Here’s how Britain can radically decentralise its economy

Can we just blame this lot? The Bank of England. Image: Getty.

A “rigged” system, the “left behind” and the need to “level” the prospects of UK regions are not phrases you typical hear in the Tory lexicon – but the Conservative Party leadership contest has finally forced the candidates to think about tackling Britain’s economic divide. However, neither has found a way to tackle economy’s structural flaws.

The financial crisis and era of austerity may have magnified these structural problems, but the problems predate both. The UK’s economic performance, measured in terms of labour productivity, has been diverging from international peers and between UK regions for decades. The average British worker is now almost a fifth less productive than the average worker from the G7 group of advanced economies. UK workers also reside in a country that is the most regionally unequal in Europe.

Vague calls for billions to be spent on infrastructure by some candidates at least recognise this fact, but this policy addresses only one part of the UK’s economic muddle. Other issues, such as the UK’s low levels of R&D spending, weak diffusion of best practice across firms, pervasive skills mismatch, shackled local government, credit constrained SMEs, and myopic corporate governance are still as relevant today as they were at the time of the last leadership contest.

These issues cannot be addressed by one ‘silver bullet’ policy. However, there is a unifying theme: a concentration of political and economic decision-making in only a few regions, firms and institutions.

Framed in this way, the solution is simple: a coordinated effort to decentralise Britain.

Plans to decentralise have been proposed before: just ask Michael Heseltine, a previous failed challenger for the Tory mantle. However, these decentralisation plans have been limited in scale and ambition.

Decentralisation must be broader than a policy proposal. It has to become a governing philosophy that guides all policy making. That is the essence of my team’s joint-winning entry for this year’s IPPR Economics Prize.

Applying this philosophy to local government would mean policies that decentralise economic activity and political governance, empowering local people and reducing local business costs. A policy such as mobility funding, which helps households and businesses relocate to new regions, is one such policy within this framework that can encourage a rebalancing of growth.


A reversal of the UK’s regional inequalities will also improve social cohesion, re-legitimise capitalism, and guard against extreme alternatives that are destructive in the long-term.

Decentralisation can also be applied to the private sector. The wide disparity in productivity between the UK’s firms can be addressed by reforming intellectual property law, adopting a system of compulsory patent licensing and incentivising collaboration between firms. Decentralising firm-level decision-making can also reverse the culture of short-term profit extraction by ensuring that the views of employees and local communities are considered in corporate boardrooms.

The financial sector in particular will serve the economy better if it is more local and community-minded. For example, we propose establishing a network of community banks that will be more responsive to the needs of credit-constrained firms and less vulnerable to global financial shocks.

All of these policies and the many more proposed in our winning report should combine as part of a ‘big push’ that can truly achieve inclusive prosperity.

Crucially, a blueprint for decentralisation will only transform the UK economy if it is adopted wholesale. This requires clear strategic leadership from Westminster, especially since implementation will be a long-term project that may straddle more than one parliament. In short, the next Prime Minister must resist the piecemeal efforts of the past and seize the opportunity to build a country that is more prosperous, less economically divided and less disconnected from decisions over its future.

Farooq Sabri was joint winner of the IPPR Economics Prize. The opinions expressed in this article are those of the author only.

 
 
 
 

What Citymapper’s business plan tells us about the future of Smart Cities

Some buses. Image: David Howard/Wikimedia Commons.

In late September, transport planning app Citymapper announced that it had accumulated £22m in losses, nearly doubling its total loss since the start of 2019. 

Like Uber and Lyft, Citymapper survives on investment funding rounds, hoping to stay around long enough to secure a monopoly. Since the start of 2019, the firm’s main tool for establishing that monopoly has been the “Citymapper Pass”, an attempt to undercut Transport for London’s Oyster Card. 

The Pass was teased early in the year and then rolled out in the spring, promising unlimited travel in zones 1-2 for £31 a week – cheaper than the TfL rate of £35.10. In effect, that means Citymapper itself is paying the difference for users to ride in zones 1-2. The firm is basically subsidising its customers’ travel on TfL in the hopes of getting people hooked on its app. 

So what's the company’s gameplan? After a painful, two-year long attempt at a joint minibus and taxi service – known variously as Smartbus, SmartRide, and Ride – Citymapper killed off its plans at a bus fleet in July. Instead of brick and mortar, it’s taken a gamble on their mobile mapping service with Pass. It operates as a subscription-based prepaid mobile wallet, which is used in the app (or as a contactless card) and operates as a financial service through MasterCard. Crucially, the service offers fully integrated, unlimited travel, which gives the company vital information about how people are actually moving and travelling in the city.

“What Citymapper is doing is offering a door-to-door view of commuter journeys,” says King’s College London lecturer Jonathan Reades, who researches smart cities and the Oyster card. 

TfL can only glean so much data from your taps in and out, a fact which has been frustrating for smart city researchers studying transit data, as well as companies trying to make use of that data. “Neither Uber nor TfL know what you do once you leave their system. But Citymapper does, because it’s not tied to any one system and – because of geolocation and your search – it knows your real origin and destination.” 

In other words, linking ticketing directly with a mapping service means the company can get data not only about where riders hop on and off the tube, but also how they're planning their route, whether they follow that plan, and what their final destination is. The app is paying to discount users’ fares in order to gain more data.

Door-to-door destinations gives a lot more detailed information about a rider’s profile as well: “Citymapper can see that you’re also looking at high-profile restaurant as destinations, live in an address on a swanky street in Hammersmith, and regularly travel to the City.” Citymapper can gain insights into what kind of people are travelling, where they hang out, and how they cluster in transit systems. 

And on top of finding out data about how users move in a city, Citymapper is also gaining financial data about users through ticketing, which reflects a wider trend of tech companies entering into the financial services market – like Apple’s recent foray into the credit card business with Apple Card. Citymapper is willing to take a massive hit because the data related to how people actually travel, and how they spend their money, can do a lot more for them than help the company run a minibus service: by financialising its mapping service, it’s getting actual ticketing data that Google Maps doesn’t have, while simultaneously helping to build a routing platform that users never really have to leave


The integrated transit app, complete with ticket data, lets Citymapper get a sense of flows and transit corridors. As the Guardian points out, this gives Citymapper a lot of leverage to negotiate with smaller transit providers – scooter services, for example – who want to partner with it down the line. 

“You can start to look at ‘up-sell’ and ‘cross-sell’ opportunities,” explain Reades. “If they see that a particular journey or modal mix is attractive then they are in a position to act on that with their various mobility offerings or to sell that knowledge to others. 

“They might sell locational insights to retailers or network operators,” he goes on. “If you put a scooter bay here then we think that will be well-used since our data indicates X; or if you put a store here then you’ll be capturing more of that desirable scooter demographic.” With the rise of electric rideables, Citymapper can position itself as a platform operator that holds the key to user data – acting a lot like TfL, but for startup scooter companies and car-sharing companies.

The app’s origins tell us a lot about the direction of its monetisation strategy. Originally conceived as “Busmapper”, the app used publicly available transit data as the base for its own datasets, privileging transit data over Google Maps’ focus on walking and driving.  From there it was able to hone in on user data and extract that information to build a more efficient picture of the transit system. By collecting more data, it has better grounds for selling that for urban planning purposes, whether to government or elsewhere.

This kind of data-centred planning is what makes smart cities possible. It’s only become appealing to civic governments, Reades explains, since civic government has become more constrained by funding. “The reason its gaining traction with policy-makers is because the constraints of austerity mean that they’re trying to do more with less. They use data to measure more efficient services.”  

The question now is whether Citymapper’s plan to lure riders away from the Oyster card will be successful in the long term. Consolidated routing and ticketing data is likely only the first step. It may be too early to tell how it will affect public agencies like TfL – but right now Citymapper is establishing itself as a ticketing service - gaining valuable urban data, financialising its app, and running up those losses in the process.

When approached for comment, Citymapper claimed that Pass is not losing money but that it is a “growth startup which is developing its revenue streams”. The company stated that they have never sold data, but “regularly engage with transport authorities around the world to help improve open data and their systems”

Josh Gabert-Doyon tweets as @JoshGD.