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Treasury should pay cities for creating jobs - report

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Treasury should pay cities for creating jobs - report


Published by Max Salsbury for in Central Government and also in Finance, Local Government

Government set for £30 billion boost from bailed-out banks Government set for £30 billion boost from bailed-out banks

Cities across England that successfully introduce measures to help increase local employment should be entitled to claim "cashback" from the Treasury, a think tank has claimed

IPPR North’s new report recommends measures to rebalance the economy and says the North of England needs a "Boris of the North" to advocate for investment plans and make the case for further powers and controls.

It urges the leaders of Manchester, Liverpool, the North East, South Yorkshire and West Yorkshire to speak with a single voice so that they are better heard in the corridors of Whitehall and Westminster.

The report says that the North of England continues to lose out on public spending on economic development which is skewed towards London and the South East. Instead, the North is currently compensated with welfare payments and grants. The report says this is a vicious cycle which needs to be reversed with more investment and financial freedom for Northern cities to grow jobs and bring down their welfare bills.

The report shows that local investment into schemes to support the unemployed into work results in national savings: with more taxes being paid and benefit payments reduced. But it argues that city budgets need to reflect their successes, claiming both the Treasury and local areas should agree to share elements of the risk involved in the ‘earnback deal’, with control being re-centralised in the case of any failing authority.

Other measures recommended that would help to rebalance investment in the regions and drive forward growth in the North include:

  • The identification of top priority infrastructure priorities for the North on a similar scale to Crossrail and the Thames Gateway in London.
  • A doubling of applied research funding spent in universities outside London and the South East.
  • 10% of the income tax take in combined authority areas being assigned to those local authorities with a corresponding reduction in central government grants.
  • Reduced central government interference with council tax and business rates.
  • Substantial place-based budgets carved out of government departments and set for a five-year period.

It says that the five combined authorities which will exist in the North by 2015, (Manchester, Liverpool, the North East, South Yorkshire and West Yorkshire) will be best placed to be the first to take on these new powers and recommends that provisions are made to introduce them in the 2015 Spending Review.

Ed Cox, director of IPPR North, said: “The Prime Minister used to talk about the public ‘sharing in the proceeds of growth’ and that’s the same logic he should apply to cities in the North of England. Cities which have the greatest potential for growth also have the worst poverty and unemployment. An ‘earnback deal’ would provide an even greater incentive to invest in employment schemes which will not only finance growth, but will also help relieve poverty. Boosting northern prosperity would in turn boost national prosperity.

“The next Spending Review in 2015 provides an opportunity to reform how public spending is allocated and break the vicious cycle which promotes growth in London and shores up decline in the north. By 2015 there will be 5 combined authorities in the North which will be well placed to take on regional spending responsibilities and rebalance investment towards northern cities.”


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