Letting Britain’s big cities develop their economies could save Britain from future economic downturns, the leader of Newcastle City Council has told MPs.
Coun Nick Forbes said the economic crash was partly due to the nation’s dependence on London, and its banking industry.
But a country with a more diverse economy and a number of successful cities would be better able to cope if there was another crisis.
Coun Forbes told the Commons Local Government Committee that major cities such as Newcastle should be able to raise far more funding locally, for example by keeping a portion of the business rates paid by employers rather than handing the entire sum to the Treasury - and use the cash to promote economic growth. But he warned there also needed to a complete rethink of the way national government redistributed cash to local authorities, so that councils with the greatest need - such as those in the North East - received more money to let them provide essential services.
Newcastle recently cut spending by £35m on top of previous cuts.
The council leader was at Westminster representing the eight “core cities” of Birmingham, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield. He said: “At the moment we have been absolutely ravaged by the recession.”
What Newcastle wanted was the ability to grow its own local economy rather than relying on handouts from London, he said - and argued this would make the entire UK economy more “resilient”.
“We have seen how London-centric the recession was. It was the collapse of the banking system that tipped us over the edge into it. We wouldn’t have that if we had a better settlement around the rest of the country.” Newcastle was already proving what it could achieve with more independence by using a scheme called Tax Increment Financing, which allows it to invest cash collected from business rates in regeneration projects to attract new businesses, he said.
“We have managed to stimulate development activities on a number of key sites in the city which wouldn’t have happened otherwise but at he moment those powers are exceptions rather than a rule.
“We could do so much more as a country and as cities.”
And he urged the Committee to recommend that councils be given more powers to cut business rates and attract employers that way.
“I can see areas of Newcastle . . where you might want to give us a discount that would allow the introduction of new businesses.”