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Cities lead the way
Local Government Chronicle – 9 March 2006

They are new here, but city regions abroad have been driving regeneration for years says Mark Smulian

The prospect of devising a city region that covered 179 councils would no doubt make David Miliband cover his head with a towel, go mad, or decide to do something less complex like finding the highest prime number.

But it has been done successfully, at Stuttgart, in Germany. The communities and local government minister would probably worry if asked to devise a system where a regional government spent 70% of the tax it raised, and local government spent most of the rest.

But that has been done too, in Bilbao, in Spain's Basque country.

City regions are based on the idea that major cities are the economic motors of their hinterlands, and can be used to turn round the economies of the main conurbations of the Midlands and northern England.

Attract investment to the city and the benefits will spread, the government believes.

That is a simple enough concept, but developing an acceptable system of governance is more challenging.

Strong city governments could cause resentment in the region's more rural hinterlands, whose residents would be perpetually outvoted.

And politicians trample upon proud local identities at their peril - an executive mayor from Leeds, for example, might go down badly in adjacent Bradford.

The councils concerned would prefer to have city regions governed by semi-formal co-operation between them. But would that give the regional body enough clout?

Foreign examples give plenty of ideas, but also flag up some pitfalls.

One thing is clear - there will always be resistance from some interest group, and success depends as much on goodwill as on structures.

Successful city regions need Stuttgart's clear economic rationale, Bilbao and Bizkaia's financial independence and Toronto's emerging broad powers.

But those that do not adapt to changing circumstances, or which offer the public a vision that seems simultaneously vague and threatening, look set to fail.

Stuttgart

"Most people in the UK look amazed when you say 179 local authorities are combined in the Stuttgart city region," says Natalie Tarry, research manager of the New Local Government Network.

The city region was imposed by the federal provincial government of Baden-Wčrttemberg in 1994 after all attempts to get these authorities to co-operate failed.

Stuttgart needed a regional tier to attract investment following the recession of the early 1990s which struck the manufacturing industry that had sustained it.

"The province gave the city region a lot of powers and a directly-elected assembly," says Ms Tarry. "It was not popular with the smaller districts, but it was popular with business and the public."

Stuttgart city region has powers over regional planning, landscape planning, traffic and transport planning, business promotion and tourism marketing, local public transport and waste disposal.

It can take on anything else on a two-thirds majority vote of the assembly.

This power has been used mainly to promote one-off projects such as trade fairs and sports events. Other matters remain with the original councils.

The city region covers 3,654 square kilometres and has an annual budget of 240m euros. This is drawn from county and municipal authorities and grants from the federal and Baden-Wčrttemberg governments. Some 85% is spent on public transport.

"Stuttgart is not dissimilar to Manchester and Liverpool," Ms Tarry says. "Councils had to co-operate just as the Northern Way cities will have to work together."

Bilbao

The Basque country has its own identity, with its own language, culture and indeed armed separatists.

Since Spain returned to democracy in the late 1970s, the region - of which Bilbao is the capital - has gained wide autonomy.

Researcher Adam Marshall visited the city authorities of Bilbao and of the Bizkaia province, effectively the city region, last autumn as part of the Institute for Public Policy Research's Centre for Cities project.

Bilbao was a port and industrial centre that slipped into recession. But it is now thriving, thanks to the "unique system of financial devolution" as described in the Centre for Cities' report on the visit. Basque province, Bizkaia and Bilbao city governments raise all their own taxes and control most of their own spending.

Bizkaia is able to take strategic decisions that affect the economy around Bilbao, and all three tiers have contributed to the new transport infrastructure that has been at the heart of the city's recovery.

Mr Marshall says: "Bilbao has regenerated large areas of brownfield land and has been able to use its financial freedoms to leverage the investment needed, for example to get former port and factory land developed next to the Guggenheim museum."

Bilbao Ria 2000 is the company that runs partnerships to regenerate brownfield land, rather like English Partnerships but with far wider financial powers. It has managed to "transform broad swathes of territory", Mr Marshall says.

"Financial freedoms played a very large part in that. They do not depend on Madrid and do not need national permission for tram projects or brownfield regeneration. They use their own revenues and borrowings and have a mechanism to capture the increase in land values."

Direct comparisons with the "extreme financial centralism in the UK" are difficult, he says, except that no tier of existing UK government is suited to major regeneration and transport investment.

He says: "Authorities here are too small for regeneration but our regions are too big and we have to look at putting regeneration and transport to the most appropriate level. City regions offer a chance to do that."

The Centre for Cities' report notes: "Powers and funding - not directly-elected mayors or endless reforms - are the key drivers of local economic change."

The Basque local powers over tax, though complex, "ensure that returns on regeneration investment are captured locally - creating a virtuous circle that incentivises continued investment".

Toronto

Toronto Metro became a city region in the 1950s to settle disputes between Toronto city and its suburbs.

The idea was that one government unit for the whole area would end the problems of a falling tax base for the city caused by the flight of wealthier residents to the suburbs.

Unfortunately, the Ontario provincial authorities failed to follow this logic as the city continued to grow.

As more suburbs mushroomed, a two-tier system was introduced in four areas adjacent to Toronto, creating a multiplicity of local authorities in the same conurbation.

Ms Tarry says: "Instead of looking at the metro area as a whole there are now competing structures and nothing formal to bring them together."

What joint working there is tends to be concerned with services rather than economic competitiveness.

"It is not a total failure, but they should have just expanded the metro area as it grew," she says.

Thankfully, though, change is now afoot. Toronto, though not its conurbation neighbours, is to gain new powers from Ontario that will give it the widest city autonomy in Canada.

Toronto will gain broad and permissive powers, rather the 10 narrowly-drawn spheres of jurisdiction it has had.

Randstad - how not to do it

The Randstad is not a city, but is the giant conurbation of the western Netherlands stretching from Amsterdam via the Hague and Delft to Rotterdam.

It is home to almost half the country's population, and its cities all have clear historic identities.

A proposal for a city region government failed in a referendum amid local jealousies.

Rather, as happened after the failure of the regional government proposals for north-east England in 2004, the status quo continued with separate local governments and little co-ordination.

But even this has lessons for the UK, Ms Tarry says:

"Referendums are not good for city regions because it is difficult for people to imagine what something will be like, and they become suspicious.

"It is better to let something arise organically, otherwise there will always be someone who sees their job at risk or their local identity lost."