012

The Government are committed to unlocking the full growth potential of our cities. We want powerful, innovative urban communities that are able to shape their own economic destinies, boost their surrounding economic areas and make a vital contribution to national economic growth. Achieving this requires a major shift in the control of resources and responsibilities from central Government to the leadership of each city, which is the purpose of the city deals programme.

I have laid in the Library a paper which summarises the deals that have been concluded. The first wave of city deals has focused on the eight largest English cities outside London and their wider economic areas. Each deal is bespoke and reflects the different needs of each community. However, each deal aims:

To give cities greater powers to drive local economic growth.

To facilitate specific projects that will boost local economies.

And to strengthen the governance arrangements of each city.

Each agreement represents a genuine deal—with both cities and Government offering and requiring things in return.

We have concluded deals with Greater Birmingham and Solihull, Bristol and the west of England, Greater Manchester, Leeds city region, Liverpool city region, Nottingham, Newcastle and Sheffield city region.

The core cities have estimated that the first wave of deals will create 175,000 jobs over the next 20 years and 37,000 new apprenticeships. If achieved, this would be a significant contribution to our economy—creating opportunities where they are needed most.

Each deal is different, a locally-determined combination of the following key components:

Greater powers and incentives to invest in growth, which include:

Earn back—a new payment by result model that incentivises a city to invest in growth in return for a share of the national tax take. (Greater Manchester)

New development deals—the freedom to deliver critical infrastructure through tax increment financing, with the ability to borrow against future business rate income in key development zones. (Newcastle, Sheffield and Nottingham)

Economic investment funds—the power to pool multiple funding streams and business rate income into a single investment fund, leverage private sector capital and invest in local priorities.

Cities will be able to create self-sustaining investment funds that will reduce dependence on central Government grants. (Greater Birmingham and Solihull, Bristol and west of England, Greater Manchester, Leeds city region, Liverpool city region and Sheffield city region)

A range of enhanced powers for the delivery of jobs and skills, which include:

Local skills funding model—a new model of skills funding that will match local contributions (public and private) with national funding to provide a skills budget that cities will control to invest in the skills that local businesses need. (Sheffield city region)

Skills bank—an employer owned mutual that will match public sector funding with private sector investment and allow businesses to buy the skills and apprenticeships that their local economy needs. (Liverpool city region)

Outcome incentives—new models to give cities greater influence over the skills system by using incentive payments or payment by results. (Greater Manchester and Liverpool city region)

City apprenticeship hubs—enabling cities to boost apprenticeship numbers by supporting SMEs take on apprentices through apprenticeship training agencies, brokerage and incentive payments. (Bristol and the west of England, Greater Manchester, Leeds city region, Newcastle and Nottingham)

Localised youth contracts—local alternatives to the national 16-17 youth contract programme, with cities having the power to design and deliver local models to reduce NEETs. (Leeds city region, Liverpool, Newcastle)

New opportunities to support local businesses, which include:

Local venture capital fund—a localised model that will match national funding with local contributions to create a venture capital fund that will invest in high-tech start-up and growth businesses across an economic area. (Nottingham)

Business growth hubs—city led business hubs that bring together all the support, advice and services that investors and local businesses need to locate, grow and trade. (Greater Manchester and Bristol and west of England)

New opportunities to drive critical infrastructure development, which include:

Rail devolution—devolving greater responsibility for commissioning and managing franchise arrangement for local and regional rail services. (Bristol and west of England, Leeds city region, Greater Manchester and Sheffield city region)

Devolution of local transport majors funding—matching local resources with devolved transport budgets so cities have the power and resources to make strategic transport investments. (Greater Birmingham and Solihull, Bristol and west of England, Leeds city region, and Sheffield city region)

Localised asset management—joint investment programmes that bring together local and national assets in an economic area to unlock resources for housing development and regeneration. (Greater Birmingham and Solihull, Bristol and West of England, Greater Manchester, Liverpool and Newcastle)

Low-carbon pioneering cities—local programmes that will help cities make critical investment in green infrastructure and technology; generate low-carbon jobs; and accelerate reductions in emissions. (Greater Birmingham and Solihull, Leeds city region, Greater Manchester, Newcastle, Nottingham)

These new powers and responsibilities are supported by strengthened governance and accountability arrangements. Liverpool and Bristol have voted to have directly elected mayors complemented by strong decision-making structures across the wider economic area; Leeds and Sheffield have joined Greater Manchester in forming combined authorities—in the west Yorkshire and south Yorkshire areas, respectively; Newcastle is working with authorities across their economic area to take steps towards forming a north east combined authority; Birmingham is an unusually large local authority and its local enterprise partnership has established strong private sector leadership; and Nottingham’s city deal is focused on a particular area of the city—its creative quarter—which is wholly within the city centre authority area.

The Government have always been clear that the city deal programme represents a point of departure not a destination. We fully intend that the process of decentralisation should be deepened over time—and also extended beyond the initial participants. Nevertheless, the first wave of the programme represents a major transfer of power from central Government to local people, one which should inspire the highest ambitions of our greatest cities.