Written evidence submitted by the Greater Manchester Combined Authority (LRS0073)
Contact: Lisa Dale-Clough, Head of Industrial Strategy, GMCA; Henry Parker, Policy and Strategy Officer, GMCA.
(I) Introduction to Greater Manchester
(II) Response to Call for Evidence
(I) ABOUT GREATER MANCHESTER COMBINED AUTHORITY AND THE ECONOMY OF THE CITY-REGION
The Greater Manchester Combined Authority (GMCA) is made up of the ten Greater Manchester councils (Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford and Wigan) and the Mayor of Greater Manchester. The GMCA is run jointly by the ten council leaders and the Mayor of Greater Manchester.
GMCA, our ten local authorities, LEP, Business Growth Hub, and business representative organisations have worked very closely together to respond to the immediate crisis caused by Covid-19 and now share the task of developing a comprehensive economic recovery strategy for the city-region.
The Greater Manchester Independent Prosperity Review (2019) conducted by 6 internationally renowned economists, provided an in-depth assessment of the city-region’s economy and progress over the previous decade. The Review found that Greater Manchester’s economy is the most diverse in the country, and includes the highest numbers of new start-up firms in the UK. It has globally unique strengths and assets in frontier sectors including life sciences and health innovation, advanced materials and advanced manufacturing; digital, ai and cyber and a clean growth mission that will put us at the forefront of the global movement for decarbonisation. However, the Review also found that Greater Manchester has the same problems in the foundations of our economy that have caused the UK to have systemically lower productivity than comparator economies in recent decades. These include problems with the prevalence of health inequalities and long-term conditions among working age adults, poor qualification levels in some areas, and the need to give young people a clear line of sight to the jobs of the future. These are problems that are very likely to have been made much worse by Covid-19.
The Review also found that our business base includes very productive, internationally-oriented and growing firms in every sector, but a long tail of businesses that need support to adopt new technologies and business models, and to raise their aspirations and work with their employees to develop the workforces of the future. This need is now also greater than ever due to the unprecedented upheaval and even devastation caused by the pandemic across our economy, and the ongoing and massively increased demand for business support in every sector of our economy to help firms adapt to wholly new operational models and ways of working.
Remedying these issues requires stable and long-term investment in our health, education, skills and work system, in our transport and digital infrastructure, in public and private R&D investment; in locally tailored business support and in place-making.
Despite some known differences, the nature and makeup of the Greater Manchester economy means the work being done locally to plan for a recovery will echo much of that that is being done nationally. For example, our sector spread is largely similar to the national breakdown used by the OBR in it April scenario-planning. This creates an opportunity for Government to work closely with the city-region during the recovery to pilot and monitor ambitious recovery responses.
Greater Manchester is developing a bold Living with Covid Plan - a one-year recovery plan for more sustainable and equitable growth, building back better, and making the most of our world-leading assets - for our city-region and the whole of the UK. In doing this we are not starting from scratch. Our Local Industrial Strategy (LIS), agreed with Government last year, set out how we would capitalise on the strengths of the Greater Manchester economy, deal with both the opportunities and threats posed by the Fourth Industrial Revolution, and play our full role in driving UK growth. However, the pandemic has accelerated some trends and brought some issues into clearer focus. We would welcome a further conversation with the Committee on how we are developing our recovery plans and how we can work more closely with BEIS and other Government Departments on a shared approach.
Latest Greater Manchester Economy Data: C19 (at time of writing)
(II) RESPONSE TO CALL FOR EVIDENCE
What core/guiding principles should the Government adopt/prioritise in its recovery package, and why?
To stimulate the economy in Greater Manchester and other regions, Government must take action now in collaboration with localities to:
How can the Government borrow and/or invest to help the UK deliver on these principles?
We urge Government to act on the priorities for recovery planning outlined above by devolving more joined-up, strategic pots of funding to Combined Authorities, accompanied by the flexibility we need to use these in an agile way as the impacts of the pandemic fall out over time. In part this is because the Covid-19 crisis is still evolving, and we need to be able to act quickly in response to changing circumstances. But longer-term the next phase of devolution in England will also require new approaches to local investment to boost economic activity, support labour market productivity, infrastructure investment and place-based resilience.
Too many of the funds available to regions and localities are short-term, discrete funding lines, forcing local government to spend a great deal of time and resources on bid-writing, line-by-line reporting and other bureaucracy, rather than acting with our political mandate to deliver for our residents. We need to shift toward a long-term, place-based funding settlement for city-regions that cuts across silos. For example, instead of different funding pots for housing and transport, we would have a single settlement across both that could fund place-based developments to unlock housing and put in the right transport infrastructure at the same time. Current bid-based funding pots and silos across departments prevent such an approach, leading to inefficiency and reducing value for money for the taxpayer.
We recognise that such a shift will not happen overnight, but the progress made in Greater Manchester demonstrates it is possible. The upcoming Comprehensive Spending Review, Devolution White Paper, National Infrastructure Strategy and Green Book Review represent a once in a generation opportunity to change how we invest in people and places in the UK. The decisions taken by Government in the coming weeks and months will determine how and when the UK recovers from the C-19 pandemic – whether we emerge with the tools needed to create the inclusive economies and productive industries our future depends on, or whether we continue to try to address problems through siloed and short-term policy and spending.
What measures and support will businesses need to rebuild consumer confidence and stimulate growth that is sustainable, both economically and environmentally?
Restoring public confidence to return to work or to move around is vital to optimising the recovery process. In Greater Manchester, we launched the ‘Safely Reopening GM’ campaign to provide safety messaging across three settings: workplaces, travelling to and from the workplace and public spaces. Aligning the safety messaging across each of these three settings provides the clarity needed for workers and businesses to plan and manage their return to work as quickly and safely as possible. A lot of care and work was taken to ensure the Greater Manchester safety messaging built on national guidance and helped place it within the local context. In future, closer engagement and consultation in advance of forthcoming Government communication campaigns would allow us to ensure they land as intended across the Greater Manchester city-region as swiftly as possible.
The confidence-building campaigns underpin the ‘Build Back Better’ initiative launched in May 2020 by the Greater Manchester and Liverpool City Region LEPs, as a guiding ethos for how we recover from the C-19 pandemic, learning the lessons from the 2008 financial crisis which left structural weaknesses across our economy. The building back better ethos recognises that a crisis can contain the seeds of opportunity to pursue positive changes – in this case to create an economy that works better for everyone. The Build Back Better movement has a number of key themes designed to engage with and galvanise the business community and promote a sustainable economic recovery, for example, by rethinking how we:
Whether the government should give a higher priority to environmental goals in future support?
A theoretical modelling exercise conducted by the GMCA has analysed the effects of Covid-19 on business and resident behaviour and subsequent potential impacts on carbon emissions. The analysis has shown that even if the scale of carbon reductions seen in the peak of lockdown was maintained for the rest of the year, we would only just be on track to meet our trajectory against the Greater Manchester target of zero carbon emissions by 2038. This is a stark demonstration of the scale and rate of change needed to bring carbon emissions down to safe levels and should form the imperative for swifter, more radical local and national action.
The response to the 2008 financial crisis was a missed opportunity to drive forward a green recovery that offered long-term economic sustainability and resilience. We now have a second chance to look at supporting and investing in companies who can deliver environmental outcomes at scale by providing them with access to direct funding support in the short-term to see them through the crisis, as well as long-term, patient finance that will allow their innovations to flourish in the years ahead.
We must also invest in decarbonising business operations throughout the recovery as part of building long-term resilience for UK industry. As well as supporting the frontier leaders broadening the green economy, Government should also look carefully at how it supports those industries who will require the most support to navigate the transition to low carbon. In aviation, for example, we have already seen interventions from countries including France that have set ambitious carbon reduction conditions for their major carriers in return for Government support. Conditions like these are not intended to be punitive but rather to stimulate the innovation and investment needed to avoid future climate-induced crises.
The Greater Manchester Local Industrial Strategy (jointly-owned by UK Government) committed the city-region to design and implement a ‘mission’ to deliver for carbon neutral living within Greater Manchester by 2038, thereby accelerating progress against the UK’s 2050 carbon neutral targets and helping deliver the Clean Growth Grand Challenge in the national Industrial Strategy. Greater Manchester has made significant progress in setting up this ‘mission’ since we launched the Local Industrial Strategy and is fundamentally committed to clean growth as a guiding priority for post-pandemic recovery and support.
Whether the Government should prioritise certain sectors within its recovery package, and if so, what criteria should it use when making such decisions? What conditions, if any, should it attach to future support?
Like many regions, we anticipate that the sectors of our economy that are most in need of support for recovery are Leisure, Retail and Hospitality as well as the Night Time Economy and Tourism. For example, Manchester Hoteliers Association is anticipating occupancy levels of no more than 30% for the remainder of the year, compared to the usual 80%, with redundancies expected in the coming months. Despite the 4 July reopening, activity and spending remain well down from typical levels, with only 40% of Night Time Economy premises anticipating opening on 4 July, with 34% reporting plans to open at some point in July, and the remainder later. There remains a significant concern within the sector of bringing employees back from furlough if there is a lack of demand or risk of a second Covid-19 spike or local lockdown. Subsequently, the risk of a sector-specific recessionary impact in these areas requires priority measures in Government’s recovery planning. One clear example is the case for extending the furlough scheme for sectors like aviation and the live music / events industry where a return to anything resembling normal operations is a long way off. Raised concerns about furlough incentive and may be paid for staff who would go back anyway.
In addition, we would also urge Government to maintain the flexibility to support other sectors where the impact of COVID-19 is likely to take longer to materialise or register in data and indicators. One example is manufacturing. As extended disruption to global demand and supply chains is very likely as the pandemic evolves in different ways in different countries around the world, new policies or support for this sector may be needed in a few months or even years from now.
We also urge Government to continue to apply the ‘challenge-led’ approach in the national Industrial Strategy to the recovery, as this helps support specific sectors whilst avoiding the pitfalls of picking ‘winners’. The challenge-led approach also reflects the reality of our economy, where cross-cutting digital, data and AI capabilities (for example) are transforming service industries as well as manufacturing and energy systems. Challenge-based investments subsequently enable Government to support multiple sectors at the same time.
Furthermore, whilst the challenge-led approach has conditionality at its core, we assert that all public investment should address our long term ambitions to build a more inclusive, greener and productive economy. Since 2015 Greater Manchester has applied the principles of Social Value in its procurement approach, and manages a Social Value Network that now has several hundred members across the city-region. Grounded in the UN Sustainable Development Goals and our Greater Manchester Strategy, and built into our Local Industrial Strategy, the Greater Manchester Social Value Framework goes beyond being a benchmarking scheme and a procurement tool, and will continue to be applied in the recovery to reinforce economic activity that is impact-focussed, fair and sustainable.
How can the Government best retain key skills and reskill and upskill the UK workforce to support the recovery and sustainable growth?
The labour market shock caused by Covid-19 is already hitting hard in Greater Manchester. The number of people claiming unemployment benefits in Greater Manchester has risen sharply (by at least 63%) and we have around 384,700 people on furlough. We are working on a comprehensive skills and labour market response, which will cover Recovery, Reform and Growth and will support a wide range of cohorts and activities. It will set out what we can do ourselves with our existing powers and flexibilities, what we believe is needed at a national level, and the areas we will need to work in partnership with Government. However, it is clear that the rapid re-alignment of demand for and supply of skills is something that cannot be done nationally, as it requires local intelligence and coordination to get right.
Essential for success will be close local and national policy development and flexibility over the use of specific funding pots. Through our LIS Greater Manchester, Department for Education and Department of Work and Pensions has been engaged in a year-long partnership to explore opportunities to connect national and local post-16 skills and work policies in Greater Manchester to deliver an effective offer for our 2.8 million citizens and create a ‘roadmap’ of how to move from the current system to the system needed to ensure the skills of our workforce align with the priorities of the LIS.
Is the Industrial Strategy still a relevant and appropriate vehicle through which to deliver post pandemic growth?
The Industrial Strategy is still the relevant and appropriate vehicle for post-Covid growth, provided Government is committed to realising its ambitions and working across Whitehall Departments on delivery. It is widely accepted that driving any substantial improvements to the productivity of industries or the prosperity of places requires decades of focus and investment. Therefore, changing the long-term policy framework for the UK’s economy risks setting us even further behind comparator countries. The stability provided by maintaining the approach or framework in the national Industrial Strategy would be instrumental to generating much needed confidence at a time of great instability.
For Greater Manchester, whilst we are reviewing the actions in our LIS implementation plan to identify areas where we need to accelerate progress or reshape implementation to reflect the impact of C-19, the core principles of the strategy remain sound:
1) improving the foundations of our economy to increase productivity and share prosperity throughout the city-region, and
2) capitalising on our strengths and opportunities to create new high value jobs and investment and direct innovation towards real world challenges.
Both of these principles fundamentally underpin our ability to build back better.
The integrated local and national approach to developing Local Industrial Strategies relied on developing shared priorities and joined-up ways of working. These are precisely the requirements needed to accelerate the recovery from Covid-19 and to rebalance the economy. A commitment from Government to the approach in the national Industrial Strategy, and the Local Industrial Strategies agreed between LEPs and Government, would therefore provide a strong message to businesses that Government has a clear sense of direction and is committed to creating an economy that works for people and businesses throughout the UK.
As part of this, Government should provide, as soon as possible, clarity on the arrangements for the UK Shared Prosperity Fund which is fundamental delivering Local Industrial Strategies and their associated growth and investment pipelines.
How should regional and local government in England, (including the role of powerhouses, LEPs and growth hubs, mayoralties, and councils) be reformed and better equipped to deliver growth locally?
The lessons learnt through the response to the pandemic are still emerging, however, a small number of key points are already apparent:
The forthcoming Devolution White Paper, Comprehensive Spending Review and Budget will need to be framed with the widespread and fundamental impact C-19 has had across our communities and economy in mind. However, some of the key weaknesses of our devolved settlement remain the same, have hindered our capacity to respond to the pandemic and will need to be addressed:
What should the Government do to ensure that delivering on its priorities does not exacerbate the vulnerability of businesses, consumers and communities/workers that have been impacted by Covid-19?
We believe that this crisis will intensify long-standing inequalities and vulnerabilities in the UK, and that these impacts will be particularly felt across communities in Greater Manchester. We are already seeing disproportionate impacts and widening inequalities by race, age, disability and gender, as well as between rich and poor, between urban and rural areas of Greater Manchester, and also within civil society.
The response to the Covid-19 emergency across Greater Manchester from voluntary organisations, community groups and social enterprises has been incredible in its strength, its depth and the speed at which it was been mobilised. Voluntary, Community and Social Enterprise (VCSE) organisations of all sizes, as well as community volunteers, are offering their support and are integrating with emergency support structures at this time. The sector has been quick to adapt at pace and with a huge degree of accuracy and efficacy to meet the needs of our communities and businesses and it will have a crucial role in supporting our residents through the recovery phase of the crisis. However, early feedback shows that around two thirds of VCSE organisations have had to change the way that they work in the current crisis and many are now struggling to find the resources that they need to respond to the demand put upon them.
Government can support our efforts to reduce the inequalities caused or exacerbated through the crisis by:
What lessons should the Government learn from the pandemic about actions required to improve the UK’s resilience to future external shocks (including – but not limited to – health, financial, domestic and global supply chains and climate crises)?
Rebuilding with resilience
Greater Manchester is well underway with the development of a GM Living with Covid Plan that aims to both address adverse impacts on communities, businesses and public services and also to support aspirations to build back better by developing a society which is fairer, greener and has better health outcomes, but is also more resilient.
There are a number of objectives for this strategy aimed at improving resilience which offer an approach for other city-regions and national policy:
Financial and economic resilience
England’s localities are playing an integral role to support the immediate response to Covid-19 and will need to be at the centre of the subsequent economy recovery process that will be delivered over the coming months and years. Localities have been at the front line of this crisis and are uniquely situated to bring together businesses, the voluntary sector and public sector bodies to respond to the economic and social impacts of Covid-19 to realise strong post-pandemic recovery and growth. Localities therefore have a central role for future resilience-building, however, their capacity to continue to act with the effectiveness that they have so far will be undermined unless their financial sustainability is ensured.
Certainty on the extent to which excess spending by councils on coronavirus measures will be covered by Government, and clarity on funding levels for 2021/22 and beyond will allow local government to optimise recovery strategies and may allow for a more aggressive approach to the spending of council reserves to support residents and local businesses in the current and any future crises. At present, the reserves held by local authorities are generally low after significant cuts over the past decade and many of these funds are allocated for specific purposes or risks identified pre-Covid-19. Many of our local authorities have taken decisive and necessary action, making the decision to draw on these reserves with no formal guarantee from Government of their replenishment. We urge Government to make the commitment to replenish these reserves as soon as possible.
We welcome Government’s intentions to release a comprehensive plan to ensure the financial sustainability of councils this financial year, however, there are steps Government can take now to give councils the strong financial foundations needed to deal with crises in the longer-term. Some further measures that would assist the financial position of local authorities include:
What opportunities exist for the UK economy post Brexit and the pandemic for export growth?
Both Brexit and Covid-19 have created significant challenges for exporting businesses. The continued uncertainty around the UK’s future relationship with the rest of the world and the threat of a second wave means that these challenges are likely to remain at least until the end of the year.
Despite the significant challenges facing industry and exporters, both Covid-19 and the UK’s departure from the European Union present a timely moment for the UK and city-regions such as Greater Manchester to consider how best to engage on an international stage moving forward. In the context of economic recovery, international trade is hugely important for getting the economy moving again and in order to promote export growth we have identified the following opportunities:
 The panel is made up of the following: Professor Diane Coyle (University of Cambridge), Professor Mariana Mazzucato (University College London), Stephanie Flanders (Head of Bloomberg Economics), Professor Ed Glaeser (Harvard University), Professor Henry Overman (London School of Economics, Director of the What Works Centre for Local Economic Growth), and Darra Singh (Ernst & Young). The findings of the review are available here: https://www.greatermanchester-ca.gov.uk/what-we-do/economy/greater-manchester-independent-prosperity-review/.