Chris Naylor is former Chief Executive of the London Borough of Barking and Dagenham. He is currently director of public service consultancy Inner Circle.
This interview was conducted on 3 February 2023.
Q: Could you tell us about your role in growth and region policy in the past few decades?
The most relevant is the last 20 years. I’ve either been a director of finance or chief executive in local government in London. I tended to be in growth boroughs. I was finance director in Tower Hamlets for five years when it was getting more New Homes Bonus than any other local authority in the country. At one point it generated £22 million of New Homes Bonus. I observed Canary Wharf growing on our doorstep.
Then for the last 10 years, I was CEO of the London Borough of Barking and Dagenham and most recently, Birmingham City Council, where I saw opportunities and limitations. Barking and Dagenham were 25 minutes away from the most successful city economy on earth, with good transport links, with space for 70,000 homes, but the market and the public sector delivered about 700 a year. I just thought something was not right here. To some extent, it’s the period after 2015 that almost helps you make sense of what was going on before 2015.
So, Barking and Dagenham, I was CEO there from 2014 to 2021. In March 2020 I was seconded in an arrangement brokered with the Local Government Authority (‘LGA’) and the Ministry of Housing, Communities and Local Government (‘MHCLG’). I was seconded to be the CEO of Birmingham Council for a year – they’d failed to appoint through an external recruitment process. So they needed a chief executive. Especially when they were two years away from the Commonwealth Games being hosted.
Since December 2021, I’ve been working for a small consulting practice which, amongst other things, works on place-based growth work. That’s led to two things in East London. One is I’ve been advising something called the Thames Estuary Growth Board, which is a successor to the Thames Gateway. Although it is very different in terms of form and function. Most recently, I’ve been having several conversations with Essex about their Devolution deal, and that takes you into a whole around growth zones governance.
Q: Could you give us your reflections on the success and failure of growth policy over those few decades that you’ve been involved?
This might be a success. Success is not an unintended consequence. But I suppose if I was being generous to the Osborne period, is that I was able to join Barking at a time when we had quite a lot of freedom and flexibility to get stuff done. We were able to borrow money. We were able to set up structures that made sense to kind of risk manage the utilisation of that resource. We were able to create functions. We were given a lot of latitude, essentially to kind of determine what was right for us and we absolutely seized that.
Barking feels very much like a northern plant onto the side of London, which had been essentially a pretty mono-employment place based around Ford. 50,000 blokes worked there up until the mid to late nineties. Today 3,000 people work there, so it’s very post-industrial. A lot of that played into local politics. So if you wanted to be a Labour politician in Barking and Dagenham, you were generally a GMB member who’d come up through the ranks. So very, very similar to South Yorkshire.
I think we kind of came to the view that no one was coming to the rescue in 2014-2015, the GLA felt too remote. They were looking at land assembly in Barking Riverside, but it was all very slow-paced, and no one was really driving it. We sort of set about the task of increasing the pace and scale of growth and doing so in a way that tried to pivot towards the people who needed that growth the most, but also make some commercial and fiscal returns to the council. That was the question.
That took us to the creation of our own growth and regeneration company called Be First, wholly owned, as a substitute for the council. It had a private sector-led board chaired by Bob Kerslake. I suppose the theory behind it in simple terms was to understand the land ownership in the public sector and private sector with the intention of that being for housing and to really understand the pipeline of five to 10-year view of the pipeline of delivery and development in the borough. We then asked the question: “what can we do to make this happen faster?” That was a combination of using our planning powers to assemble land. It was about understanding the financial reason why schemes weren’t getting away and the extent to which we could use our own balance sheet to get stuff going quicker. In some cases, that was us directly delivering development, so we became a developer in our own right. We didn’t sell the land to somebody else. We bought the land, we built on it, we made returns on it.
In other cases, it was working with others to underwrite or in some other way, encourage them to crack on. Four or five years on, housing delivery tripled, the council is making £15 million a year in revenue returns. In 2021, a quarter of all affordable homes being built by councils in London were being built in Barking and Dagenham. It’s a story of using our balance sheet, creating the right structures that enabled the public sector to be a long-term patient capital investor. But doing so in a way that wasn’t reckless. It does seem to me that this notion of the public sector being a long-term patient capital investor is important. It can potentially take a lower rate of return and have a slightly higher appetite for risk because its cost of capital is much lower. In the case of Barking and Dagenham, it was the thing that changed everything and there’s not a dissimilar conversation taking place now.
Thurrock has got a set of problems, but that part of South Essex, the Freeport, it’s a question of its a sweet spot of land values, but you need a very long-term view on that. This was exactly the mindset we took into Birmingham. So you start with who owns the land? What’s the borrowing capability of the council to kind of underwrite that?
Q: How widespread is an institutional framework to act as a strategic long-term partner for investment and regeneration?
It’s not that typical and it’s not that widespread. I definitely recognise that there are certain conditions in Barking and Dagenham which I think exist in Birmingham. There are certain conditions of the place which might not be relevant for parts of South Yorkshire. For example, its the proximity of underdeveloped places which theoretically are punching below their weight and the proximity of those places to sources of high land values effectively. So what we were essentially leveraging here was the fact that those land values were just not high enough for the private sector to step in, but they weren’t so far away.
I think this model wouldn’t work in Blackpool or Grimsby or Rotherham. They definitely have the potential to work in places like East Birmingham, parts of Leeds, Cardiff, definitely London fringes, where essentially what you’re trying to do is get the market to just kickstart and unblock what’s going on. But then you’ve got to have a very comprehensive view of the moving parts. So you’ve got to understand the pipeline, you’ve got to have people who can understand investment decisions. You’ve got to have the kind of governance that goes along that, and then you’ve really got to have the capability if you’re going to spend the money.
If you’re going to build something, that will make a return if it costs 50 million and you can rent the products or sell it for 60. You’ve got to make sure it actually does cost 50. You know, there’s a reason why the big major house builders look for 20 per cent profit on schemes. It’s because not many things need to go wrong and they go bust. You can burn your way through a lot of problems, so there’s a big capability question. It’s a big leadership question. For Barking there’s a big political leap of faith because essentially you’re putting at arm’s length, something that’s quite intimate to you.
Q: How much do you think that generalises beyond property?
There are other parts of the story. So, in Barking it definitely started as a housing proposition. It’s moved into a commercial spaces proposition. Another feature of that local economy was sort of quite old-fashioned use of commercial land. The council essentially has now started to get into doubling the capacity of warehouses. We used to have a Venn diagram in Barking that was an inclusive growth piece, which is what we’re talking about here. It was a public service reform bubble which was about: do we understand the root causes of why people are coming into expensive public services.
Often there’s an economic dimension to that. So we were really desperately trying to make a connection between the growth opportunity and those individuals. This was not the case for everybody, but for a lot of people, that was the case. The third bit of the Venn diagram was a civic engagement proposition. People were so pissed off that in 2005/2006, in Barking’s case, they voted for 12 members of the British National Party. There’s a whole civic engagement trust piece.
If I’m being harsh about it, we could definitely claim in the Barking story was we were building houses that people could afford if you were earning 19 to 20 grand a year, which is sort of like London living wage salaries. We were building homes and making a return on those homes that you could rent, and that was a big deal. We were building them in higher quantities than we were losing them through the Right to Buy, for the first time in 40 years. Whether or not that made a material impact on the well-being of the community as a whole is difficult to say. But you could see over a period of time it was definitely going to help.
What it wasn’t doing, but it could have done with a bit more imagination is the kind of wider supply chain of people coming into those professions but it’s much longer-term stuff. There are loads of film studios being built in Barking. We’re starting now to kind of catalyse apprenticeships. The story I’ve just told you was seven or eight years in the making, over 20 years, you might point to they were the things that started that wider piece.
Q: In that part of the reason for land value rising in Barking and Dagenham was because of the investments 20-30 years earlier in East London? Is it a story of how regional economies spread out?
The key thing for me was the pace and scale and also the extent to which we were able to shape. The Tower Hamlets reflection was we weren’t able to shape any of that – it was just happening around us. We managed to extract sufficiently from developers to build schools and surgeries. I don’t think the politicians got their heads around what was happening to their place. They were still under the impression we want to build council houses, that we want to build family-size council houses – so that families can stay in Tower Hamlets.
It was just strategically all over the place, whereas I think in Barking we could see it coming. There’s a rumble, but it’s not happening fast enough. In the meantime, our indigenous population is getting more and more annoyed. We can leverage that and make it happen quicker. But we can shape it, and I suppose that’s what we did. We shaped it.
Q: Was there something about the wider governance or infrastructure in the relationship with central government or the mayor, which meant that it was possible to do things in Barking and Dagenham?
In terms of the GLA, they’ve got 32 other places to worry about. Barking Riverside was quite important to them, but we just got on with it. We were a straightforward economic geography. It was a defined proposition. We had all the tools at our disposal to get on with it. We could borrow money. We were the planning authority and we didn’t need permission from many other people to do anything. We weren’t asking for TFL to start digging up roads. We didn’t need major railway infrastructure. We basically took an opportunity that was in front of us and seized it.
I get to Birmingham and although it’s a much bigger footprint, the opportunities there were the same. What they had there was a kind of developer-led approach to economic growth. It’s the story of Birmingham where you’ve got the paradise circus stuff all around the council house. But it’s all developer-led, and the role of the Council in that space is as a regulator and an influencer. But what it meant in the Birmingham context, is that there are nine towns that make up the rest of the city which felt very left behind.
Essentially because the council was not taking an interventionist approach, like in Barking. we intervened, we borrowed a billion and we intervened. In Birmingham that’s not what they’ve done, it’s not what they’ve done in Manchester. They’ve created the conditions in Manchester. They may well have used their asset portfolio and disposed of it to achieve certain outcomes. But what they’ve not been is an investor in their place. They’ve not borrowed money themselves to shape and influence what the market does.
Q: Is that a function of different starting points?
I don’t know if it was a misstep or not, but I think it comes down to whether there is a universal truth from a public policy point of view as to the role not only of local government, but regional government. We’ve got very used to a grant-led approach to public investment in places rather than a more entrepreneurial approach that sees the role of the state as a commercial investor.
Q: Do you think that there was anything about the nature of London structures is different to what you see in other parts of the country?
There was something quite odd about the Birmingham context, which is just had Andy Street surrounded by red. There was this weirdness of the size of Birmingham City Council compared to the other local authorities. I suppose in London having TfL, with responsibility for strategic transport, they are a much bigger beast than Transport for Greater Manchester or Transport for West Midlands. They’ve got a lot more cash, and although they used to drive us mad, eventually you get there in a discussion with them.
Q: Does the London mayor have the capacity to do the kind of things which you were able to do in Barking and Dagenham?
No.
Q: And that is true of the West Midlands and the Manchester mayor at the moment?
That is also true.
Q: But the individual local authorities in the West Midlands or in Greater Manchester individually or together could have done it.
Correct.
Q: And you’re saying that they did less of it.
That’s right.
Q: Do you think the market was more inclined to see a Barking opportunity?
When I was in Tower Hamlets, there was a lot of cash flying around for social issues. However which way you looked at it, it was just cash. There wasn’t a burning platform for thinking about how we could leverage our assets to do these things, because, really, we didn’t really have a financial problem. It never really occurred to us.
In Birmingham, I genuinely think they’ve got the asset base, they’ve got the borrowing power. What they don’t have is the organisational capability, and it’s not as simple as saying, they just have not had the right person leading it. This is not for the faint-hearted. If you just look at Thurrock, if you get it wrong, you get it badly wrong. I think that if you’re going to try and create a sort of public policy framework around it, the question is: who does it affect?
It affects the finance profession. It affects the kind of regeneration profession. I think politicians need to get their heads around it. There are a lot of reasons why it doesn’t happen. But I do think quite a lot of it is cultural and a national conversation about the role of the state in being this long-term investor, as opposed to the use of the words like enabler or facilitator. I think that what we were doing was quite entrepreneurial. We were commercial. We were intervening and trying to shape the way the market economy was working in our part of the world. It doesn’t feel like other civic leaders quite see it in those quite stark terms.
Q: How do you get more of that style of leadership?
What we’re talking about here is creating the space for people to have 10 to 20-year view, and I recognise it with Manchester. Whether that was serendipity, you got Howard Bernstein and Richard Leese who just bossed it for 20 years. To some extent, there’s a micro version of that in East London. To some extent, the reason why it’s not happened in Birmingham is you’ve not had that sort of solid leadership. I think anything that creates the conditions for long-termism.
On the wider question, I’d almost approach it in a slightly different way, which is like what makes it easier and what makes it harder? What makes it easier is when the people borrowing the money are the same people that are making decisions about spending it. Who are also in control of as many of the variables that could mess it up along the way and planning is the most obvious one there.
I’ve talked to Andy about this a number of times, and he’s a commercial guy and he understood it entirely. But the problem is he doesn’t own any of the land and he’s not the planning authority. So short of creating an MDC, which I don’t think he can do in the West Midlands because he needs the permission of the authorities to do that, he can’t do it. So therefore, the only people that can do it are the individual boroughs, because they’re the ones that have got the balance sheets. They’ve got the land ownership. They are the planning authority and that’s when it starts to fall apart.
Two things flow from that argument. One is, at the moment, there’s an impasse in West Midlands because Andy needs Birmingham City Council’s agreement to create an MDC. Really, he should be able to at some point veto that. So if you take East Birmingham, they’re not cracking on with it. He should have a step-in ability to kind of get going. If I’m being totally honest with you, part of the reason why we cracked on in Barking and Dagenham was that we were worried that the mayor might step in and just do it. So it’s a bit, let’s crack on before they do. Turns out Sadiq wasn’t that kind of mayor, but anyway.
If someone’s got to do something and if they’re not prepared to do it, then the person with the mandate should be given the power to do that. That should come with full control of all the levers, planning, and everything right. You can see that potentially happening in South Essex. It should definitely happen in East Birmingham. The only question then is does Andy’s combined authority have the financial heft to be able to manage the risk of the borrowing that would be required?
There was a reasonably unique set of circumstances, for the ripple of regeneration coming out of London. Let’s be clear, if you’re going get stuff going potentially in East Birmingham, in parts of South Yorkshire, in the North East, Blackpool, et cetera, you’re still going to require, the very longest patient capital. Which effectively probably is just spend.
Then the question is, who is the gatekeeper of that? I do think that does need to be at the combined authority level. But I suppose if you take that Birmingham example if he’s got a step in the ability to create an MDC, he’s also got as much control over and visibility of government pump prime funding. East Birmingham needs transport networks going in. It needs a whole lot doing, it needs land assembly. There’s the prospect of the state getting that money back in 30 or 40 years’ time, but they’re not going to get it back in five years’ time, right? Making that as a single intellectual owner and political accountable body for all of that has to be right, and at the moment, it’s just too much of a jumble.
I think the principle of subsidiarity is probably the right one here, which is instinctively going as close as you possibly can to the people who are making the political democratic decisions. Canary Wharf went down like an absolute fart at the time if you lived in East London. It was like, what is this thing that’s just been imposed upon us? Whether or not 40 years later, you’re going to get away with that ability to follow the China approach to development, is anybody going to get away with that anywhere?
Who are the best people to engage local residents, businesses in a conversation about the future of their place, or probably the people closest to them? Right. So start there. If there’s a capability gap there, try and resolve that capability gap. And if not, then I think a kind of combined authority step-in process is probably the right one.
Q: Would it be better if it was done by Dudley than done by the mayor of the West Midlands?
Depends on the site in question. Ideally, you want a situation for Dudley Council to be as capable as possible of doing the sorts of things we did in Barking and Dagenham. This comes back to ‘what’s the opportunity’? Take a strategic view of the West Midlands. I don’t know what opportunities exist in Dudley. Maybe Dudley is maxed out. Maybe there’s very little that actually requires much state intervention. I don’t know. I think that’s why you’ve got someone in there who’s got to have the big map and go, where are we underperforming? Like on a kind of balance of probability, why haven’t we got away?
Q: Where should planning be located? At what level?
I think in a particular economic place, there needs to be a deeply strategic view about an answer to the question, what are the opportunities that are currently not being delivered and what is the problem? What is the problem that needs fixing? And in some cases, they will be best fixed by Dudley. I don’t think a 10- to 20-year view exists in these places.
Q: Which is the better way to approach this, unitary or two-tier level?
I think the two-tier is a big problem, because essentially, particularly in Essex, your planning authority is your lower tier. That is the bit that needs to be as strategic as possible, yet it is the most fragmented, between local plans and planning officers. I was talking yesterday to the Freeport people and the Thames Enterprise Park, which is part of the Freeport. It’s frustrating as hell for them to be dealing with Thurrock’s Planning Department because they’re just slow because they’ve only got a handful of people. So that’s problematic.
I think the advantage of Essex of having a directly elected mayor is that it provides a political mandate to have the strategic conversation about where are growth opportunities and what’s stopping that growth opportunity taking place in a way that Essex County Council can’t do. That is because the districts get stressed about what’s their mandate. The districts are too small because they just think: how am I gonna build 200 homes in Rochford. The problem is: does the mayor have the power to intervene and do something? I’d rather give them the chance and opportunity to be in the space, because I still think you’ll get a better result if they do that. I genuinely think had the power been taken away from Barking and Dagenham Council and given to the GLA, because the view was it was so strategically important, you would have got a less optimal result.
Q: In terms of the attitude of Whitehall, was it homogeneous?
Different for different departments. MHCLG didn’t get in the way. We had to humor the commissioners, but that was that. With Treasury, I don’t know. I didn’t really need to engage them that much. Because I had the powers. There were a couple of schemes in both Barking where we needed the Treasury to underwrite something. Let me give you an example from Barking. On the A13, we have this slightly crackers idea of tunnelling it for a kilometre. So it completely cuts the borough in half. But also that would have unlocked land for 16,000 homes. If you speak to the Chinese, they do this all the time. They just bury stuff. They reclaim a load of land, and they stick something on it. You get an economic return. The problem is you need to have sort of bollocks of steel, right? Because you’re basically borrowing a couple of billion quid for years, and then you get your return.
Virtually no private sector person in the world is going to do that. We couldn’t do that as a local authority. The GLA couldn’t do that. The only way that was ever really going to get a way was talking to the Treasury, and they were just like, there was no bit of the Treasury you could even have that conversation with. They just don’t see that as their job. I think if you look at some of those big regional growth opportunities, this is not about the Levelling Up Fund. How do we get physical infrastructure?
Then people would say to me, the UK Infrastructure Bank is meant to be doing this, and they’re not doing it. If you’re interested in that productivity, the average healthy life expectancy of women in Barking and Dagenham in 2014 was 53 years old. In productivity, what was going on in their lives that led to them being so ill by their early fifties that they couldn’t work. We’re not talking like a handful. We’re talking tens of thousands of women. If you get a strategy map, which bits of government need to get together to sort that out. It is DWP and big chunks of primary care and mental health, none of which local government has any influence over, and it’s hard. The whole of acute care adult social care piece, we were quite good at that. It’s not that difficult.
Q: What have we got right and what do we still need to fix?
To some extent it becomes a self-fulfilling prophecy? If you keep eroding something, it will not be capable. I genuinely think that the way forward on this is great things happen when you empower local places to do it. Take it to the combined authority level. But I also think it’ll be both of those things, do both, but make sure you’ve got the power to step in if someone else doesn’t do it
I think that needs to be a national mission, like we’re not prepared to allow you not to do it. So you either do it and we give you the tools to do it, or we’ll step in and do it. If they don’t do it, someone has to keep going. In that context, what’s absolutely critical is that as many of the levers as possible stay in the control of the person who’s been given the responsibility to sort it out. Planning, fiscal, land ownership. If they are spread about in different places, it just makes it harder, right? In the middle of all that strategic transport planning has got to be a big part of that. I don’t know, something inside me dies if the answer is to give more power to combined authorities. I think, giving combined authorities the power to step in is in my head. But you will definitely lose something that is less optimal than a more partnership approach.
ENDS