The Andrew Carter interview: sustainability, innovation, place and economic policy

Around 60 per cent of UK economic activity takes place in cities, yet over the past decade growth across the UK has been highly uneven. If the UK is to build a sustainable urban future, it is essential that all of our towns and cities perform well for citizens and nature.

Andrew Carter is the Chief Executive of Centre for Cities, the think tank dedicated to improving the economies of the UK’s largest towns and cities. With over 25 years of experience working on urban economic policy in the public and private sectors, Andrew is the latest expert taking part in Calvium’s sustainable urban futures interview series.

Alongside his role at the Centre, Andrew is Deputy Director of the What Works Centre for Local Economic Growth. He also spent time in the US as part of the Churchill Foundation’s Fellowship Programme reviewing urban economic development policy and practice in American cities including New York, Washington DC, Boston and Chicago.

In this interview, Andrew shares his views on what makes cities grow, how to create opportunities for people and why urban areas should be positioned as environmental responses to some of our greatest challenges.

Cities are often described as engines of economic growth but also as places where inequalities are most visible. How should urban economic policy evolve to better balance growth with inclusion and social sustainability? 

Rather than thinking of it as a balance, you have to think about the relationship between those two things. If you want more people to benefit and enjoy higher living standards, you need growth and development to create opportunities, and you need to help people access those opportunities.

So it’s less about growth on one side and inclusion on the other, and more about how they complement each other. The real question is whether what we do in the policy space is felt by a broad base of the community, the neighbourhood or the city. It’s not helpful to see growth and inclusion as being in tension, and it’s certainly not helpful to think that one causes the other.

What we’ve seen over the last 20 years is that, in the absence of growth, everything else becomes more difficult. Whether it’s providing good public services, building the homes we need, or having the money to maintain safe, well-managed public spaces, all of that becomes more challenging if we don’t have the proceeds of growth to make it happen.

From your perspective, what distinguishes the cities that successfully turn economic strategy into meaningful improvements in place and quality of life for residents? 

The first factor is whether cities create the conditions and the environment that allows the economy to grow and new investment to come into the area. If we are seeing an economy that is expanding and creating good jobs, there is more likely to be activity in that area. What cities do particularly well is growing the ‘new economy’ type activities, such as creative, digital, finance, professional services and science – the leading edge of the economy.

This then feeds into what’s often referred to as the everyday economy, which is the part of the economy that is largely providing activities and services to people based on where they live, such as retail, hospitality and entertainment. 

The second factor is whether people are being supported to take advantage of available opportunities. It’s all very well having jobs but can people access them? Fundamentally, this means ensuring education systems are providing people with the qualifications and skills needed to be able to take those opportunities. Another is ensuring people can physically access jobs, which means ensuring the transport system is in place to enable people to travel. This is particularly important for lower income individuals who are more reliant on public transport.

Which places are doing this well?

Brighton is a good example. Not only does it have a good number of people with the skills needed to participate in the labour market, it is one of the places that also benefits from its proximity to other places. While Brighton has created higher value wage jobs from within, it is only a 45-minute train journey into London so people can take advantage of London’s job markets and then bring wages back. 

That benefits the everyday economy in Brighton because wages are then being spent in Brighton. This has a knock-on effect so when you look at the high street, for example, it has lower vacancy rates than other places because the demand for space is higher on the high street because its disposable income in their area. Similarly, wages and conditions in areas like retail and hospitality are typically better because there’s a pull-through effect.

What opportunities and risks do you see in the rise of impact-led institutional investment?

Institutions are investing in urban areas more than they historically have been because that’s where the market leads them. They might have ulterior motives at the margins, but they know that urban markets, particularly for a certain cohort of society, are just good business sense.

Bristol, for example, is a growing economy – it’s young and highly skilled – and what we know is younger higher-skilled people typically want to live in and around the urban environment rather than do what their parents did, which is to live in suburbia. Firms like Legal & General are responding to those signals and providing the housing that they need. Similarly, on the commercial side, new economy firms are overwhelmingly urban, often located in and around city centres because that gives them the maximum opportunity to access the workers that they need.

What we don’t have in the UK is the mid-rise, relatively dense 7-9 storey apartment buildings, which are typical in many European cities. So what you get is very spiky city centres but relatively flat suburban land. This is important because higher density living is more environmentally friendly living as well – less emissions on the residential and transport side because people are walking, cycling and using public transport more. Glasgow and Edinburgh are unusual within the UK because they already possess the kind of mid-rise tenement housing that much of England lacks. If you care about the environment, you should care about density. 

Who should be leading the charge in creating more sustainable population density?

Because the financials are difficult, it’s complicated in terms of site ownership. The physicality of sites means there’s usually quite a bit of upfront work needed to bring land into single ownership, but also to do the remediation and the preparation. All of that is costly and whilst we see end-use values – sales and rent values going up in places – in many places there is still a shortfall between what the end value can provide and what the cost of development is. Because of this gap, I think there is a public sector requirement both on the preparation and remediation side, but also on some of the financing.

In truth, in the absence of a well-defined product that is well understood and well demonstrated, the financial costs associated with providing such a product are going to be slightly higher than they would be otherwise. So there is going to be a proof-of-concept premium that will need to be dealt with; again, the public sector is probably going to have to help mediate and manage some of the gap as we begin to prove that there is a market for mid-rise good quality housing that is close to urban centres.

What can places that are struggling to grow do differently? Where should they start?

You have to go back to basics, which is understanding what bits of the economy they do have and being clear as to whether you can complement and support that.

In Warrington, for example, much of its high value land economy is happening on the outskirts of the city – in science parks and in business parks. What they’ve deliberately done for a prolonged period is make land continually available for that kind of activity to expand, which has resulted in making some big decisions. For example, taking bites out of their green belt to make room for commercial space. They’re not blind to the shape of their economy, where their strengths are and therefore where there is demand to grow; the question is whether you enable that growth to happen or try to constrain it. In this case, they chose to support growth and that has proved to be a good thing.

Barnsley has made a similar set of decisions, but its out-of-town development has focused more on logistics, distribution and warehousing, which is an expanding part of the economy due to the shift to online shopping. They are also considering how to make space for the growth of a still small and nascent new economy built around creative, digital and science – both in terms of flexible office spaces and the housing needed to attract people into these roles.

The failing in places is often that they don’t think about this in the round. You have to build and develop from where you are rather than where you ideally want to be, which requires a degree of realism.

Who needs to be around the table to make that kind of long-term growth happen?

It’s always a partnership model involving more than one actor because no single organisation can take these agendas forward on its own.

Both the business and civic communities need to be involved but the council, as the custodian of the place, is the lynchpin of that partnership. If the council doesn’t have the perspective or willingness to take a prominent leadership role, everything becomes materially more difficult. Many key levers – whether it’s planning, accessing public grants, or securing low-cost loans through the Public Works Loan Board (PWLB) – are public sector responsibilities, but opportunities are significantly reduced if the council doesn’t participate.

As such, council officers and elected politicians have a responsibility to have a growth mindset: to believe that the place should expand and grow, and to recognise that achieving that may require difficult decisions. Some people will inevitably be unhappy but hopefully the winners will outweigh the losers.

How do we create the right incentives for places to embrace growth?

You want people who are motivated to make these decisions, which ultimately comes down to incentives. This means creating financial and other incentives so that development and growth generate opportunities for people within a place, as well as those coming into it. Then you need local leaders to make decisions that support growth.

A practical example is housing targets. The government is unlikely to meet its overall target but they’ve still had an important effect, seeing councils rethink their position. This isn’t because they’ve suddenly recognised the value of providing better quality housing at more affordable prices; it’s because the government has created a strong incentive. If councils don’t do it, they risk losing control through judicial review and legal challenge.

We need to have a system that isn’t just sticks but also has some carrots. We want to be able to say: if you create the opportunities for growth, you will benefit from the financial and other rewards that accrue. This might mean being able to retain more of your business rates or modifying how your council tax system works.

You’ve studied cities internationally. Are there examples of how other countries give places stronger incentives to grow?

The way transport systems are funded in France is one. They have the versement tax, which is a mandatory payroll tax used to fund local public transport. It’s locally determined and raises money that can be reinvested in local public transport, helping to keep fares affordable.

We don’t have that in this country because we don’t have any tax-raising capability. In order to do that kind of intervention here, we need government investment, funding and sign-off, which you don’t need in France.

That’s just an incremental example of the way that this locality-enhanced fiscal system allows money to be raised and reinvested locally, which ultimately makes the place a better place to live, work and visit. It can be extrapolated into housing and other bits of infrastructure or provision as well.

Digital technologies increasingly shape how people experience cities. From an urban economic perspective, where do they fit alongside more traditional drivers such as skills, transport and investment?

We don’t really look at the ownership question, and I’d say we’re fairly pragmatic rather than philosophical about it. We used to look at measures such as access to superfast broadband across the 63 urban areas we analyse, but the differences between places turned out to be relatively small and, over time, those measures stopped telling us very much.

For us, the bigger questions remain the fundamentals. How do cities create opportunities? Do people have the skills to access them? Can they physically reach jobs and services? Digital technologies clearly shape how people experience cities, but they don’t replace the importance of getting those underlying economic and transport systems right.

Looking ahead, what do you think is the biggest challenge, and opportunity, for the future of our cities?

That’s a big question. On one level, we need to be framing our cities as a response to critical issues such as climate change and biodiversity loss in a positive way. If you look at the urban areas we focus on – the UK’s 63 largest cities and towns – they account for around 55% of the UK’s population and roughly 45% of its carbon emissions. On a per capita basis, emissions vary, but on average these urban areas can be up to two-thirds more carbon efficient than non-urban areas.

So, despite the way cities are often perceived – as places of concrete, buildings, bricks and mortar – they are actually one of our best opportunities to avoid the worst impacts of climate change. The way we build, occupy and use our cities over the next 20, 30, or even 50 years will play a significant role in determining whether we achieve a more climate-friendly future.

That’s why we should see our cities not as part of the climate problem, but as one of our greatest opportunities to solve it.

 

Thank you Andrew for sharing your discoveries, observations and insight on urban development, sustainability, place growth, innovation and investment.