by Richard Hatcher
The decades from Thatcher onwards have seen the neoliberal transformation of cities in Britain. London epitomises the neoliberal global city, but London is not typical of British cities in either its size, its global financial role or its system of local government. Much more typical are England’s eight ‘core cities’: Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham, Sheffield, all attempting to reinvent themselves after the destruction of their traditional industrial base in the 1980s. Manchester, Birmingham and Leeds – all Labour-led councils – are in the lead in constructing a new city centre regime of capital accumulation based on financial services and other knowledge-based business services.
David Harvey, the Marxist geographer, has claimed that Marxists’ focus on macro-economic analysis has led them to neglect the city and the scale of the urban: ‘there has been no serious attempt to integrate an understanding of urbanization and built-environment formation into the general theory of the laws of motion of capital’ 1.
An exception is Jamie Gough, who argues that
‘localities are a crucial site for left strategy, because important social and economic relations are enacted and reproduced there, because of dense local relations between economy and social life, and because daily interactions and proximity facilitate building relations of solidarity and collectivity. Transforming social relations at higher spatial scales is certainly necessary, but local struggles are a dialectical moment in this.’ 2
Gough provides a more comprehensive analytical framework than Harvey’s, incorporating both economic production and social reproduction in the urban environment. In this context we need an analysis of the role of the local state. There are two components of the neoliberalisation of local councils, ‘roll-back’ and ‘roll-out’ 3.
Roll-back neoliberalism comprises reductions in the role and powers of local councils, most obviously through massive cuts in government grants to urban authorities. Roll-out neoliberalism entails the construction of a new model of local government. Government cuts in council budgets have a dual function of reducing state spending and enforcing the transformation of the local state, through the privatisation of public services and the reliance on partnerships with business.
The priority of the transformed neoliberal city council is to facilitate business development. Contracting-out council services, or simply handing them over, to private providers, with the most profitable services going to commercial companies, is one aspect. But in the largest cities outside London, led by Manchester, Leeds and Birmingham, the council’s key role is to facilitate a new regime of capital accumulation based on city centre development by property investors and knowledge-based businesses, many of them global. High-level profits are generated from two sources: the workings of the companies themselves, and the booming market in the sale of and investment in the land and property they occupy.
I am going to illustrate the new city centre economy and the role of the local council in its development by using Birmingham as a case study. While the local context of each city is unique, a concrete analysis of one can reveal general underlying economic and political processes which apply to other cities too.
The neoliberalisation of Birmingham
Birmingham’s economy was hit hard by the decline of industry under Thatcher in the 1970s and 1980s. The strategy of the city’s Labour council in response was to attempt to reposition the city’s economy by reconstructing its city centre in order to attract new office-based private sector investment 4. While private sector jobs in Birmingham as a whole fell by 11% between 1998 and 2011, private sector jobs in the city centre grew by 17%. The city centre specialises in the knowledge intensive business services (58%) and retail (13%) sectors.
The role of the Council in facilitating city centre development is two-fold: to use its planning, regulatory and funding powers to support business development, and to provide a city environment to attract knowledge-based services companies, in competition with other cities in Britain, including London, and abroad.
The current principal policy instrument of Birmingham city council is the City Centre Enterprise Zone, which comprises 26 sites in the city centre. It is run by a public-private local enterprise partnership with a budget of £275 million to attract business investment by offering discounted business rates of up to £275,000 and easier planning rules for property development. It also enables borrowing against the anticipated rise in business rates in order to spend more immediately on infrastructure (Birmingham Post 5 March).
In short, under the rules of the game imposed by the government, the council is cutting services and transferring the money to subsidise business profit. As Sir Albert Bore, Birmingham’s Labour leader, acknowledges, ‘It’s hard for people to understand that we are investing on the one hand but cutting services on the other – but we are using financial tools that are not available on the other side.’ (Daily Telegraph 4 February).
The resulting transformation of the city centre is staggering in its speed and scale. Investment in offices in Birmingham rose by £607 million last year over the previous year, representing a growth of 800%. The only restriction on further growth is the lack of supply of new office buildings. (Birmingham Post 12 February). It is a feast for property investors, as this enthusiastic report shows:
‘A few days ago I attended a Movers and Shakers breakfast networking event for senior people in Birmingham’s commercial property development sector. There were around 130 delegates, keen enough to be meeting and making sense at seven in the morning, mostly from large builders, developers, professional advisers and commercial property agents. Names like Atkins, Wates, Savills, CBRE and EC Harris. The place was buzzing with confidence and excitement as speaker after speaker told the meeting about the fantastic business and development opportunities opening up in the city, right now.’
‘Private sector representatives at the breakfast meeting organised by Movers and Shakers a London based, property networking forum, were fulsome in their praise of the council’s enabling role in getting Birmingham ‘shovel-ready’ for the upturn. […] Developers also like the city’s Enterprise Zone – where securing funding is ‘an easy and transparent process’ – and the ability of council officials to work in tandem with the private sector to make things happen.’ 5
In February this year the council announced its latest city centre redevelopment project, Snow Hill, which will provide additional new office space equivalent to 28 football pitches. The aim is to attract more financial businesses of the calibre of KPMG and Deutsche Bank, who already occupy the existing two Snow Hill office blocks. The council boasts that the £600 million scheme will be Birmingham’s answer to Canary Wharf, a major hub for professional services to rival Frankfurt or Zurich. As Albert Bore said, ‘Birmingham is emerging as a global investment destination.’ (Birmingham Post 29 January.) In January he received the accolade of an invitation, along with only two other city leaders, to a meeting at No 10 designed to put local authorities in touch with investors. And in March the council offered for sale an even bigger development, the £1 billion Southern Gateway, at MIPIM, the world’s leading annual property investment event in Cannes, with 21,000 participants including 4,500 international property investors. (Birmingham Post 5 March.)
The city council and the ‘gentrification’ of the city centre
The role of the neoliberal council is not just to partner business development. It is to provide a city environment capable of attracting global business and high-end earners. ‘Gentrification’ of Birmingham city centre was begun by the Labour council in the late 1980s with the building of prestige projects – the International Convention Centre, the Symphony Hall and the National Indoor Arena – funded by money taken from the education and housing budgets 6.
This strategy for signalling the city’s aspiring global status has continued ever since, with expensive new-build apartments, upgraded transport (the renovation of Snow Hill and New St stations, the tram extension, and in 2026 High Speed 2), the new shopping centre (Grand Central) and up-market retail provision (Selfridges, Harvey Nichols, John Lewis), and most recently another spectacular public building, the new Library of Birmingham.
The visible transformation of the city centre, and the physical experience of it as you walk its streets and squares, has a powerful hegemonic function, mediatised by the constant boosterism of ‘Boom Town Brum’ from the Birmingham Mail, that trades on and feeds a strong popular sense of cross-class Brummie pride and identity.
Council promotion of these prestige developments also continues to be supported by funding diverted from front-line service budgets. Children’s social services has been failed repeatedly by Ofsted, partly because of years of underfunding, and has now been taken over by a government Commissioner. The Council borrowed most of the £188 million building and set-up costs for the new Library of Birmingham, and it costs some £10 million a year to run. The result is that, only 18 months after it opened, 100 staff – around 50% – are to lose their jobs and opening hours are to be cut from 73 hours a week to just 40, while community libraries in the city are being closed or having their hours reduced.
Government driving the neoliberalisation of Birmingham: the Kerslake review
In September last year Sir Bob (now Lord) Kerslake, Permanent Secretary at the Department for Communities and Local Government, was despatched to Birmingham as Eric Pickles’ enforcer to carry out a review of the city’s governance. The review was published in December 2014 7.
It is unusual for government to intervene directly in this way, and it is particularly interesting because of what it reveals of how government wants the neoliberalisation of councils to proceed. The two immediate catalysts were the crisis in children’s services and the Trojan Horse affair, but these demonstrated, from the government’s point of view, the underlying failure of the Labour Council to carry out the internal restructuring and reorientation of governance needed to deliver the neoliberal agenda efficiently.
Kerslake was an appropriate choice. The mask of civil servant neutrality was briefly discarded in April 2013 when he wrote in the Daily Telegraph in praise of Margaret Thatcher and her pioneering privatisation programme.
According to Kerslake the efficient continuation of the neoliberal transformation of the council in Birmingham requires three major and interrelated developments.
1. More efficient central corporate leadership and management of the Council
The Council’s cuts programme needs to be more strategic and transformational, less short-term and reactive. Workforce planning and performance management needs stronger central control. This means a tougher approach to the reduction of the number of staff and tighter management of the workforce that remains.
2. External partners not only as providers of services but as partners in the governance of the city
The huge and ongoing cuts in the Council’s budget means it needs ‘partners’ to deliver services, but according to Kerslake the problem is that current partnerships are dominated by the Council. One consequence is that the government’s plan for the creation of a combined authority for the city region, similar to Greater Manchester, is being held back because neighbouring local authorities won’t accept Birmingham’s dominance.
Birmingham council has always had a pragmatic partnership with the private sector, but what is new about Kerslake’s proposal – the most radical in the review – is that business representatives should have a formal role in the governance of the city. (He says third sector and community representatives as well but it’s obviously the business ones who would have the clout.) The new vehicle for business intervention in the city’s governance is an ‘independent Birmingham leadership group’. It is worth quoting what Kerslake recommends:
‘23. The council should facilitate the creation of a new independent Birmingham leadership group. The group should approve the new long-term City Plan and be used to hold all involved in delivery of the plan to account.
25. This group should be used to help guide and deliver both the vision for the council and the partnership approach across the city. The group should be independent of the council, representative of the city’s communities.’ (p55)
The effect of this proposal would be to subordinate the elected city council to the veto of a business oligarchy. As Kerslake says, the council ‘needs to work much harder to align its priorities with its partners’ (p39).
3. Involvement by the community but not empowerment
Kerslake says: ‘By working together with local communities relatively modest steps can help pressure on resources by reducing the consumption of services and supporting local communities to help themselves and, where necessary, giving people the tools they need to do so.’ (p48).
For Kerslake community involvement is desirable for two reasons: to induce community acceptance of the austerity programme, and to substitute community provision for some aspects of reduced provision. The latter is as much for ideological reasons, symbolising legitimising the cuts in ‘democratic’ terms, as for actually saving money, which is likely to be minimal. This is involvement but not empowerment. Any transfer of power to communities would weaken central control and risk challenging both the cuts programme and partnerships with the private sector.
Unemployment and the lack of private investment in production
Birmingham has relatively high unemployment. In 2013-14 it was the 58th highest in the list of the 64 largest towns and cities in England, and 59th for young people on JSA. 8 Kerslake echoes local politicians in placing the blame on the low level of skills of the population. It is true that Birmingham has a relatively high level of workers with no qualifications, putting it bottom of the 64 and second to bottom for young people on JSA.9 Undoubtedly there are skills and qualifications shortages in some sectors, but this becoming a legacy of the past: school attainment at GCSE level in Birmingham has now overtaken the national average, including for the poorest young people, white British boys on FSM. 10 Lack of jobs, not lack of skills, is the main problem.
The Council and its business partners make bold claims for how many jobs will be created from the city centre developments. It is claimed that the £275 million Council-private partnership investment in the Enterprise Zone will ‘help create 40,000 jobs over the next 25 years’ 11. That works out on average to just 1600 jobs a year. In 2014-15 the Enterprise Zone spent £18 million but created just 1,000 jobs. Many will be professional and managerial jobs in the knowledge-intensive services companies. But many others will be low-paid low-skill jobs servicing them, such as cleaners, security, and retail staff.
What about jobs outside the city centre? Two job creation schemes have been launched this year. On January 8 Nick Clegg joined private and public sector directors from the Greater Birmingham Local Enterprise Partnership to sign the Greater Birmingham and Solihull Growth Deal, which secures £357m of government funding, as well as a further £80m of investment from local partners and the private sector. The target is to create 19000 new jobs by 2020.12 The following month, on 14 February, the East Birmingham Growth Prospectus was launched by council leader Sir Albert Bore with the claim that it could generate 9000 jobs over the next 10 years’ 13. East Birmingham has the highest unemployment in the city (11.5%) and the highest percentage (28%) of people of working age with no qualifications (Birmingham Post 26 February).
But the large majority of the funding for both these is not private capital committed to investment in production, it is funding for infrastructural improvements in the hope that they will attract investment and jobs in the future: business park sites, skills and ‘employability’ development, improved transport links – much of it predicated on High Speed 2, which isn’t due till 2026 at the earliest.
The claims of job creation that these two projects make are likely to be grossly inflated – just look at the existing balance-sheet. Since the Greater Birmingham and Black Country LEPs were launched in 2012 they have together generated 3,200 jobs (Birmingham Post 5 March). By my calculation that is a paltry increase of 0.25% in the 1.3 million jobs in the two areas – one new job for every 400 existing jobs. Many of these require qualifications which exclude the majority of the unemployed. And of the jobs that are created in Birmingham, how many will be full-time and well-paid? According to the TUC one working class area of Birmingham, Northfield, is ‘the top living wage blackspots in the country with 53.4 per cent of the jobs based there paying less than the living wage’.14 And Birmingham is a ‘hotspot’ for zero hours contracts, the second highest area in the UK (Birmingham Post 26 February).
The unspoken hole in the centre of recent government and council job creation schemes like these, their fatal flaw, is the reluctance of the private sector to invest in production. The reason is simple: it isn’t profitable enough, and certainly much less profitable than investment in city centre property and knowledge-intensive business services. And this will continue as long as the market determines investment, as these market analysts confirm:
‘if globalisation continues to influence the industrial specialisms of countries as it has in the past then the UK will continue to specialise in knowledge intensive service activities. This has two implications for future growth in Birmingham. Firstly, the city centre is likely to play an ever increasing role in Birmingham’s overall economy as these businesses look to take advantage of the benefits of density that the city centre provides. Secondly, it is likely to mean that employment in manufacturing will continue to be squeezed as UK manufacturing attempts to increase productivity with a smaller workforce to remain competitive. In order to support future jobs growth in the city, Birmingham City Council and its partners should focus economic development measures in the centre.’ 15
A new challenge for the left
The transformation of the built environment of city centres with glitzy office and apartment buildings, high-end retail, prestige public buildings, upgraded transport and new public spaces provides visible symbols that serve a powerful hegemonic function: that austerity is working, creating a new economy from which all will benefit as wealth trickles down. Councils boast of their role in partnering business to enable this transformation, along with new schemes for economic growth and job creation, in regular triumphalist announcements in the local media. The narrative is that while councils currently have no choice but to implement cuts in services, however regrettable, they are reinventing themselves with a new market-based role and strategy for economic growth which can serve the public interest. This is the roll-out neoliberalisation of the city and of the city council itself.
The left is practised at opposing roll-back neoliberalism, with local campaigns against council cuts and privatisations. The simultaneous development of roll-out neoliberalism poses different challenges and requires additional policy responses so that we can present credible informed alternatives.
The roots of cuts and privatisation in council services and unemployment, precarity and low pay for the many alongside booming city centre developments lie of course in the austerity agenda of the Coalition government. The TUC has just published a report which reiterates an alternative to austerity: a massive government programme of infrastructure spending, including on transport, housing and green energy, coupled with lifting pay caps and boosting the minimum wage to increase demand and stimulate private investment.16 We can go further: a radical programme of public ownership including nationalising the banks, reinvigoration of public services and investment in socially useful production.17
At the local level, even within the present national policy context, opposition to the neoliberalisation of the city needs to combine opposition to council cuts and privatisations with a challenge to the role of the council to use its powers of planning and regulation of business investment to address as far as possible social need, for example by insisting on the channelling of investment to job creation outside the city centre as a condition of approval. As Gough and Eisenschitz say, ‘the point should be to democratise and politicise the process of investment and the choices it involves’.18
That raises the question of the democratisation of council structures and procedures, for example through opening up Scrutiny committees to union and community representatives, making use of current Labour Party rhetoric about ‘local democratic renewal’, and even better, abandoning the Cabinet and Scrutiny system in favour of service committees with union and community representatives .19
Another strategy concerns the use of trade union pension funds, including local government pension funds. These are major investors in property development. For example, Birmingham’s current 17 acre city centre Paradise Circus redevelopment is a joint venture between the council, a property developer and British Telecoms Pension Scheme. Unions could use political pressure to have a say in how their industry’s pension fund is invested, as in Sweden.
Because production and social reproduction are so intertwined in the city there is the potential for local alliances of workers and jobseekers in both the public and private sectors with the users of public services to campaign for demands like these. 20
Finally, the move towards greater devolution of powers to city regions, whatever the next government, led by Greater Manchester’s control of a £6 billion NHS budget, presents a new scale of analysis and raises sharply the question of the relationship of democratic localism to national equality.
References
1. David Harvey (2012) Rebel Cities. London: Verso. P35.
2. Jamie Gough and Aram Eisenschitz (2010) Local Left Strategy Now. In A Pike, A Rodriguez-Pose and J Tomaney (eds) A Handbook of Local and Regional Development, Abingdon: Routledge. https://www.shef.ac.uk/polopoly_fs/1.218443!/file/JG.docx
3. Jamie Peck and Adam Tickell (2002) ‘Chapter 2.’ In Neil Brenner and Nik Theodore (eds) Spaces of Neoliberalism: Urban Restructuring in North America and Western Europe. Malden, MA: Blackwell Press.
4. Louise McGough and Elli Thomas (2014) Delivering change: Putting city centres at the heart of the local economy. London: Centre for Cities. http://www.centreforcities.org/wp-content/uploads/2014/12/14-12-11-Delivering-Change-City-Centres.pdf
5. Vicky Sargent (2014) Birmingham. The economic powerhouse gears up for growth. http://www.theinformationdaily.com/2014/09/24/birmingham-the-economic-powerhouse-gears-up-for-growth
6. Patrick Loftman and Brendan Nevin (1994) Prestige project developments: Economic renaissance or economic myth? A case study of Birmingham. Local Economy 8(4), 307-325.
7. Bob Kerslake (2014). The way forward. An independent review of the governance and organisational capabilities of Birmingham City Council. London: DCLG. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/384732/The_way_forward_-_an_independent_review_of_the_governance_and_organisational_capabilities_of_Birmingham_City_Council.pdf
8. Centre for Cities (2015) Cities Outlook 2015. London: Centre for Cities. http://www.centreforcities.org/wp-content/uploads/2015/01/15-01-09-Cities-Outlook-2015.pdf
9. Centre for Cities (2015) Cities Outlook 2015.
10. Birmingham City Council (2015) Outcomes for White Working Class Boys. Report to the Education and Vulnerable Children Overview and Scrutiny Committee 11 February.
11. Paul Dale (2015) Boom time for Birmingham city centre as Enterprise Zone deals kick in. Chamberlain Files 5 March. http://www.thechamberlainfiles.com/boom-time-for-birmingham-city-centre-as-enterprise-zone-deals-kick-in/
12. Centre of Enterprise (2015) http://centreofenterprise.com/2015/01/08/gbslep-sign-357m-growth-deal-with-deputy-prime-minister/
13. Paul Dale (2015) 9,000 jobs and workforce skills revolution in council pledge for east Birmingham. Chamberlain Files 24 February. http://www.thechamberlainfiles.com/9000-jobs-and-workforce-skills-revolution-in-council-pledge-for-east-birmingham/
14. TUC (2015) Make Birmingham a Living Wage City: Citizens UK Birmingham and Midlands TUC to visit Birmingham Living Wage employers. 25 February. https://www.tuc.org.uk/economic-issues/britain-needs-pay-rise/fair-pay-fortnight-2015/make-birmingham-living-wage-city
15. Ed Clarke, Paul Swinney and Dmitry Sivaev (2013) Beyond the High Street: Birmingham Analysis. London: Centre for Cities. http://www.centreforcities.org/wp-content/uploads/2014/08/13-10-22-Beyond-the-High-Street-Birmingham-Analysis.pdf
16. TUC (2015) Productivity: no puzzle about it. https://www.tuc.org.uk/sites/default/files/productivitypuzzle.pdf
17. See Socialists and the Capitalist Recession (2009) and Capitalism: Crisis and Alternatives (2012), both published by Resistance Books.
18. Jamie Gough and Aram Eisenschitz (2010) Local Left Strategy Now. In A Pike, A Rodriguez-Pose and J Tomaney (eds) (2010) A Handbook of Local and Regional Development. P17. https://www.shef.ac.uk/polopoly_fs/1.218443!/file/JG.docx
19. See my article ‘Why we should campaign to democratise local government’, in Socialist Resistance no. 77, Winter 2014/15.
20. Özlem Çelik (2014) Urban neoliberalism, strategies for urban struggles, and ‘the right to the city’, II: An interview with Jamie Gough. Capital & Class 38(2) 430-451.