By Judy Hirst | 1 July 2013
The man who promised to 'intervene before breakfast, lunch and dinner' is back, and demanding a new local growth plan. Lord Heseltine talked to Judy Hirst ahead of the Spending Review
Hang around long enough, and everything comes back into fashion. Maxi skirts, Abba and – now it seems – Big Government are all back on trend. Even quangos are having a moment.
For proof, look no further than the rising stock of Michael (now Lord) Heseltine, the one-time Conservative poster-boy, who famously knew exactly where to locate the party’s erogenous zones.
His 299-page report, No stone unturned, was commissioned by the government to explore new ways of promoting growth. Not only has it not – as predicted by the naysayers – been kicked into the long grass, but 81 of its 89 recommendations were endorsed by Chancellor George Osborne and Business Secretary Vince Cable at the time of the Budget. Even the International Monetary Fund has said it should be implemented post-haste. At the time of writing, the Heseltine Review is about to have some funding (albeit very modest) attached to it in the Spending Review.
How so? How come a government wedded to the idea of a laissez-faire, small state – which enthusiastically abolished the Audit Commission, regional development agencies and much else associated with state interventionism – is bringing on board the man who once pledged to ‘intervene before breakfast, lunch and dinner’ in pursuit of his economic goals?
Sitting in the west London HQ of his Haymarket publishing empire, Lord Heseltine exudes the insouciant air of someone who’s been there and done it all, including of course swinging a parliamentary mace above his head; a piece of political theatre that earned him the permanent sobriquet of ‘Tarzan’.
Now a well-preserved 80-year-old (still with a fine head of that trademark hair), he is deeply unfazed by the turn of events that has seen him hauled in to reverse the fortunes of UK Plc; something of a trend, judging by the number of ex-CEOs being prevailed on to rescue ailing companies.
As a former deputy prime minister, environment secretary, defence secretary, president of the board of trade and first secretary of state, Heseltine is possibly the grandest of all Tory grandees – and, as such, well-qualified to offer an overarching perspective on the predicament the government is in.
‘The free market view has a degree of naïvity about it,’ he says, with that familiar glint in his steely blue eyes. ‘It’s far too simplistic.’ Our competitors do things very differently, he assures me. ‘Most have industrial strategies, and to a significant degree are interventionist. There’s no evidence I know of that they’re wrong and we’re right.’
Under normal circumstances, says Heseltine, his views on these matters would be easily dismissed. But these times are self-evidently not normal. ‘The length and the depth of the recession have made people more open to initiatives that would not have been taken so seriously in other circumstances.’
In other words, they’re desperate. Despite the odd green shoot, George Osborne’s ‘march of the makers’ has yet to materialise and the Treasury’s Plan for growth is quietly gathering dust. Most economic pundits expect a long, hard haul back to prosperity. The Institute for Fiscal Studies and the Institute for Government predict that austerity policies are likely to continue all the way through to 2020, whoever is in office; and the IMF has told the government to go easy on the fiscal tightening, to help kick-start growth.
No wonder ‘Plan H’ – as the chancellor has dubbed the Heseltine Review – is being promoted in Whitehall as a more palatable alternative to a diet of cuts and yet more cuts; a Plan B in all but name. In its official response to No stone unturned, the government approved a host of measures that, if implemented, would create a turbo-charged form of localism in the cities and regions.
The basic idea is that departmental budgets should be top-sliced to create a ‘single local growth fund’ – or ‘single pot’ – that Local Enterprise Partnerships and other bodies would bid for. The pot (£49bn over four years in Heseltine’s hugely ambitious scenario, plus another £9bn from European Union funding) is to be created by ‘brigading’ funding streams from across Whitehall, including skills, local infrastructure, housing, innovation, and business and employment support. All this largesse would be used to leverage in a much bigger total spend from the private sector; via ‘gearing’, says Heseltine.
The principle behind it is that growth funding should be wrenched away from ‘functional monopolies’ (aka departmental silos) in Whitehall, and directed to the local communities and leaders best able to put it to work; in modern parlance, the politics of ‘place’.
Heseltine would like the whole edifice to be overseen by (whisper it) a new quango, the National Growth Council, chaired by the prime minister; plus a panoply of mini quangos, tasked with implementing a far-reaching National Growth Strategy.
If this all sounds as retro as shoulder-pads and avocado suites, it is. Many of the concepts reprised in Heseltine’s growth review were shaped in the crucible of the early 1980s inner-city disturbances; in particular through Heseltine’s experiences as ‘Minister for Merseyside’ at the time of the 1981 Toxteth riots.
His views on the need for an activist state – and his refusal, unlike most of his Cabinet colleagues, to endorse the ‘managed decline’ of deprived areas – became hugely influential in regeneration policy for decades after. Urban Development Corporations, City Challenge, the Single Regeneration Budget, New Deal for Communities, the Regional Growth Fund and numerous other pump-priming projects owe their origins to these turbulent years.
Heseltine, who is the headline speaker at this year’s CIPFA conference, harks back to this era when he expounds upon the philosophy behind his report. ‘Wherever I went, in Liverpool and elsewhere, I always asked one question: who is in charge? If you’ve got a sink estate with appalling problems, and all these disparate agencies, each with individual funding streams and different people running things, it means you’ve got no one in charge, and nothing’s going to change.’
Pooling the funding, putting someone dynamic and locally based in charge and, crucially, fostering public-private partnerships; this in its essentials is the Heseltinian formula. And it really works, he stresses: ‘In complex, sophisticated economies, there are many things the public and private sectors can work together on much more effectively than when they stand apart. It’s sterile to think otherwise,’ he says, adding, ‘I am a one-nation Tory, after all.’
Vestiges of the approach can still be found in the coalition’s LEPs, City Deals, Enterprise Zones and Community Budgets. But these efforts are just ‘piecemeal’, he argues, and the sums involved paltry in comparison with his grand designs. What’s required is a much more interventionist push from the centre to drive the major reconfigurations Heseltine has in mind; sort of command-and-control meets localism.
This, remember, is the politician who created the Audit Commission, and deeply regrets its abolition. ‘I would have been perfectly happy to examine it to see if it was guilty of mission creep,’ he tells me. ‘But I would not have got rid of it. In fact, I would have extended its powers to examine central as well as local government.’ It was also, he says, a mistake to scrap the RDAs. Such talk is anathema to those in his party who want more not less deregulation, and see supply-side reforms as the answer to stalled growth. But it’s a message, however counter-intuitive, that is increasingly getting a hearing.
‘Necessity is the mother of invention,’ says Andrew Carter, deputy chief executive at the Centre for Cities. ‘There’s now a grudging recognition that the economy won’t just recover of its own accord, and that a more interventionist approach is needed. It’s Big Government in all but name.’
And it’s not just Heseltine plugging the dirigiste line. Industrial policy (little heard of since the Bennite 1970s) is making a comeback, with work under way by an all-party group on rebalancing the economy, and industrial strategies pouring out of think-tanks and party offices. The London Finance Commission’s proposals, backed by mayor Boris Johnson, also reflect the new mood music, says Carter. ‘They’re about money, of course. But they’re as much about wresting local control. There’s an obvious synergy with Heseltine’s world view.’
Boris, Hezza – everyone wants a piece of the state-sponsored devolutionary action. But will any of it even happen – or work? The jury is out on just how transformative Heseltine’s urban policy ever really was. ‘There were some clear successes, in Docklands, Liverpool and elsewhere,’ says Jonathan Portes, director of the National Institute of Economic and Social Research. ‘But there was also plenty of window-dressing. Successive governments have talked about devolving economic power, but departments are very unwilling to let that happen.’ Long-term funding streams connected with, for example, the Work Programme (a functional monopoly if ever there was one) can’t just be dismantled, he says.
The hand-to-hand combat between ministers, permanent secretaries and the ‘quad’ in the run-up to the Spending Review indicates the problem with persuading Whitehall fiefdoms to relinquish more than a token amount to the regions. Heseltine, of course, concurs. ‘There’s a deep suspicion behind closed doors in Whitehall. They don’t say it in public, but there’s a real lack of confidence in local ability.’ He puts a lot of the continuing problems in Liverpool and other cities down to the fact that he was never allowed to go far enough. ‘I always wanted to get City Challenge built into something much bigger, into the single pot. I just couldn’t get the support.’
But if that was the case then, how much harder will it be to firm up support for Plan H now? And how willing is the private sector to step up with the finance needed to boost the country’s most depressed regions? Not very, judging from the lack of interest in even the attractive terms offered by PF2, the rebranded Private Finance Initiative, and (outside of London) the generally sluggish state of investment. Doug McWilliams, chief executive of the Centre for Economics and Business Research, tells PF: ‘Plan H all feels a bit remote from the problems we face right now, like how to generate effective spending on infrastructure. It will be surprisingly difficult to do in a time of austerity, with the underlying economic outlook much worse than the Office for Budget Responsibility predicts.’
But Heseltine is having none of that. ‘The recovery is on its way, and the recession was in any case never as deep as the official statistics stated,’ he says emphatically. As a firm supporter of Osborne’s fiscal consolidation strategy (that’s one stone he’s not about to upturn), and a self-made multimillionaire, he is upbeat about harnessing the private sector’s vast resources. ‘But I want us to speed it up. That’s why I want gearing, and place-based economics.’
He is dismissive of the jeremiads about how we’ve never had it so bad. ‘The 1980s were far, far worse. Companies were falling like flies. Remember in 1981 we had three million people out of work, and riots on the streets. That was a very rough time to be in politics, very dangerous. There’s no comparison today.’ The rise of the UK Independence Party, whose local election success has so seriously rattled many Conservatives, is also nothing to get excited about, he says. ‘It’s just people looking for a vehicle of protest, and being offered all sorts of delusionary alternatives. We’ve seen it all before.’
Keep your nerve and carry on, would appear to be his advice to David Cameron, as growing numbers in his party – including in the Cabinet – stampede for the EU exit door. But then as a lifelong Europhile and party moderniser, he would say that; especially about the Right-wingers who still blame him for walking out of the Cabinet over Westland, and the late Margaret Thatcher’s eventual downfall.
He’s certainly not in favour of Cameron’s European Union referendum, or indeed any kind of referendum: for example, on mayors. ‘I’m a big fan of mayors. But I also believe in parliamentary democracy. I would have imposed them on local authorities, not put them to a referendum,’ he tells me, with a faint air of hauteur.
This is standard Heseltine fare. The kind of iconoclastic, challenging stuff that made him such a darling of Tory conferences. Significantly, one of his proudest political moments was addressing the party faithful, in 1981, on the issue of race. It would have been easy, he says, to give a speech on council house sales, or something else that had massive party support. ‘But this was confronting a hugely sensitive and controversial area. The reception was quite extraordinary, tear-jerking. I’m very proud of that.’
So has he been missing it all? The cut and thrust, the standing ovations? Or has tending the arboretum at his Oxfordshire country pile (he’s always been a ‘mad keen’ gardener), plus a few sinecures, been enough to satisfy him?
‘Well,’ he says musingly, ‘I’ve been rather reabsorbed by all this. Rather drawn back in.’ It was ‘dear old Liverpool’ that did it, he says. ‘David Cameron was up there on a tour, as leader of the Opposition. Someone must have said, you should ask that funny old fellow who was there in the 1980s to come.’ He did, of course, and subsequently got involved again in drafting urban policy. Then, at the suggestion of Steve Hilton, Cameron’s former policy guru, he went on, with the help of a team at the Department for Business, Innovation & Skills, to write No stone unturned.
The six-month project was ‘the culmination of all those 30 years and, on the assumption that they do it, it’s where I’ve been trying to get to all this time.’ Yes, but not quite. He never did make it to prime minister, the pinnacle of the career plan that he allegedly plotted on the back of an envelope when he was at Oxford.
That, at the end of the day, is his biggest regret. And as he admits, it might have been down in no small part to, for a politician, a fatal weakness. ‘The networking aspect, the small talk, working the tea rooms, I’m not good at it. That was a failure.’
And it meant he never did get the chance to push through ‘all those things I’ve been talking about ever since.’ Because, as Heseltine – one of the last of the big beasts – is the first to acknowledge, it really always is a question of asking: who’s in charge?
Lord Heseltine is speaking at the CIPFA conference being held in London on July 9–11. This feature was first published in the July/August edition of Public Finance magazine
