Report to: Economy, Employment and Skills Overview and Scrutiny Committee – 16 November 2011
Subject: Steady State Economics
Report of: Chief Executive
Deputy Chief Executive (Neighbourhoods)
1. Introduction and Background
1.1 This paper addresses the concept of a ‘Steady State Economy’ (SSE) raised in discussion at the November 2010 meeting of this committee.
1.2 There are some important potential tensions between the economic growth strategy and ambitions of Manchester and the other Greater Manchester authorities, and the concept of Steady State Economics.
1.3 The Council’s strategies emphasise the importance of continuing to grow the city’s economy both in absolute terms and particularly in certain key sectors such as creative and digital industries, advanced manufacturing and pharmaceuticals. Our strategies also emphasise the importance of reducing the city’s and wider region’s carbon footprint in ways which will contribute to, rather than reduce, our growth trajectory.
1.5 At the city scale the concept of pursuing a strategy based on achieving a steady state economy is highly problematic. In a Manchester context where too many residents are without work; where land and other resources are under-utilised;
where there are significant opportunities to grow the economy;
and where the city and its wider region has a vital role to play in rebalancing the national economy and reducing the over-reliance on London and the south east, the emphasis of our strategy in the short and medium term is on growth rather than the achievement of a position of low or no growth.
1.6 Despite the downturn in the economy forecasts still show an overall increase in jobs within Manchester and 50% of all future job growth in Greater Manchester will be within Manchester, illustrating the predominant economic role it has in the sub-region. The GM Forecasting Model predicts that the Greater Manchester area will continue to show the best performance in terms of Gross Value Added (like GDP a measure of output – minus intermediate consumption) and other key economic indicators over the next decade . This job creation will be heavily reliant on financial and business services, which are forecast to create 70% of the additional jobs. The next largest growth in employment will be in distribution and hotels.
1.7 This is not of course to argue that, within the context of a growing economy, we should not continue to reduce dependency on carbon and thereby reduce emissions that contribute to climate change. Indeed, the case made by Lord
Stern is that innovation and technology developments enable growth to be delivered at the same time as achieving cuts in carbon emissions.
2. Manchester’s Economic Strategy, SSE and the potential for “Green Jobs and Skills”
2.1 There are therefore limited prospects of developing a true SSE in Manchester as international, national and local policy is not geared to this goal. To seek to
develop a Steady State Economy at a local level would put Manchester at a competitive disadvantage with other cities and other areas. Manchester continues to promote economic growth as this presents the best opportunity to deliver a good quality of life for all Manchester’s residents and reduce social exclusion, deprivation and worklessness. However, Manchester is committed to develop more autonomy over how it implements its growth strategy – directing this to certain areas, groups and sectors and ensuring that it is as socially and environmentally beneficial as possible.
2.2 As reported to a previous EES O&S meeting in November 2010, demand for green jobs and skills is being generated through the creation of major programmes of activity, designed to meet our carbon reduction targets by 2020 of 48% for Greater Manchester (from 1990) and 41% for Manchester (from 2005).
2.3 By 2015 the programmes covered by the Low Carbon Economic Area (LCEA) – domestic retrofit, non-domestic retrofit and low carbon infrastructure – are estimated to deliver an additional: 34,800 jobs in the built environment sector, giving a total of 68,920 new jobs in the sector; £1.4 billion of GVA generated against a baseline business as usual forecast of £0.9 billion, and; carbon emissions from existing buildings reduced by an additional 1.8 million tonnes, raising the total figure for carbon savings to 6.1 million tonnes.
2.4 However, there is a significant risk of a mismatch between the skill demands of low carbon employers and the skills of the local labour force. This would not only exclude local residents and businesses from capturing the benefits of the unprecedented investment in low carbon industries, it would also put the whole Greater Manchester economy at a competitive disadvantage.
2.5 Skills will play a pivotal role in establishing Greater Manchester’s competitive edge in low carbon. Addressing this is the ‘Low Carbon Skills and Employment’ programme of the LCEA, which offers an early opportunity for a newly-agreed GM Skills and Employment Partnership to demonstrate how it can help maximise growth and build economic resilience. While labour demand will(almost) always get met, the priority is for Greater Manchester to gain the maximum benefit from low carbon industries by anticipating and fostering skills and employment opportunities for local providers, employers and individuals.
2.6 If this is not done, we risk having contractors, jobs and skills imported from elsewhere, with incomes and profits leaving the area. Built around the approach established through the LCEA, existing jobs will be safeguarded and new ones created in order to deliver the other Greater Manchester climate change programmes for: ‘green infrastructure’; ‘transport’; and ‘sustainable consumption and production’.
3.1 The idea of Steady State Economics has been around for several decades but the debates are currently being aired because of the global economic turmoil that has followed the credit crunch and recession over the past few years.
3.2 It is neither possible nor desirable to isolate Manchester from the national or global economy and pursue a strategy of SSE. However, it is possible for Manchester to direct its economic strategy to create more sustainable growth
both socially and environmentally. This strategy of sustainable development is clearly set out in both the Sustainable Community Strategy and the Greater Manchester Strategy and aims to create a model of sustainable economic
growth based around a more connected, talented and greener city region where the prosperity secured is enjoyed by the many and not the few.