18 July 2019

Rebalancing Britain: The northern city on the south coast

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Today CapX launches a major new project with the Joseph Rowntree Foundation focusing on how the next Prime Minister should tackle the longstanding imbalances in the British economy. The project will focus not only on the well-documented North/South divide, but on the way smaller towns and cities are often left behind in national policy debates.

To kick off the series, CapX’s Acting Editor John Ashmore visited Portsmouth to find out the challenges facing the ‘northern city on the south coast’ – and the policies that can help address them.

On first inspection, Portsmouth might seem an unusual place to report on the challenges of rebalancing the British economy.

My first impression stepping off the train at Portsmouth Harbour is of confident prosperity.

Tourists converge on the HMS Victory and the Mary Rose, while the Emirates-sponsored Spinnaker Tower looms on the water’s edge. Bestriding the waterfront is Gunwharf Quays, once a key defensive bastion for the home of the Royal Navy, but now a 33-acre development of upmarket shops, offices and upmarket flats.

Look the other way, though, and you are greeted by the tower blocks of Portsea, an area that was once home to thousands of local dockers.

Those grey 60s buildings crop up all over the island city and are a reminder that while it might have world-class attractions, and it might be in affluent Hampshire, this city is also home to some of the most deprived places in the country.

HMS Warrior docked alongside the city’s historic dockyard (Photo: Gareth Milner / CapX)

It is often referred to as “the northern city on the south coast”. That’s partly an aesthetic observation – long Victorian terraces certainly make you feel more as though you’re in south Wales or the industrial north than the Home Counties. And like those areas, Portsmouth has suffered from the slow drawdown of traditional industry. Where once the local dockyard employed 40,000 people, now there are only a quarter of that number.

Though the city is medium-sized, with about 215,000 inhabitants, it is part of a much wider Solent economic area that is home to 1.3 million people, taking in Southampton, the New Forest and the Isle of Wight.

Wage levels and the unemployment rate in Portsmouth are average by national standards, but they lag behind the rest of the south-east.

Donna Jones, who led the local council between 2014 and 2018 and is now the Conservative PPC for Portsmouth South, says her home town stands out in the comfortable affluence of the wider region.

“Our average house prices, average employment, average education is much lower than the remainder of the south-east, the demographics of cities are often more challenging than the demographics of the countryside around.

“Portsmouth and Southampton are both very working class, elbows out, they’ve got a bit of an edge to them.”

Unlike some now down-at-heel former industrial towns, though, Portsmouth’s is not a story of steep decline from a heady era of shared prosperity. Parts of the city have always been poor, with a large working class population sustained by working at the docks. Conversely, areas such as Old Portsmouth and Southsea have been rich for a long time.

That disparity is reflected in the huge variation in house prices – a four-bed end of terrace in Buckland might set you back £200,000, while a similar-sized property in Old Portsmouth is on the market for just shy of £1.4 million.

Old Portsmouth is packed with high end housing and tourist attractions such as the Spinnaker Tower (top left) and the Royal Garrison Church (Photo: Gareth Milner / CapX)

After the Second World War, when Portsmouth suffered sustained bombing, huge slums were cleared and made way for council estates in the central areas of Buckland, Landport and Somerstown, as well as Paulsgrove, which is north of the island but still thought of as part of Portsmouth.

Back in 2014 David Cameron’s government was moved to create a Minister for Portsmouth when BAE announced the end of shipbuilding operations and the loss of almost 1,800 jobs – a role filled variously by Michael Fallon, Matt Hancock and Mark Francois. Several hundred more followed at the end of 2017.

Those job losses were a big blow to a city which includes neighbourhoods which rank in the bottom 10 per cent of the UK using the government’s Indices of Multiple Deprivation. [see Figure 1].

The disparity in affluence is clear in health outcomes. A resident of affluent Drayton in the north-east corner of the island can expect to live fully 10 years longer than someone just a few miles away in Charles Dickens ward (named for the novelist’s birthplace).

Figure 1 – How Portsmouth compares to the nation on the Index of Multiple Deprivation

Nor are the poorer parts of town tucked away or relegated to the margins: Portsmouth is the UK’s most densely populated city and its poorest areas rub right up against much more affluent ones.

As I walk around central areas such as Somerstown and Fratton, the contrast is quite striking.

While the waterfront has been lavished with care and cash to reel in the tourist pound, further inland boarded up shops and neglected buildings speak to some of the deep-seated economic challenges facing the city.

Despite these kinds of differences, Portsmouth also feels like a place with a strong sense of itself and its long history. Flick Drummond, who represented Portsmouth South between 2015 and 2017 describes a cohesive, tight-knit community.

“It’s not a divided community because we all work together. We all live on top of each other so we all know how the other half lives and there’s a community spirit,” she says.

Politics

Politically the city is a real mixed bag. Labour won Portsmouth South for the first time ever in 2017, while Defence Secretary Penny Mordaunt holds a 10,000-odd majority in Portsmouth North.

No party has overall control of the council, which is led by the Liberal Democrats’ Gerald Vernon-Jackson with Labour support. His predecessor, Donna Jones, is now the prospective parliamentary candidate for Portsmouth South, as well as leading the opposition group.

Portsmouth South is exactly the kind of seat the next Conservative leader will have to win back in a future election if they are to have any hope of a Tory a majority.

And if they are to win, the Tories must focus on the concerns of those on low incomes, whose votes are very much up for grabs. New research from the Joseph Rowntree Foundation and academic Matthew Goodwin shows that Britain’s least affluent people are more engaged in politics and less loyal to particular parties than ever before.

Ten years on from the financial crisis, these voters are still feeling the pinch. Goodwin’s research found that those in low income households are as likely to say they are struggling financially as they were after the recessions of 1992 and 2008.

Long rows of Victorian terraces give Portsmouth the look of cities much further north (Photo: Blom UK via Getty Images)

Struggling to get by

One person who sees that belt-tightening up close on a daily basis is Sandy O’Neill, the chief executive of Portsmouth’s Citizens’ Advice Bureau.

Last year the charity’s Money Advice Team helped over 2,500 local residents, primarily with debt problems. Solutions range from formal measures – declaring bankruptcy, Individual Voluntary Arrangements or Debt Relief Orders – to simply asking creditors to relent.

The causes of financial trouble are familiar: high housing costs and rising utility bills and an increase in transient, short-term work have all contributed. O’Neill says her clients are more likely to be living in the private rented sector than in social housing.

The constant struggle to make ends also has a profound psychological impact, O’Neill says.

“In some areas people feel powerless. They feel that’s their lot and there’s nothing they can do about it and nobody’s listening to them.

“It’s born out of having battled for such a long time and nothing’s changed, they just feel like it’s pointless.”

Something has clearly gone badly wrong when people living in a relatively job-rich city in one of the country’s most affluent regions feel they have no way of improving their lives.

Frustrations dealing with government can add to the energy-sapping financial difficulties. For instance, some clients wait weeks just to get through to a Department for Work and Pensions adviser on the phone.

Being in arrears on Council Tax may also invite an extra charge if a client is taken to the magistrates court, something O’Neill describes as a postcode lottery.

“Charges in Portsmouth are very expensive, so when someone fails to pay Council Tax the local authority can take them to Magistrates and they charge approx £95, in London it’s £110.  When you look at Fareham it’s £45, in Havant it’s £60.

“We believe it only costs £25 to the local authority so they’re passing on a cost to the resident…to be charging on a profit basis just seems to be ludicrous.”

Council leader Gerald Vernon-Jackson agrees that there is a “large group who feel disenfranchised by the system”, something which was partly reflected in a 58-42 split in favour of Brexit.

He too identifies housing as a major issue. He points to the experience of one local woman who has had to move flat 17 times in the space of nine years, despite holding down the same job for seven years.

But, as the presence of affluent areas alongside the poorer ones suggests, the economy here has a great deal going for it. The Royal Navy has contributed to a thriving ecosystem of small, specialised engineering firms. While some service the defence sector directly, there are also firms working with Formula 1, pharmaceuticals and precision engineering.

In terms of  bigger employers, IBM did at one time have their European headquarters in Portsmouth, but have been gradually scaling down their presence. The likes of Airbus, Rolls Royce and BAE Systems are here too.

SMEs

The problem, Vernon-Jackson argues, is attracting companies in between the big conglomerates and the smaller outfits.

“We’ve got a few big companies and we’ve got lots of little ones – what we don’t have is as many medium companies as we should have and that’s the area where we need to grow the economy of the city.”

Attracting medium-sized companies is one thing, but the city also needs to do more to make sure they are bringing the kind of highly-skilled jobs that boost productivity and wages. In the Centre for Cities ranking of urban areas based on their share of knowledge-intensive service jobs, Portsmouth came 50th in a list of 62.

“In the context of other cities it hasn’t done well in attracting these kind of jobs. That has implications in terms of jobs, wages and career progression,” says Paul Swinney, the Centre’s policy director.

Swinney says the issue is not so much skills – where Portsmouth performs reasonably well – but the poor condition of the city centre. In that respect, it’s a challenge shared by many similar-sized towns and cities in the post-industrial north of England.

The Centre for Cities advocates using a portion of the £31bn National Infrastructure Fund specifically for city centres, which areas like Portsmouth would then be able to apply for.

However Vernon-Jackson says that even if bids are successful, the whole model of local government bidding for slices of Whitehall’s cash is an exhausting, counter-productive process.

“We waste such huge quantities of money bidding for stuff, setting stuff up and then when the money finishes three years later winding it all down again and the money would be much better spent if we could just put it in the base budget and we knew what we were spending it on.”

Another concern is an over-reliance on public sector employment, which means vulnerability to cuts in central government. At the moment the biggest employers are the Queen Alexandra hospital north of the island, the Navy base and the council itself, which between them have nearing 30,000 staff – this in an area with a working-age population of about 145,000.

Retail woes

That parts of the private sector are struggling is evident in areas such as North End, where many of the shops on the main thoroughfare, London Road, are boarded up or in a state of disrepair.

Caroline Collings, who chaired the city’s branch of the Federation of Small Business for 15 years, points the finger squarely at the tax system.

“The business rates are ridiculously high for retail and have decimated our high street so at one point the business rates were higher than the rents being charged.

“London Road is classed as a ‘high street’ so it was being charged exorbitant rates. It has a main road going through it, but that doesn’t make it a high street.”

Disused shopfronts, including a former snooker hall on London Road (Photo: Gareth Milner / CapX)

The demise of some retailers and the fact many shopfronts are left more or less abandoned creates a vicious circle. The kind of high-wage middle-sized companies the council wants to attract are not keen to locate in a city centre that is not the most attractive and lacks high-quality office space.

In an attempt to rectify that, the council has recently given the green light to spending £100m to buy up a 120-acre site in the north of the city. It’s not a move that’s been met with unanimous approval, to say the least. Morgan, the local Labour MP, has described it as a “very risky gamble”. On the Tory side, Donna Jones is concerned that one of Lakeside’s biggest tenants, IBM, is dialling down its operations at the site.

Infrastructure

Inadequate infrastructure is also holding Portsmouth’s economy back. It’s a challenge the city shares with swathes of the country waiting for a better bus service, a road to be dualled or a train line to be electrified. Smaller towns in particular are often forgotten in a national transport debate that has in recent years become fixated with mega-projects like Crossrail and HS2.

The train from London takes an hour and 40 minutes on the “fast” service and a little over two hours on the stopping one. It may be in the south-east, but in terms of transport to the capital, Portsmouth might as well be in the Midlands – except that it’s actually much quicker to travel the 120-odd miles to Birmingham.

Although getting to the country’s economic powerhouse quickly is clearly desirable, of much greater importance to most Portsmuthians is transport within the city and the wider Solent region

It’s an issue that will only become more important given the paucity of land available to build new houses on the island, which means new housing is liable to be north of the island. Local buses are not terrible but could be improved. Ideas for a tram or a light-rail system have been floated in the past, only to wither and die on the vine of tight budgets.

In terms of what economists call ‘agglomeration benefits’, the Solent region could be doing a lot better too. The train between Portsmouth and Southampton takes about an hour to crawl just 20 miles along the cost. That means people in both cities are forced into their cars.

“Lots of people work in Southampton, so the motorway is busy every day, it’s like a carpark in the morning because the motorway is so overcrowded,” Donna Jones observes.

There’s little love lost between the two cities – especially when it comes to football – but closer, quicker links between the two would clearly benefit the whole of Hampshire’s economy.

Local government

The way services are provided is also clearly a source of frustration. A common theme talking to local politicians was a feeling that the council could administer many services more efficiently and responsively than Whitehall departments, some of which have competing and sometimes actively contradictory policies.

Gerald Vernon-Jackson cites skills as a prime example. “Government has 42 different agencies delivering skills stuff and the transactional cost between all those organisations is enormous and the waste of public money and all their stuff is done on a national basis and different places have different needs for different skills,” he says.

Bus services are another area he would like to see brought under local control – and one where improvements could have a marked impact for those on low incomes.  As the Local Government Association has pointed out, there are some 5 billion bus journeys a year in the UK – three times more than made by train.

Policy solutions

Where do we go from here? The ‘rebalancing’ debate in the UK often seems to boil down to a crude regionalism, with projects such as the Northern Powerhouse dominating the conversation. Although redressing the investment imbalance between the north and south is certainly a necessary condition for improving the UK’s economic performance, it is far from sufficient.

There are other equally pressing imbalances – between coastal communities and those further inland, between big cities and small cities, and between built-up areas and the countryside.

And just as the north is far from uniformly deprived, so too the south of England is far from universally affluent. As a city like Portsmouth amply demonstrates, some of the most deeply ingrained poverty can be found in places that appear to be doing alright.

As Matthew Goodwin’s recent research demonstrates, addressing the needs of low income voters is a political imperative for the next Prime Minister.

The next Chancellor, whoever he or she may be, will also have the chance to shape longer term priorities with the Spending Review, which will conclude at the same time as the Budget in the autumn.

The good news is there are a great many pro-market, conservative policies that the next occupant of 10 Downing St can put in place to deal with people’s concerns and revitalise the parts of the country that might need a helping hand.

  • Among the biggest priorities will be coming up with a post-Brexit regional development policy to replace the EU structural funds on which some areas have relied heavily.  Millions of voters who backed a campaign based on taking back control want to see that reflected in concrete plans – and money – for their local areas.
  • Reforming taxes to help the poorest is crucial. One of the policies put forward by CapX’s parent organisation, the Centre for Policy Studies, is making sure people on the lowest incomes no longer have to pay national insurance, a step which would significantly boost disposable incomes for the least well off workers.
  • The CPS has also called for a reduction in the taper rate for Universal Credit, as recommended in the CPS’ Making Work Pay report, would significantly boost the incomes of the working poor and ensure people are always better off in work.
  • Dealing with concerns over housing by both liberalising the planning system to increase supply, while also offering more secure tenancies for those in the private rented sector.
  • Small businesses, often the lifeblood of our town centres, also have an unnecessarily hard time – and their struggles have serious knock-on effects that must be taken into account. While it’s encouraging that reform is now high on the political agenda, the next Prime Minister must be bold and really tackle what has become the scourge of small retailers, replacing a system that is both complex and iniquitous with one that is simple and fair.
  • A simpler, flatter funding system for local government would be welcome, too, so that councils do not have to waste their time and limited resources bidding for central government money and can concentrate on actually getting things done.
  • The next Prime Minister must also continue the decentralisation agenda which begun with the introduction of Metro Mayors, and recognise that local government is often much better placed than Whitehall departments to deliver services.

Over the coming weeks CapX will be publishing a series of responses from MPs and commentators as part of the Rebalancing Britain series, beginning on Monday with a piece from Mansfield MP Ben Bradley. 

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John Ashmore is Acting Editor of CapX