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Cities Unlimited, the latest report from Policy Exchange, puts forward some bold proposals for urban Britain 鈥� arguing that policy-makers should focus on housing in the South rather than regeneration in the North.

While some of the report鈥檚 policy recommendations fall outside the political and economic mainstream, the fundamental observations that underpin them are correct. Geography and history do constrain the economic potential of some British cities and towns 鈥� places like Sunderland and Hull.

It鈥檚 also true that the Government鈥檚 regional economic policy, which seeks to promote convergence between the greater South East and the English regions, has not eliminated the gaps which remain between Britain鈥檚 cities.

However, it鈥檚 not time to write off the cities of the North just yet. And we鈥檙e not sure that a mass migration from the North to millions of new homes in the greater South East will fix things either.

A more nuanced approach is needed, focused on improving the economic performance of Northern cities along with measures to sustain the success of the greater South East.

In the North, steps should be taken to build up the regional economic hubs 鈥� Leeds and Manchester 鈥� and to 鈥榥etwork the North鈥�. With additional investment in infrastructure, such as a wider range of housing which will attract high-skilled workers, these two successful cities could attract additional businesses. Follow-on investment in local transport links would help neighbouring towns and cities, such as Blackburn and Wakefield, to benefit from core city growth 鈥� and develop a new economic role linked to Greater Manchester or the Leeds City Region.

A massive expansion of Cambridge or Oxford 鈥� as proposed in the Policy Exchange report 鈥� is both politically and economically unlikely.

In the greater South East, more houses are needed 鈥� but growth must be carefully linked up to transport to ensure that the whole region is both denser and better-linked. There is a strong case for careful expansion in Cambridge, Oxford, and London, using some green-belt land, to ensure that these cities have the houses they need to support their local workforce.

But a massive expansion of Cambridge or Oxford 鈥� as proposed in the Policy Exchange report 鈥� is both politically and economically unlikely. Local councils in both areas have mounted fierce opposition to large-scale new developments in recent years. At the same time, the perilous performance of the house-building industry makes the delivery of huge quantities of new housing unlikely over the next decade. So rather than tear up the planning rule-book and focus on wholesale urban expansion, policy attention should focus on adding denser, high-quality development in these cities 鈥� together with the transport links that enable residents to access jobs.

Finally, devolution. The Policy Exchange report makes a good case for giving councils the power to experiment 鈥� and to use regeneration funding in innovative ways. We agree that greater local control over resources would help to grow local economies, especially through investment in infrastructure. However, rather than give every district council in England its own budget, economic development funding should be allocated at the level of 鈥榬eal economies鈥� 鈥� that is, the sub-regional or city-regional level. Housing and labour markets function at this level, and it鈥檚 important to match regeneration and transport spending with the right geographical scale.

Policy Exchange鈥檚 urban vision presents challenges to politicians on both sides of the Commons, and rightly so. Both parties should be focusing on policy ideas that help to build up the North鈥檚 biggest economic hubs 鈥� with complementary policies that help smaller cities and towns to benefit from their growth. That鈥檚 the best way to keep the North open for business 鈥� and to underpin regeneration in the decades to come.