Capturing the benefits of the visitor economy

I remember my interest in this being piqued at the time the Edinburgh Fringe was beginning but a combination of deadlines and some holiday meant that it slipped my mind. But, coming back to work and clearing out the inbox, I stumbled on this piece in the FT.

Visitors give money to local business, but not to the local government

The pressures on popular tourist cities from ‘over-tourism’ are well known (see a piece in CityMetric from earlier today), these often focus on the impact on local residents in terms of changing natures of their town or city centres (increases in businesses that are dominantly tourist-focused such as bars, souvenir shops, etc.), and the pressure on house prices and quality of life caused by rapidly-increasing shares of accommodation given over to temporary tourist accommodation through platforms such as Airbnb.

These are all very real, but I want to focus for now on the impact of large-scale tourism (and this includes one-off, large events, more prolonged festivals such as the Edinburgh fringe, or permanent tourism destinations) on local authorities, and its parallel that can also be applied to economic growth through retail or other destination-led expansion of local economies.

I’m interested in this angle because I see it as a small part of a much larger problem within the UK’s centralised economic and political structures, but particularly through its Westminster-driven fiscal policies. Much has been written elsewhere (and I’ll contribute more to this literature myself) on the lack of fiscal devolution in the UK, with local authorities raising only a small share of their incomes and having genuinely direct influence over the spending of an even smaller part.

Even with recent committed reforms to local government finance and the retention of business rates (see my publications section for the weeks of my life I’ve lost to this cause), local government is able to capture very little uplift of any growth in its area. However, there is at least a (theoretical) ability to capture some of the increase in large-scale commercial developments whilst not incurring much – or any – of the cost of delivering it.

But with tourism, and particularly with events-related tourism, there can be costs to bear. As Edinburgh City Council noted in the run-up to the Fringe, the city bears additional costs in terms of street cleansing and other associated activities in terms of managing the enormous increase in the number of visitors, but isn’t able to fiscally capture the benefits. There are spill-over benefits, of course: businesses see more trade, the city increases its profile (which can, of course attract more tourists, bringing more costs and benefits with it), but the critical point is that the city corporation – the local public budgets – see none of this uplift.

The call then, from an SNP-member, is for a tourist tax to both raise revenue and to perhaps soften demand for tourist-led temporary accommodation of short-term lets. These, usually in the form of bed taxes, a fixed levy on the number of person-nights stayed are common in other countries and have an advantage over other taxes by being payed mostly by people who, by definition, don’t live in the area. Because every supplier of bed-nights to visitors would come into scope (but only if the regulation of Airbnb and other types of resident or property-owner lets can be delivered alongside this) would be the inflationary impact would be felt sector-wide, providing little intra-sectoral competition issues.

In terms of its introduction, it seems that tourist taxes may be one of the more simple ways of beginning the process of tax devolution. It doesn’t impose on the traditional nationally-led taxes, and could be managed almost entirely within the collection architectures already present as part of the business rates system. There’s little to lose from a political perspective, and it would bring the UK into line with many other developed countries. And, of course, it would bring some welcome relief to the austerity that has fallen so heavily on local governments across the UK.

There’s a wider debate to be had, too (but not in this blog), about the benefits of charging visitors different rates than residents. This is also common in other countries: alcohol may be expensive in Sweden for holidaymakers, but a residents’ card reduces the price significantly, and other European cities offer discounts for local residents on public transport fares.

Interestingly, London played with this concept briefly, albeit not explicitly, when it introduced the Oyster system. Londoners were quick to migrate to the contactless system as the deposit for a card was low enough to be worth it for the lower-than-cash fares that non-Oyster holders had to bear. This meant that visitors were likely to pay higher fares for using TfL’s services than local residents. But, since the wider move to direct contactless payment through bank cards, the cheaper price is now available to non-residents with a contactless card (great news for UK and many EU citizens, bad news for Americans). An interesting project would be trying to find out the lost revenue caused by an increasing share of non-cash payments, but that’s for another day.

So, there are benefits to tourism taxes for local governments. Increased revenues to support existing costs, and potentially a benefit for locals by helping to share the pain with visitors. It may even help Westminster by supporting local government more to self-finance. The question is who will get there first.

Taking back control?

This post comes on the back of an outstanding piece in Politico by Jack Blanchard. There’s lots worth reading there in full, but I want to dwell on the comments raised in Wigan and highlighted by Tom Forth in this tweet.

Whilst lots has been written by both academics and policy advisors (think-tanks, etc.) about devolution and the importance of what more recently has become known as functional economic areas, the debate around place and identity and their relationship to governance has mostly been left to the academic world, meaning much of the detailed research and thinking lingers in journals and academic conferences and doesn’t permeate what I might call (and hope I can get away with it in my new role in academia) the real world.

Lisa Nandy (MP for Wigan) comments about the challenges of ruling elites and their distance from the people they serve. A number of authors have raised this as a key issue in the Brexit vote, that people feel disconnected from a ruling elite in Brussels, and would prefer one closer to home. I would argue that the problem has been a distance from the ruling powers in Westminster and Whitehall rather than Brussels, but that will have to wait for a future post.

But isn’t this a problem that devolution was meant to solve? After all, the good residents of Wigan have part of a more local government since the 1970s reforms, first in Greater Manchester Council, later through the voluntary working arrangements of the Association of Greater Manchester Authorities (AGMA), and most recently as a constituent of the Greater Manchester Combined Authority. The whole point of these reforms (at least the most recent – the 1970s reforms and their 1980s reversals are worth a entire suite of posts on their own) was to bring more power closer to the people, but if the population feels disenfranchised by these, then where to we go from here?

History may help us out to some degree. The 1970s reforms took power away from smaller councils and passed it up to new districts and and an overarching metropolitan tier. In terms of direct democracy, it’s not clear that more power was given to either local areas, or to their voters to effect change. And it’s perhaps that latter point that’s where the disconnect may be the greatest.

Power given if useless if it cannot be shaped. Wigan (and other boroughs like it across the country) have markedly fewer powers today to actively shape their places in response to the wishes of the local people. The democratic feedback loops are at best tarnished, and may be broken. There is little point in championing the powers that Greater Manchester now has (and they have noticeably increased) if the people of the boroughs do not feel as if they can shape them.

Whilst this is in danger of sounding like a call for increased direct democracy, that’s not what I’m suggesting: that is an idea based in good intent but riven with challenges in its delivery (see Brexit for a recent example). But voters must be able to feel that they can influence and shape the fortunes of their place, and it’s not clear that the current model can do that.

The creation of the directly-elected mayors, whilst opposed by a majority, I think will, over the longer term, provide a useful tool in repairing the democratic deficit, but I suspect that the powers they currently hold are insufficient to enable that to happen on a scale that’s sufficient. The mayors will always be challenged by the image of ivory towers at city hall, but other places around the world have solved this with a far more extensive and sweeping powers at a local level than this country has seen in the past century or more, and arguably ever. (There’s another piece I must write on the history of sub-national governance in the UK and why it is so centralised, but that’s definitely for another day).

So, to come back to place and identity, this raises a final question for now: to where do places like Wigan see themselves as belonging? As someone who was born and brought up there, I hope I have a sliver of understanding about this. During the 1980s and 1990s when I lived there, it was clear that Wigan didn’t naturally look to Manchester as its neighbour, partner or bigger brother. Liverpool was a more natural urban parent, but Warrington and West Lancashire towns like Skelmersdale, Ormskirk, and even Preston, were mentioned more by the people I knew than Manchester ever was.

The 2001 census placed Wigan in the same Travel to Work Area (TTWA) as Manchester, and Greater Manchester, in these maps, was a near perfect fit for the mobility of its population. This changed in the 2011 data, when Wigan became paired with Warrington, and Greater Manchester gained Cheshire East and Macclesfield within its reach. Part of this is changing public transport availability, part is the phenomenally rapid growth of Warrington and Cheshire’s economies during the 2000s (again, worth a post on its own).

We shouldn’t worry about fitting governance structures exactly onto changing patterns like these, as the borders will be endlessly shifting. But identity is much less mobile, and representation within larger structures matters to individuals’ feelings of autonomy and the validity (real or perceived) of their governments.

This is where devolution can help, but we need a level of support from politicians, as policy can’t fix all the problems. In reality, Wigan is probably best served within the Greater Manchester structures, where the scale for investment, and for its returns, is greater. But in the end, the people of Wigan will need to feel they have adequate representation, and that their voice is heard equally with those of more prosperous and more vocal boroughs like Manchester.

Andy Burnham, the mayor of Greater Manchester, has made clear that he wants to see greater representation of, and policy designed to benefit, the outlying areas which have seen relatively little investment compared to the city centre and wider urban core. But the challenge is that this mustn’t come as a form of jam-spreading, where spend is dictated solely on a per capita basis (I disagree with IPPR North and its policy recommendations for transport spend for the same reason – spending should be balanced more towards need than equity).

Redistribution is important here, and will remain so for ever more, for no country is equal throughout. But in areas like Greater Manchester, where the whole does not generate net returns from which to distribute, this places a further challenge on the political messaging. Whether local spend is in Manchester or Wigan, it will ultimately be driven by money redistributed from somewhere else. But Greater Manchester as a whole is aiming to correct its fiscal balance, and balance its books over the coming decade. That will give the politicians greater leeway in taking distributive decisions.

So, for now, whilst policy can go someway to correcting the problem, it will take a long time for that to come (and fiscal devolution – the ability to raise and spend your own money – is critical to this). In the shorter term, the solution lies with politicians to create the narrative and lead the people. On a national scale, this is woefully lacking. At a local level, while it has a way to go, the signs are more positive.

Thoughts from an English vacation

My partner and I are keen city-break fans. We try and get to different places across Europe regularly, and enjoy the experience of the different histories and cultures that they provide. But, we’ve not done all that much travelling around the UK, and outside our working city of Manchester, don’t really know much of our own country well outside other northern cities (including Edinburgh, perhaps for me the UK’s most European city) and, of course, London. So, whilst the weather in the UK has been good this summer, we planned a week of travelling around the East and West Midlands.

Perhaps the biggest and most pleasant surprise was Coventry, a city I’ve often heard remarked on as a concrete jungle. Yes, there’s lots of it, but it had a interesting feel to it, some great pubs and excellent restaurants, and an open, friendly and vibrant feel to it, and you see clearly what the planners were attempting to create in its pedestrianised centre.

But the places that captured my imagination the most were Lincoln and Newark. One an ancient city, seemingly surprisingly off the tourist trail (despite one of the very finest cathedrals in the UK and a fine castle and old town) and one an old market town, they struck me as being quite similar.

Though I’ve moved around the north over the years, I consider myself foremost as a city-dweller, even though I now live in a small village in the Pennine hills, as I commute to Manchester daily and love the city passionately. A side effect of this, alongside having worked in urban economic policy for a decade, is that when visiting small towns and cities, I tend to always ask myself ‘what do people do here? How is the economy structured? How do these places survive?’.

But in both Lincoln and Newark, I see places that are well kept, with plenty of independent companies, relatively few empty shops, and a generally positive vibe to them. Economic research and development policy has, over the past decade, been focused on cities as the engines of growth, perhaps to the exclusion of other parts of the country, and this divide between rural and urban can be seen in party-political affiliation, the Brexit vote and other indicators. The aftermath of the financial crisis and the recession, and particularly the decision to leave the European Union, have reawakened interest in the places outside our cities, and we are now seeing some excellent research being published on towns, particularly by the new think-tank Centre for Towns.

So, spurred on by these thoughts (which, I’m conscious, come from a lack of experience and understanding in non-urban economies), I’ll be looking more closely at some of these in the coming days and weeks, seeking to answer my questions and to better understand how – and if – they are different to cities, and to learn about their challenges and opportunities they face in their futures.

I’m particularly interested in those towns and cities that are not within easy striking distance (or economic capture) of major cities, as I think those that are, whilst having similar challenges, have very different policy requirements for their solutions. I’ll return to these questions and more, hopefully with some answers, soon.

Happy new (academic) year!

Whether in business, academia or much else of the world. the first of September feels like the start of a new year. In schools, colleges and universities, preparations are being made for a new academic year and, with the rest of the world returning from what they hope have been long and restful holidays, attention is turned to new starts, new ventures, and the anticipation of a productive ‘push’ to the Christmas break.

It’s much the same for me. After changing jobs in April, moving from the business world to academia, I’ve spent my first few months beginning to understand what, for me, is a very different world from my previous employment, as well as realising that it shares many of the same hopes and challenges. The summer has been spent in a combination of reading, writing and, most recently, resting, and now, as attention turns to the unflux of nearly 40,000 students in a few weeks, I’m busy launching a new research unit, Future Economies Analytics, within my research centre and finally updating my own website.

I’ll talk about this in more detail over the coming days, as well as pondering on some aspects of the UK economy that struck me during my holidays as I toured around parts of the country, but Future Economies Analytics will be a unique addition to the university sector research space, focusing on secondary micro-data analysis and forecasting for sub-regional economies across the UK.

Whilst George Osborne’s ‘devolution revolution’ has slowed down over recent years and government grapples with Brexit, increasing attention continues to turn to cities, to towns, to rural areas; to transport connectivity that goes beyond city-to-city commutes and begins to understand the role of buses; to inclusive growth and the ‘left-behinds’; to the future of the UK outside the European Union; to what a local industrial strategy means; and, perhaps the biggest challenge, what type of economy should the UK and its constiteunt parts (both devolved nations and local government) seek to develop over the coming decade.

Future Economies University Research Centre at Manchester Metropolitan University, where I now work, is working on these and more questions, seeking to answer the core question “what are the challenges that future economies face, and how should policy makers respond to them?’. Within that, my team will be working on exitsing and innovative new datasets and cuting-edge statistical techniques to help answer these questions, and we’ll be publishing regularly with traditional academic papers, but also more accessible policy white papers, research documents, blogs and podcats, interactive charts, spatial mapping and live forecasting models.

All that’s to come but, for now, follow me personally on this website or on Twitter at @ChristianSpence. Future Economies Analytics tweets at @MMU_FEAnalytics, the wider research centre at @MMU_FutureEcon, and its (temporary: new one coming soon!) website can be found at Future Economies will formally be launching later in the autumn and if you’d like to be kept up-to-date with developments and our news, contact me via any of the above and we’ll add you to our mailing list.