Supercity of north to rival London wins more backing

The man who coined the term "Brics" has called for the creation of a northern supercity he tagged "ManSheffLeedsPool" as a way to close the economic gap with London.

Jim O'Neill, the former Goldman Sachs economist who chairs the city growth commission, said devolving power from Whitehall to Britain's 15 biggest urban areas was vital to curbing the budget deficit and national debt.

Manchester, Sheffield, Leeds and Liverpool should be given powers in parallel with Scotland, with draft legislation by January, matching a pledge given to Holyrood after Scots rejected independence in last month's referendum.

In a report entitled "Unleashing Metro Growth", the commission also recommended heavy investment in transport, with a high speed "Tube" system for the north and an equivalent of London's Oyster smart card to allow seamless travel in the north and the Midlands.

City devolution could boost the national economy by £79bn a year by 2030, adding 5 per cent to its size and almost £1,700 into each city resident's pocket, according to the report. This would come from bringing the average growth rate for northern metropolitan areas in line with the national average. The northern metropolitan rate was 3.87 per cent compared with 4.13 per cent for the whole of Britain in 1997-2012.

Mr O'Neill said "greater connectivity between 'ManSheffLeedsPool' and this 7m person region could start to see the level of scale we need for change". The 15 biggest metropolitan areas "should be able to take on different packages of devolved powers over time", with areas such as the northeast and Greater Birmingham joining when they are ready.

The commission concluded that Britain's centralised political economy was "not fit for purpose" and attempts to cut the deficit and national debt from London were futile. The capital, with 8.4m people, is more than eight times as big and rich as Birmingham, the second-largest city. Cities only raise about 5 per cent of the revenue they spend.

Chancellor George Osborne has backed the creation of a "Northern powerhouse" by linking cities together and pooling their workforce, universities and cultural attractions to provide a counterpoint to London. He has promised to use his Autumn Statement in December to fund northern projects.

Bigger metropolitan areas could do for their regions "what London does for the southeast - driving investment, productivity and growth," the report said.

Ministers have been slowly handing over power. They have signed one-off "city deals" allowing cities more control over areas such as transport and training. The government has also promised to hand over £2bn annually in spending. But the commission said it needed to go faster and further, with business rates and council tax receipts retained along with greater borrowing powers.

"The scale of the challenge is huge," the report said, pointing to Greater Manchester's annual fiscal deficit to the Treasury of £4-5bn.

The national approach to training and immigration was failing cities that struggle to find highly skilled talent, it said. Cities should be allowed to recruit beyond the cap on tier 2 skilled immigrants and train workers for specific industries in their area. Employers should also collaborate to pay off the student loans of graduates who stay on in the north after university for at least three years in a "golden handcuffs" scheme.

Mr O'Neill dismissed calls from other areas, such as shire counties and smaller cities, for devolution. The Treasury had to concentrate on a few leaders, he said. "Forget it, it is not realistic," he told an audience at Manchester Business School.

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