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Levelling Up: will it work?

Author: ICAEW Insights

Published: 05 Apr 2022

The phrase ‘levelling up’ has been used since the 19th century. But can this government succeed in resolving regional inequalities where other programmes have failed?

The irony that the Department for Levelling Up, Housing and Communities (DLUHC), established in 2021, is centrally controlled and based in London is hopefully not lost on a government that has pledged to make devolution of funds and decision-making a central plank in its levelling up plans. 

In February Boris Johnson’s government finally published the long-awaited Levelling Up White Paper with a list of ‘12 missions’ outlining how it proposes to fix the disparities across the UK. Broadly, the plans are welcomed. The White Paper is big on vision, ambition and practical first steps, but critics say it is thin on tangible implementation plans, so far. And many question the ability of the government to achieve those goals with little new public money to invest, and a heavy reliance on private company investment.

The UK has a chequered history of geographical inequality with London and the south-east of England long associated with high levels of wealth and well-being, while much of the north and south-west of England has languished in regard to key indicators such as life expectancy, educational attainment, well-being and wages.

Regional equality across the UK compares unfavourably with most of its G7 peers, too. Even though the former East Germany has still not fully bridged the gap between itself and the more affluent former West Germany, it now has a GDP per capita higher than many parts of northern England and Wales, according to the Centre for Cities.

The consensus is that undoing 50-plus years of development and investment focused on England’s capital is unlikely to be achieved in eight years – especially where previous governments have attempted to eradicate regional inequality with only limited success. 

New Labour governments focused on social and educational policy successfully raising standards in education for the poorest children, but they were less successful in reducing inequality of educational opportunity.

The provision of Sure Start children’s centres was another flagship Labour social policy. The programme’s success can be partly attributed to the fact that Labour delegated responsibility to local authorities for planning and managing of the children’s centres.

The success of Sure Start centres was underlined by the widespread public outcry when successive Conservative governments since 2010 closed thousands of the centres due to sweeping cuts in the provision of children’s services.

One point in favour of the current government’s approach is that it cuts across seven different government departments, while New Labour tended to focus attention on individual departments.

However, after more than 10 years of austerity, a global pandemic and a cost-of-living crisis, realising the ambition to eliminate regional disparities will be no easy feat. In fact, some say the policy plan as it stands will not achieve its goals by 2030.

“The key question is what the objective is, because if the objective is really to achieve similar levels of development across the whole of the UK; to make sure that communities have a lower level of discrepancy in income or wealth, then that’s a huge agenda. Any plan can only go part of the way towards it,” says Nigel Wilcock, Executive Director of the Institute of Economic Development (IED), which represents the interests of local authority economic development and regeneration officers.

For context, it is estimated that up to €2trn was spent on the German East-West reunification project between 1990 and 2014, equivalent to around £71bn every year, according to the Centre for Cities. For comparison, the UK’s levelling up fund is £4.8bn in total.

“Maybe it’s the moment where we set a new direction of travel and people start to think about every government policy in line with UK regions, but certainly the plan itself is not going to level up the UK,” IED’s Wilcock says.

The government has already begun to move some civil service roles to locations outside London, including Glasgow, Edinburgh, Cardiff, Manchester, Birmingham and Leeds, and more plans are afoot.

The government’s White Paper also lays out plans for further devolution. “We will extend, deepen and simplify devolution across England so that by 2030, every part of England that wants one will have a devolution deal with powers at or approaching the highest level of devolution with a simplified, long-term funding settlement,” it says.

With such ambitious plans, the government is also counting on private business investment to achieve its goals, which business welcomes.

“As an innovation business and a business that has a presence in Manchester and London, we appreciate the fact that innovation has been put front and centre in terms of R&D spend, and how that’s utilised,” says Lou Cordwell, Chief Creative Officer at innovation consultancy Fluxx.

Cordwell, also the Chair of the Local Enterprise Partnership, and lead for Communications, Digital Broadcasting and Skills Fund, says that the pandemic has “triggered a different sense of consciousness and purpose of business where it wants to play a more active part”.

Without private investment it’s unlikely the government will achieve the lofty goals for levelling up. She says: “Even when government is dialling up its spend and redistributing it in a more democratic way across the country, public sector spending is dwarfed by the large innovation players and what they can bring.”

Apart from the lack of new public money to be invested, another concern is the approach. Emmet Kiberd, a consultant with New Economic Foundation Consulting, says that a high proportion of jobs in any economy occur in the more everyday sectors such as health, education and social care where wages and job quality have been eroded by underfunding, and that levelling up should seek to rectify this.

“There’s still a reliance on a model of inward investment leading to productivity rises, or gross value added. And this is expected to trickle down in terms of local wages and living standards. From our research, we don’t think that the connection is very strong,” Kiberd says.

He also questions the competitive funding process that local authorities must submit to to access levelling up funds. Preparing bids is resource-intensive and cash-strapped councils are already low on resources after a decade of austerity.

Furthermore, Kiberd says that even when they win funds, central government dictates what councils can spend the money on. “It’s not really a devolution of decision-making to local areas if they have to bid only for the things that central government says they should build or should invest in.”

Although hopeful about the policy paper, business needs clarity and certainty on the implementation and approach to invest confidently. Government policy on things like nuclear power has flipflopped, and it has yet to set a framework for carbon capture and storage. 

Cordwell says: “For business to have some confidence we’re going to need to see that granularity. We’ll need to understand the frameworks and how government is going to be joined up to work across many departments. We’re supportive of the principles but all of this now rests on the execution.”

No one disputes the need for a more regionally-equal Britain, but suggesting the goal can be achieved in eight short years is disingenuous. If the government wants to close the UK's regional productivity gap and boost living standards, it needs to promote cross-party support and develop a long-term strategy and commitment that lasts longer than a single parliamentary term, or a single party’s political agenda.

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