Falling living standards are partly about the price of essentials, like electricity, gas and public transport rising faster than inflation. It is also about wages rising too slowly, and too many people – especially young people – being without decent jobs.
There are four big problems we as a country have got to tackle.
First, businesses are being held back and individuals are being impoverished by acute skills shortages. Four in 10 businesses say they are finding it hard or impossible to fill jobs requiring technical skills, yet youth unemployment continues at nearly one million.
The second challenge is low productivity and innovation. Output per hour worked in the United Kingdom is far lower than in the United States, France or Germany.
Third, we have too few growth companies, in particular companies which export. Only one in five of our small and growing companies export, compared to one in four on the continent.
And fourth, too much of our infrastructure is inadequate – particularly transport and housing.
In each case, big changes in national policy and leadership are needed. For example, we need a revolution in the youth apprenticeship system to transform the quality and quantity of apprenticeships.
But just as important as national policy, radical improvement is needed in the capacity of our cities, city-regions and counties, to take charge of their destiny.
Cities, in particular, need to be far more powerful engines of growth. Over 90 per cent of new private sector jobs have been created in city-regions since 2010. But there are not enough jobs, and they are not well enough paid. Outside of London, our major cities are almost all below average in their per capita income, in stark contrast to Germany where regional cities are all above average. This reflects inadequate skills, infrastructure, regeneration and economic development.
My conclusion is that Whitehall is simply too distant and too lacking in knowledge to tackle these problems effectively. It can only be done by handing power and resources to city- and county-regions.
This requires business leaders and local authorities to come together at the level of city-regions and counties to take responsibility for key areas currently directed from Whitehall, including skills training and apprenticeships, support for the long-term unemployed to get into jobs, and the planning of infrastructure.
The imperative is to devolve to travel to work areas which need integrated infrastructure and a trained workforce to promote jobs and growth.
For example in Birmingham, the travel-to-work area is far wider than the city of Birmingham itself. There is an enterprise zone in the city centre, but the metro goes up to Wolverhampton to the north-west, buses and trains flood in from all the neighbouring authorities, while the airport and the National Exhibition Centre, key growth magnets, are in the south-east in Solihull, where there is also planned to be a major HS2 interchange.
So more budgets and economic decision-making should be at the level of our city-regions and counties. This means strengthening local enterprise partnerships as the voice of business and putting them together with local authority leaders covering the same city and county areas. Greater Manchester has done this by creating a combined authority with strategic responsibility across the whole city-region for transport and economic development.
This is a broad model other city- and county-regions should follow. As they do so, significant funding should be devolved from Whitehall to give business and local authority leaders real responsibility for the big decisions to unlock growth in their areas.
My report will set out a plan to make devolution real, and to make it happen fast. All this is critical to what Ed Miliband calls the ‘race to the top.’
Andrew Adonis is shadow minister for infrastructure and former secretary of state for transport. He tweets @Andrew_Adonis
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