Addressing inequality in cities

1. Transport
One “silver lining” in the CSR was that transport was spared drastic cuts. Long-term under-investment in infrastructure has drawn frequent criticism: the classic example being the gap between the UK behind our European peers in high speed rail.

Many city leaders viewed connectivity through transport infrastructure to the global economy as being of paramount importance. I was struck by the parallels with findings on economic development in India presented by McKinsey at the World Bank in Washington DC this month.

McKinsey’s report on India posits the need for unprecedented urban infrastructure investment to make Indian cities liveable, sustainable and prosperous (and prevent gridlock, decay and decline). What is interesting is the relevance, to the UK, of McKinsey’s recommendations for how India can finance and manage investment in urban infrastructure.

McKinsey recommendations include that India 1) allows cities to retain a proportion of the GST (General Sales Tax – equivalent to VAT in the UK) that is generated within their borders; 2) encourages cities to issue municipal bonds; and 3) introduces directly-elected mayors of metropolitan regions, leading the implementation of 20- and 40-year master plans.

The recent developments in the UK move slowly towards this prescription: the Local Growth white paper released today included further support for the introduction of Tax Increment Financing to the UK (through consultation over the next five weeks), and there are plans to consult on whether business rates should be retained by local authorities as part of the Local Government Resource Review in January 2011.

However, the CSR also announced that the cost of financing capital expenditure for local authorities will increase. Since local authorities are legally required to balance their books every year, this change does not reflect a change in the risk of lending. It will save central government £1.3bn over the next three years, making the prospect of local authorities issuing municipal bonds more likely, but only by making their current arrangements more expensive. This move drew criticism from several corners at the briefing, and the Centre for Cities says it puts the development of new housing at risk.

And while many English cities are looking forward to the first wave of referendums on the introduction of elected mayors next May, the strategic planning policy vacuum created by the Coalition has drawn widespread criticism.

2. Housing reform
On Wednesday afternoon, I listened to Steve Wilcox talk about the CSR reforms to social housing.

The displacement predicted as a result of housing benefit reforms has troubled many, not least Boris Johnson. What will be lost in social capital and personal well-being, for households uprooted from friends, family, schools and neighbours? Indeed, these are the people and institutions which for many unemployed people often prove vital in securing employment.

I am intrigued by the debate over whether socially and economically mixed communities produce better lives for all their residents. Perhaps to further the recent debate of Wilson and Pickett’s The Spirit Level, we need to understand inequality as we experience it, face-to-face with other people. A Joseph Rowntree Foundation/LSE review argued that policy and investment to encourage economically integrated neighbourhoods may not reduce poverty as effectively as other interventions. However, a report this month by The Century Foundation argues that providing social housing for poor families in affluent areas is effective in improving educational outcomes: perhaps an alternative to the mixed results of significant investment in under-performing schools in poor neighbourhoods.

Comments from the both events indicated concern that the changes would impact the overall health of high-cost urban economies, where low-paid workers fill service jobs related to demand from highly-skilled and highly-paid workers. Such polarisation of the labour market is a well-documented feature of globalised city-regions competing in the “knowledge economy”. The excesses of this inequality are evident in India, as much as the West; a further concern is that some data suggests that the recovery from the recession in the US is producing wage growth but job losses in places such as Manhattan which were already rich before the recession, exacerbating economic inequality between places.

Transport and housing investment are both hugely important to creating sustainable, liveable cities. As data emerges on the impact of recent announcements, my hope is that advocates can use this to powerfully illustrate what segregated and unaffordable cities look like, and contribute spatial insights to the definition of fairness.