Dan Holden: How we can make devolution work for us

Sheffield is now following in the footsteps of Manchester down the path of devolution, becoming a ‘city region’. However, it will take a balance of investment and local leadership to take the whole of Yorkshire forward.

Yorkshire will be getting more control over their own destiny and with that attention must quickly turn to what these powers can achieve.

At the moment, the big challenges we face are to get businesses in Yorkshire to produce more and boost wages for workers.

These are issues the whole of the UK faces. On productivity, we are ranked 14th in the OECD (below Germany, France and Ireland) and we are trailing globally in productivity growth.

With growth returning, output increasing and productivity stagnating, we are left with the situation where an hour worked in the UK only produces 76 per cent of what is produced in a working hour in the US, despite headline figures showing a recovering economy.

Productivity, or rather not enough of it, is a far more damaging issue than it sounds on the surface. The economist Simon Wren-Lewis argues that productivity is a bigger, longer-term and more dangerous economic issue than the deficit.

According to the OECD, productivity is still the main path to securing long-term prosperity. This is not a just a dusty subject for economists; it is something that we have to address now.

The UK’s productivity problem is playing a part in holding down wages, which leads us to another economic nightmare; income.

As with productivity, wage growth is one of the UK’s systemic and long-term problems that we are falling behind on internationally. Wage growth in the UK has been at one its slowest points in the last few centuries; the pinch we have been feeling since 2009 is the biggest hit on living standards since 1860. Wage growth has been pretty stagnant, minimal at best, in the last few years.

Although average wage growth has now begun to rise above inflation for the first time in a long time, this is not a universal truth. Wages certainly have risen for many, but often this is localised within certain industries and the already low-paid – the food industries and retail – are seeing a devastating lack of wage growth.

We can’t just read the top line statistic about wage growth and assume that everything is alright; we need to make sure it applies to everyone.

Disposable household income in Yorkshire and the Humber had the lowest growth of any region in the UK between 1997 and 2012. It’s not just wage growth where Yorkshire is suffering either; the region has the lowest productivity of any of the English regions. Between 2007 and 2012, Yorkshire’s productivity grew slower than those of Scotland and Wales as well as the other English regions. In fact, Sheffield City Region has the second lowest productivity per head in the UK and one of the lowest rates of business start-ups in the UK, alongside Barnsley and Hull.

The problems of productivity and wage growth are in many respects very British problems. The UK far outstrips both the EU and OECD average in employment rates and growth, performing much better than those countries which so roundly beat us when it comes to productivity.

Likewise, Yorkshire’s employment figures far outstrip those of neighbouring regions. Our problem now is less GDP and unemployment figures, but productivity and wages; both of which are at their worst in Yorkshire.

Productivity is one of those parts of economics which baffles economists, let alone members of the public. There is a reason that it is called the ‘productivity puzzle’; we all know it’s important, but no one really knows how to fix it. Solutions vary depending on who you ask; increased investment expenditure on infrastructure and new equipment, more expenditure on skills or more money spent on research.

In truth, it’s probably a combination of all of these. These are not quick fixes, nor are they sure-fire solutions, but they will address the underlying problems of productivity. We need a more skilled, more educated workforce with the right infrastructure, but that cannot be achieved on our own.

Greater powers at a local level will enable us to tackle local problems and take advantage of local strengths. However, it also means investment from the national money pot. This mix of local leadership and national investment can help Yorkshire cities compete with the likes of Manchester, Frankfurt and other international cities. As power is handed down we have to learn how to balance the national and the local to achieve just this.

Dan Holden is a freelance journalist and editor of the political blog Shifting Grounds. It can be found at shiftinggrounds.org