Brummienomics – your time has come

Sunday Telegraph Oct 9 2016

I have been arguing in articles, books and blogs for years now that we need to be much more innovative and creative about our assets in Birmingham and the West Midlands. They are mostly un-mined, unexploited and unsweated. They sit as a locked network of resources which should now be fully accessed and harvested.

I’ve suggested a way of linking investment directly to positive assets in the city: housing, other infrastructure, and long-term venture capital investment in our own people in small and medium-sized businesses across the city – a 40-ward investment strategy. An access-all-areas investment, not just for big commerce in the city centre but across all of our local centres delivering an inclusive economy that works for all. In particular, I have suggested rewiring pension fund investment into these bonds.

So you’ll forgive me if reports in today’s Sunday Telegraph seem a little familiar.

It appears that: Radical pension reforms are being prepared by the Government to help millions of savers get better returns, including schemes to get pension funds investing in building projects.

Not only that, but: No 10 is looking at whether cities such as Manchester, Birmingham and Coventry can be allowed to raise their own bonds, with the proceeds spent on local infrastructure. One idea being considered is to give cities and city regions powers to create “city bonds”, raising up to £1 billion that would be underwritten by the Treasury.

A government source said: “Pension funds need to invest their money; they don’t want it sitting in cash or government bonds. If you can put it into something that can get them a decent return, that is far better.”

The Telegraph article even mentions the Social Impact Bonds I’ve been pushing for the last five years; and we already do them here!

This stuff certainly rings a bell.

Could it be that these central planks of ‘Brummienomics’ are starting to resonate in Whitehall? I really hope so.

My argument is that we need to use the great assets in the region to back up a much wider regional wealth fund over which we have control and which we do not have to go cap in hand to London for.

And this is not about borrowing to spend. It’s about rewiring and using out assets cleverly to make sure we use our wealth in our cities and regions to supercharge investment.

There seems to be three corners of this dynamic West Midlands triangle of wealth.

  • First, there is the vast amount of publicly-owned assets across the full range of public bodies across the region. Councils, certainly, but also land and physical assets in the ownership of other public agencies in sectors such as health, environment, education, law and order, highways and (importantly for them) the arts. Third sector and charity assets can fall within this side of the triangle too.
    Birmingham City Council alone owns more than £5 billion in assets. The land and property owned (excluding council houses, heritage assets and community assets) stands at about £2.5 billion.
  • Secondly, there are the mighty regional pension funds – most importantly of all the West Midlands Local Government Pension Fund.
    At well over £12 billion in invested assets, it is without doubt the major financial anchor institution of the entire region. Whilst it obviously has a public sector aspect to it (with council taxpayers and ordinary taxpayers funding it as employers) it is essentially the private wealth of over 275,000 active, retired and ex-local government employees.
  • Thirdly, the wealth of the private sector in the region and whatever further private sector investment from outside the region which can be leveraged into the engine of wealth which the regional fund can become.
    The fund can draw into it such investment which currently goes elsewhere for want of a regional investment vehicle at present or which inevitably finds its way into the London financial, banking and commercial mixer.

This triangle of wealth and opportunity should not be seen as some sideshow in a combined authority: it should be its engine.

It can be a generator of economic activity which can rival any region of its size anywhere. It can be something the region owns and has control over, though the financial instruments, bonds, and economic pathways which it can create. It can generate new investment routes into and within the region. One which some of its citizens can, and must, demand a real say in how it works, especially through the 275,000 pension savers.

So I welcome today’s reports. It is time to be more radical. It is time for cities and city regions to take even more of a leading role in the post-Brexit economy.

This is about getting a massively better return for investors (large, small or individuals) in our cities and especially from pension funds. This is good for ordinary Brummie pensioners in public and private sectors, and ordinary citizens with pensions in cities across the UK.

We’re not asking for powers as such to do this (especially as, to coin a phrase, ‘we’re going to do it anyway!’). We’re already working hard to bring capital into our cities, so just let us be free to do what works.

Somewhat ironically, with the Conservative Party Conference in our city this week, much of the talk has been about Joseph Chamberlain – Birmingham’s local government legend who, according to Churchill, ‘made the weather’.

Chamberlain’s approach was all about confident acts of local economic self-determination and my message in 2016 is very simple: We’re ready to ‘make the weather’ again. We want to control our own destiny and use our own assets to improve the lives and life chances of people across the city.

Cities – especially Birmingham – can lead the way!

Posted on October 9, 2016, in Blog and tagged , , . Bookmark the permalink. 1 Comment.

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