Levelling-up: The mountain to climb

19 Mar 20

No self-respecting minister in the Boris Johnson’s new administration would dare deliver a speech without referring to ‘levelling-up’. But what does the buzz-phrase actually mean and what financial choices does it imply for policymakers? Professor Colin Talbot and Dr. Carole Talbot investigate.

George Osborne has been warned that making elected mayors a precondition for city devolution presents an ‘impossibly high hurdle’ in some areas and could even derail his Northern Powerhouse plans.

End goal: Liverpool mayor Joe Anderson wants the city to grab the opportunity offered by George Osborne to have more autonomy. Photo: Shutterstock

It appears that ‘levelling-up’ is supposed to be the antidote to being ‘left behind’ – but with both these terms it’s not always clear exactly what the government, and others, are talking about.

One problem lies in confusing people and places. In one version of being left behind and in need of levelling up, it is places – regions, cities, city-regions, towns or rural areas – that are the focus.

In another it is people, and the focus is on inequality, life-chances, education, employment, poverty, etc.

Two decades ago the new New Labour government got into some hot water when it published a paper, Sharing the Nation’s Prosperity – Variation in Economic & Social Conditions across the UK, in which it pointed out that some of the worst individual cases of poverty existed alongside some of the richest people in areas of London, for example.

A recent paper titled The North is Everywhere from the Social Market Foundation think tank makes the same point.

But the new Johnson government seems, for the moment, to be focusing on place rather people.

So what challenges does that pose?

One immediate problem is which places, or rather spaces, are to be considered when trying to level up?

Since devolution, the Westminster government only has partial responsibility for Scotland, Wales and Northern Ireland.

So, are they in or out of any levelling-up policy?

Much of the current debate tends to focus on England and ignores the other three polities.

Within England, again, the focus is unclear. Is it regions, cities, city-regions, mega-regions like 'the North' (as in the 'Northern Powerhouse'), towns or rural areas?

For the purposes of this article, we’ll focus on English regions – but all the others matter too.

A simple framework for assessing what tools are available to government for “levelling-up” is to look at money, authority, organisation and information.

Money

Let’s take money first, as it’s usually the main focus of debate.

About 85% of all public spending can be analysed at regional level.

Within that spending there are some quite big divergences by region.

London is top, on £10,378 per person per year, while the South East has the lowest spend, at only £8,299, or 20% less than London (2017-18).

If all the English regions were levelled up to London it would cost the Treasury about £72bn extra a year – roughly the size of the education budget for England.

By contrast, let’s take a much smaller area of spending, but one which could be vital for local economies – investment in science and technology.

In per capita terms, the East of England does best, with £65 per head of population – which is probably mainly because of Cambridge.

London again does well with £60 per head, but Yorkshire and the Humber and the North West only manage £44 per capita each, despite all the recent investment into Manchester.

To level up to the East of England would cost £56m, or just under a 20% increase in spending.

If the simplistic rhetoric of levelling up was taken seriously, these two measures of public spending show just how hard that would be to do.

And we have not even touched on the effects of taxation.

Authority

To really shift authority away from the capital would involve devolving real power.

That would mean giving much greater autonomy to devolved administrations, and especially English local government, to set their own rules of the game – regulations – locally.

The advent of elected executive mayors for urban areas has been heralded by some as such a move, but in reality this has mostly been about shifting power upwards, from town halls and other local services, to the new mayors – rather than devolving power from Westminster and Whitehall.

Central government could use regulation to tilt the balance towards left-behind regions.

So, for example, proposals to change the tax regime for inheritance or housing ownership could act as a redistributive mechanism from wealthier regions to poorer ones – but it would probably be met with fierce resistance.

Similarly, changes to the Treasury rules governing public investments – the so-called Green Book – have been proposed to rebalance assessments.

Existing rules favour regions that already perform well because they are likely to provide a higher return on investment than poorer regions.

So Crossrail trumps Cross Pennine every time.

Information

In an important piece, Philip Aldrick, economics editor for The Times, points out that “numbers won’t tell us the full story on regions until we start counting correctly.”

He points out that although London’s GDP growth is higher than other regions, levels of happiness are lower.

The position in Northern Ireland is almost the reverse.

The Treasury has already given the Office for National Statistics £23m extra in 2015, and is about to give it more, to improve regional and local data.

Such data is already producing some surprising results about links between GDP, jobs, productivity, and household income which would otherwise be invisible.

Aldrick points out that good local data combined with real devolution could make policy properly responsive to local needs.

Levelling up is not likely to happen without both.

Of course, any serious levelling-up policy needs to consider all of the above, and much more. One thing can be said with certainty – if it can be done, it will not be easy, or fast.

 

Colin Talbot is Professor Emeritus of Government at the University of Manchester, and a Research Associate at the University of Cambridge.

Dr Carole Talbot is a board member of the Radix think tank, former Lecturer in Public Policy at the University of Manchester, and also a Research Associate at Cambridge.

A version of this article previously appeared on the website for King’s College London.

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