Frazer-Nash's Ian Durston shares his thoughts on the government's Levelling Up White Paper, and what it could mean for the imbalance of economic growth in the UK.
The government’s recent 'Levelling Up' White Paper has been high on the news agenda, with the Secretary of State for Levelling Up, Housing and Communities, Michael Gove, detailing to the press the activities the government is proposing to take to reduce the economic disparities between the different regions of the UK – in particular between the north and the south-east.
The concept of levelling up is capturing people’s attention, as they perceive the importance of addressing the imbalance between those who enjoy the benefits of economic growth in the UK, and those for whom these advantages are physically, and economically, a great distance away. Indeed, levelling up is so important it has now made its way into the name of a government department, so it’s worth taking a closer look at the background to the desire to level up, and considering whether the proposed steps go far enough to address the inequalities that exist.
Weighing up the scale of the problem
Firstly, the numbers support the fact that across many measures, according to Organisation for Economic Co-operation and Development (OECD) figures, the UK has one of the most regionally unequal economies of any in the advanced world. For example, in 2016 London produced well over £200,000 of gross domestic product (GDP) per capita, whereas County Down in Northern Ireland produced less than £20,000. Compare this with Sweden, where all areas produced between £20,000 and £75,000 per capita, but the average GDP per capita was about the same as the UK at roughly £30,000, and you start to get some idea of the scale of the problem. In pure economic terms, the ability of London to improve people’s standard of living, pay for public services and reduce poverty, far outweighs that of County Down.
So what steps is the government proposing to address the issue? Well, new money is not part of the white paper. The £4.8 billion Levelling Up Fund outlined in last year’s Spending Review will continue to provide the cash behind the aspirations, though the Secretary of State has said the funding will now be ‘tilted’. Regions and local areas can also expect to tap into the £2.6 billion Shared Prosperity Fund that is due to replace European Investment Funds, though this fund is yet to go live.
Measuring successful outcomes
The white paper does, though, set out four requirements that must be fulfilled to achieve successful levelling up. These are:
- boost productivity, pay, jobs and living standards by growing the private sector, especially in those places where they are lagging
- spread opportunities and improve public services, especially in those places where they are weakest
- restore a sense of community, local pride and belonging, especially in those places where they have been lost; and
- empower local leaders.
The last point is where a significant emphasis is placed in the white paper, with a continuation of the process of devolution by creating more metro mayors and mayoral combined authorities, like those already in place in Manchester and Birmingham. The proposal is to move more powers from Westminster to the mayors, through devolution deals that increase local decision making, with the existing mayors in Manchester and the West Midlands being invited to negotiate even more comprehensive devolution deals. In support of this increased devolution, Levelling Up Directors will be established across the country to work across all tiers of government, coordinating central government’s interactions with the mayoral authorities. There is also a plan to move 22,000 Civil Service roles and 50% of UK-based Senior Civil Service roles out of Greater London by 2030.
Learning from the past
So, is this shift of governmental power from Whitehall to the regions going to work? While the term ‘levelling up’ may be relatively new and fashionable, the aspiration and the process isn’t. Over forty years ago, Michael Heseltine, the then Secretary of State for the Environment, also launched a devolution initiative after the Toxteth riots in Liverpool. He tried to enact a similar change to the centre of gravity of economic development from central government to local bodies. Writing in the Guardian newspaper recently, he described how difficult this was, and that he:
“...was able to persuade colleagues to accept only partial and gradual shifts in the status quo.
“The objections came from all directions. The Treasury wants to maintain its tenacious grip on expenditure. The Whitehall barons fight to preserve their functional powers. Local councillors resist the abolition of their jobs, and Members of Parliament are deeply suspicious of change that creates local figures more powerful than them and deprives them of the foot soldiers they need to hold their seats.”[1]
Writing about devolution in a white paper is the easy bit. Getting it to happen in practice is more challenging.
And there is still a lot of work to be done in refining and streamlining the local government landscape. For example, some areas have more than one mayor – Bristol has an overlap between its city mayor and the West of England Combined Authority Metro mayor. The future of Local Enterprise Partnerships (LEPs) is also still waiting for the outcome of a review that has been going since the middle of 2021. Also, mayors and combined authorities focus on urban, city areas – rural areas will argue that they too, are being increasingly disadvantaged. If asked, many local people are likely struggle to accurately describe the bodies that are responsible for developing their local economy, so promoting and increasing this understanding will be key to encouraging engagement. Issues like these will need to be resolved if citizens are going to buy-in to the devolution process.
Focussing on funding and drivers to growth
A more long-term, focussed funding stream would also benefit the levelling up agenda. It’s not the most efficient process to have local bodies constantly bidding for small pots of money from disparate and isolated funding programmes, as has been the case over recent years. This is especially the case when individual-proposed projects are directly competing against projects from other areas, in a process that is susceptible to political interference. The Treasury Green Book was recently up-issued to address some of the disparities between different geographic areas when assessing projects, but many would argue it still has further to go to achieve this.
And levelling up is not just about devolution. It is about the actions that devolved bodies take, and what they choose to focus on. People have tended to associate levelling up with large new infrastructure projects, in particular around transport – but whilst these projects are important, there has to be an attraction to a town/city/area that encourages people to want to be there in the first place. This is particularly important in relation to young people, and therefore the skills, education, place-making and built environment agendas should be just as high up the rankings as the devolution one.
Skills and education are key, because without good local further education colleges and universities, a significant cohort of young people are going to leave an area at 18, and will be unlikely to return. Projects that focus on place-making and the built environment will also drive equality of opportunity. Everybody wants to live and work in a place that is vibrant, safe, aesthetically pleasing and up-and-coming, and if people want to live and work somewhere in the first place, the private sector will follow with housing, small businesses will start and grow, large businesses will invest, and a virtuous circle will be created. Clearly, there is a degree of ‘chicken and egg’ here, but by choosing investment projects wisely, focussed on people’s aspirations, then the process can be kick-started.
However, these are areas that, again, are not necessarily easily captured in a Treasury Green Book compliant business case. Measuring the benefits and value for money of qualifications and aspirations is something that needs to be developed into a more robust science. That’s something we’re increasingly exploring at Frazer-Nash. Our Techno Economic Assessment team have significant experience of developing Green Book compliant business cases. The monetisation of social benefits is something we include more and more in the economic cases that we develop. Quantifying social value (and natural capital), so its importance to funding applications is understood, is an essential part of achieving equality.
Critics argue that levelling up is just a catchphrase with no substance behind it, but I believe that the white paper offers a useful starting point, from which measures that achieve true levelling up of the regions could be developed. There is plenty of detail in the 305-page paper, but for it to be effective, a long-term approach will be necessary that streamlines local government structures, consolidates funding, and ensures that aspiration is given equal billing to infrastructure. That way, one day, County Down will be able to improve people’s standard of living, pay for public services, and reduce poverty in the same way as London.
[1] The Guardian, 3 Feb 2022, ‘’Levelling up’ has been tried before – so where did we go wrong?’ by Michael Heseltine.
