Northern rising: How "Devo Manc" is reshaping the UK's economic map

"It was not so much their stand at this global trade fair, which was impressive, but the way they operate across the event. They are at all the right events, putting across the right messages in the event programming and at the senior networking where the real business is done at the evenings, dispensing advice on the 'Manchester model' to other city regions with complex problems like Barcelona and Turin.

"If the model begins to develop where individual [English] regional centres and individual cities are setting up interesting new income streams, through cleverly-designed sales taxes or income taxes or whatever it may be, and then have an added incentive to invest in regional development, we [in Scotland] may find ourselves with highly competitive, very attractive centres for development right on our doorstep."

Although he feels Glasgow "made a bit more of an effort" at MIPIM this year than in previous years the Chamber leader "I think the city's delegation came back thinking there is a lot more work to do". And in an article for the Herald last week, he warned Scottish politicians to "watch every move that the [UK Government] makes to develop the Northern Powerhouse around Manchester."

The steady rise of the North's metropolis, from post-industrial problem city to European poster child for creative and co-operative leadership, has just been turned up a notch.

Post-election announcements suggest that the plans for the Labour-dominated city were not necessarily the northern vote-gathering Tory gimmick that cynics assumed. Although still in their infancy, ambitious plans to improve transport and other links between Greater Manchester and the cities within and beyond the "M62 corridor", Liverpool, Leeds, Bradford, Sheffield, Hull and Newcastle are promising to reshape the economic geography of the UK.

Tuesday's Queen's Speech is likely to show that the move to use devolution of powers over business taxes, infrastructure, skills and health to create new centres of growth, led by Manchester is now set as a main plank (along with reducing the deficit and boosting productivity) of the UK government's economic agenda. By implication, it will also by the yardstick of the Conservatives worthiness of re-election in 2020.

The rise of the North was underlined earlier this month by Chancellor George Osborne's appointment of superstar ex-Goldman Sachs economist Jim O'Neill as Treasury minister for infrastructure and the Northern Powerhouse. The man who first coined the term BRICS, O'Neill is a Mancunian, and a graduate of Sheffield University. He is tasked with driving through the Cities Devolution Bill for which Manchester is the blueprint.

"Jim O'Neill is steeped in city development and really understands it" according to Chris Fletcher, policy and marketing manager of Greater Manchester Chamber of Commerce. "He is very commercially and financially astute and he will be able to batter down the doors of the Treasury to make sure things happen and there are no bean-counters talking about financial constraints. It won't be a blank cheque, but his appointment is a sign that the government is taking this seriously and putting its money where their mouth is."

The revival and empowerment of Manchester, which locals date from the redevelopment following the 1996 IRA bombing and the 2002 Commonwealth Games, was enshrined in the creation of the combined authority of Greater Manchester Combined Authority which brought together the ten regional local authorities of Manchester, Salford, Bolton, Bury, Rochdale, Oldham, Tameside, Stockport, Trafford and Wigan.

Growing out of the looser Association of Greater Manchester Authorities (AGMA) formed in 1986, the new civic body with its judicious distribution of leadership responsibilities to different local council's has proved both resilient and effective.

According to Patrick: "It's not just a pals act, its a proper structure, a properly governed, well-designed body, that subdivides a series of issues that mostly have economic outputs." It is set to be strengthened further by the appointment of an interim mayor next month, followed by the direct election of a Mancunian equivalent of a Boris Johnson or Ken Livingstone in 2017.

Although many of the details of "Devo Manc" and the Northern Powerhouse are still to be worked out, business leaders and civic authorities in the Northwest are enviably united about the potential benefits of stronger local control. As one prominent Manchester businessman puts it, his city no longer feels like "the filling in the sandwich" between comparatively power-rich and increasingly devolved Scotland and the generally richer semi-autonomous mayoral fief of London.

"The feeling is that we just get bypassed, and we don't seem to get our message across" he said. "The fact that people are latching onto the Northern Powerhouse is way of rectifying that. We don't want to drag London down and we don't want to damage Scotland's because that's an important part of the UK economy and why would you want to do that? But we want to be sure that we are on a level playing field and have a level playing field and equal opportunities when you are looking at inward investment."

One potential cause resentment of Scotland might be the fact that north of the border has an elaborate system of government-funded enterprise bodies such as Scottish Enterprise, Highlands and Islands Enterprise and an overseas sales promotion arm Scottish Development International. Equivalent quangos, some of them covering disadvantaged areas, including the Northwest Regional Development Agency and One Northeast were dumped by the Coalition Government in 2012.

The concept of the Northern Powerhouse will be "broadly helpful across the board, allowing us to catch up and begin to fill in some of the gaps." according to Manchester Chamber's Chris Fletcher, who cites various constraints on growth that stronger devolution might overcome, by introducing the powerful element - someone to take the rap in case of cock ups.

"You can have that local control but it doesn't mean anything unless you have accountability, and that's the missing element that will come with the elected mayor." Fletcher says.

Devo Manc does of course differ from its older Scottish cousin in that the powers are claimed purely to solve problems in the economy rather than that plus the assertion of national identity. There is no shortage of problems. The chronic background social issues that restrain growth,- particularly in the north and east of the conurbation - are as bad or worse than Glasgow's.

More directly, according to Fletcher: "The problems businesses suffer are that they aren't able to move people and goods around the area because of congestion, there is also the need to get superfast broadband to as wide a group of people as possible. There are major industrial estates near the centre of the city where the coverage is woefully inadequate for what business needs are, and when you are setting yourself up as a digital and creative hub with Salford's media city and all that, then you have got to be sure that you have an infrastructure that works."

"The other elements we are looking for are greater control over skills funding, making sure that we rectify the situation of where the skills supply does not match business demand, activity can be put in place at a local level, because businesses knows what they need far better than Whitehall. This kind of local control is very important."

From 2012-14 Manchester piloted an £8m scheme caked Employer Ownership of Skills (EOS), which put skills funding in the hands of businesses rather than skills providers, giving them training funds (via bodies like the Chamber of Commerce) to purchase training from multiple sources (if required). The scheme, according to reports "has left a significant legacy in how employers are being supported to engage with workforce development and training" Over 80% of the businesses that the Chamber's EOS team placed apprentices with were SMEs, who in the past have not always had the capacity to obtain trainees suited to their needs, and business in general complains a lot about the significant skills shortages in areas like the digital and creative sectors where people capable of coding, for example, have to be sought overseas.

Is EOS programme a model for Scotland? Probably not say experts. The skills landscape in Scotland is more coherent than in the far larger and messier English system, with an established sectoral and regional approach that already has strong employer involvement.

Arguably the most significant development in Manchester however is the evolution of a system that allows business rates raised locally to be retained locally, transforming the balance of incentives. Manchester has been allowed to pioneer an "Earn Back" deal which incentivised the local authority to invest in economically beneficial projects. As officially described:

"Earn Back provides an additional incentive for Greater Manchester (GM) to prioritise local government spending to maximise GVA growth. If successful in driving economic growth, under Earn Back, Manchester will receive a larger proportion of resultant tax take generated from this growth than would otherwise be the case under business rate retention. The 'earned back' resources would be used for further investment, similarly prioritised on net GVA impact at GM level. This will create a genuinely revolving Fund which rewards GM for delivering growth."

Although this is far ahead of the tentative first steps taken in Scotland to incentivising business-generating investment with Tax Increment Finance (TIF), it is seen by Manchester's forward-leaning leaders as a first step, not an end in itself.

After Earn Back's successful trial, the city leaders went back to Whitehall and said this is all very well but... Manchester raises only 17% of what it spends, whereas the OECD city average is 50% raised through measures like sales taxes and business rates, amounting to a clear incentive for cities to manage their affairs to raise income streams for the future, invest in skills and infrastructure and general and create a virtuous circle of rising prosperity.

It sounds good in theory, and if works in practice the Northern Powerhouse might have powerful lessons for Scotland on new practical approaches based on incentivising economic growth above rhetoric. One task for the new contingent of Scots MPs in Westminster could be to keep close tabs on what the North of England does with its new powers to grow business, and report it back to Holyrood.