Ruth Kelly

Senior Fellow, Economics and Social Policy Read Full Bio

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For the Government to deliver on Levelling Up it must be serious about devolution

Feb 4, 2022

 

Levelling Up may have become one of the Government’s better known political slogans, but for millions of people in disadvantaged parts of the country the slogan captures a harsh economic truth. The UK suffers from chronic inequality, with whole regions and towns feeling that they have been left out of an economic agenda driven by disconnected politicians in Westminster. The recognition of that fact in this week’s White Paper is something for which the Government should be applauded.  It is in fact a serious and robust attempt to think about questions of geographic inequality, the link between deprivation and poor economic outcomes, and how the state can be an effective partner for boosting productivity and growth across the country. Nevertheless, big questions remain about whether the solution proposed in any way matches the scale of the task.

The facts have been well-documented. The UK is one of the most geographically unequal countries in the developed world; compared with 28 other developed countries, it ranks near the top of the league table on most measures. Perhaps the most startling revelation in the Levelling Up White Paper, however, is this: if the measure of performance is the output produced per worker, the UK’s cities outside of London, perform worse than all our closest comparators, except for those in Poland and Mexico.

This matters, not just for the people whose aspirations are capped, but as the White Paper makes clear, the woeful productivity performance outside London and the South East is a major obstacle to the high-growth, high-wage future the people of the United Kingdom deserve. The missions that form the heart of the White Paper’s purpose, aiming to reduce regional inequalities across a whole range of areas from living standards to digital connectivity will, I hope, galvanise the whole of Whitehall. In future, all departments will have to factor in ‘place’ to their analysis of needs, a new Levelling Up Cabinet Committee will coordinate across Government and a Levelling Up Advisory Council will oversee design and delivery.

But to turn around a town or a City, it is clear that more central direction – even of funds and infrastructure – cannot be the whole answer. Alongside physical infrastructure, places need innovation, access to talent, as well as to financial capital and social infrastructure, such as decent houses and green spaces, to succeed. This can’t all be delivered by central government. Arguably, regeneration will need strong local leadership which understands the unique strengths of its area, and can convene and broker agreements across the public, private and voluntary sector. Indeed, more work will be needed to flesh out exactly the role of the private and voluntary sectors in meeting the Government’s vital missions.

Even despite the introduction of Metro Mayors, England, by any measure, is still uniquely centralised when compared with other countries. It is good to see that the White Paper is serious about extending devolution, sitting alongside directly elected mayors to ensure accountability, to more cities – and now counties – across the country. Nevertheless, the White Paper notes that mayors in other countries, like New York and Paris have significantly more powers than any that are planned for the leaders of combined authorities here. It suggests there could be ‘trail-blazing’ deals for Greater Manchester and the West Midlands ahead. That opportunity should be taken with both hands. Deepening devolution was called for by Policy Exchange in the Modernising the UK report, and we are going to do further work to develop those ideas.

This leads inexorably to what is missing in this White Paper. First, it is worth noting that the carrot of further devolved powers has not in the past been sufficient to get many combined authorities to step up to the plate and choose an elected mayor. Local politics has often got in the way. Over time the pressure may increase, but to ensure the highest possible take up for deals, it is likely incentives will have to be greater. There is positive language in the White Paper about ensuring no recalcitrant authority can prevent devolution over a sensible economic area, but the Government will have to stick to this position even in the face of opposition.

Second, as has been famously said in the past, there seems to be no money left. Tackling regional inequality will take time, determination – and funds, beyond the relatively small amounts announced at the White Paper launch. Local government has been denuded of both powers and funds over decades. Even after the money promised for Levelling Up, local authorities will have seen a reduction in central grant funding in real terms from 2009-2010.  Now would have been a good time to open the door again to some form of fiscal devolution. But it seems that door has remained shut.

Growth ultimately will come from private, not public, investment. This will need a supportive tax environment- hard to reconcile with the increase of corporation tax to 25 per cent next year.

Third, while there is a huge, and welcome, emphasis on data in the White Paper, so that the performance of local areas can be compared across multiple facets, there is nothing to fill the space left by the abolition of the Audit Commission. In order to truly evaluate Levelling Up and improve local government, the White Paper is right to set up a body that can hold local government to account.

And fourth, it is worth bearing in mind that ultimately all politics is local. It is about real communities, and the real lives lived within them. The White Paper is light on how local areas should devolve power down even further to levels at which people can begin to feel truly empowered.

The White Paper provides a valuable framework for the future of economic policy in the UK, but without further action it is just a framework. It must be the beginning, rather than the end of this vital conversation.

Ruth Kelly

Senior Fellow, Economics and Social Policy Read Full Bio

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