Britain’s inequalities are growing and levelling up is difficult – here’s why | Larry Elliott

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The idea that governments should act to level up Britain is nothing new. For at least a century there has been an acceptance that something needs to be done for those parts of the country initially hit by the long-term decline of cotton, coal and shipbuilding, and subsequently at the sharp end of the de-industrialisation of the 1980s.

But only in recent years has regional policy become sexy and for that we have Brexit to thank. The EU referendum was a wake-up call to Britain’s political class.

Brexit highlighted how starkly divided Britain was between the haves of London and the south-east and the have nots in other parts of the country. That split had been widening for decades but Brexit provided an opportunity for people in hollowed-out towns and cities to express their discontent.

More crucially, the Brexit-voting communities of the north and Midlands discovered they had political clout. Seats that had been considered Labour fiefdoms were in play. Both main parties needed to make a pitch for voters both had previously assumed were fixed in their political allegiance.

That explains why levelling up was such a big thing for Boris Johnson. Voters in the North and Midlands were to be rewarded for voting Conservative in the 2019 election with measures to narrow the regional economic gap.

It also explains why Labour is paying more attention to voters in what used to be considered its heartlands than it has done for a long time. As things stand, Labour will recapture the “red wall” seats lost in 2019, but the party knows that voters there cannot be taken for granted. These are seats that will remain in play whatever the result of the forthcoming election.

The message seems to have sunk in. Levelling up has entered the political consciousness and there is agreement that something has to be done. Nobody any longer seriously believes – as the Conservatives did in the heyday of laissez-faire in the 1980s – that trickle-down economics will be enough to lift all boats. The idea that all governments need to do is look after the national economy and the north-south divide will look after itself is no longer fashionable, even among Conservatives. That approach has been tried and failed.

But as a newly published paper, co-authored by the former Labour cabinet minister Ed Balls, notes, awareness that there is a problem is one thing; tackling it is another thing altogether. “Widening regional divisions are not inevitable but correcting them is hard,” the report for the Mossavar–Rahmani Centre for Business and Government at the Harvard Kennedy School says.

It is hard to argue with that conclusion. Germany has spent almost two trillion euros over three decades in its attempt to level up the old East German Länder, and the job is not done. Here in the UK, Johnson gave the voters of “red wall” seats the impression that he could turn things round quickly. Only in Britain would it be imagined that deep structural schisms that have been widening for more than a century could be significantly closed in a single parliament. Such has been the growth divide between London and the rest of the country that the UK has some of the highest regional inequalities of any advanced country, bigger even than between east and west Germany or between the north and south of Italy.

There are reasons for that. The north and the Midlands bore the brunt of the shakeout of manufacturing and the closure of the pits in the 1980s and 1990s, while the south-east has been the main beneficiary of the economy’s switch into knowledge-intensive services.

The Harvard Kennedy School paper is fascinating because it contains lengthy and insightful interviews with more than 90 of those involved in regional policy – minsters, officials, academics, local government leaders – asking what went well with regional policy initiatives, what went wrong, and what lessons need to be learned. George Osborne, Andy Burnham, Gordon Brown and Michael Gove all have their say. The overriding sense among politicians who have left office is that they wish they had done more when they had the chance.

Some of the conclusions of the report fall into the category of the blindingly obvious: past policies have not been ambitious enough; there has been too much emphasis on a centralised approach; chopping and changing has resulted in chronic short-termism; and success will continue to be elusive unless there is sustained commitment by the prime minister and the chancellor to empower local government.

The good news is that there appears to be a degree of cross-party support for the idea that lessons can be learned from Manchester, with levelling up conducted through combined authorities, headed by an elected mayor.

The bad news is that this won’t be nearly enough unless the main parties can agree to a joint, long-term strategy, back it with sufficient money, and stick to it. “Scale, longevity, interdependence of policy appear to be core ingredients of both success and failure,” says Andy Haldane, the managing director of the Royal Society of Arts, in his interview for the paper. “UK plc’s done, in relative terms, a poor job of all three.”

Labour and the Conservatives can’t even agree on a united position on achieving net zero so it is hard to envisage a truly collaborative approach to regional policy. Money is tight, and will remain tight for some time to come. Under Rishi Sunak, the emphasis has been on the national – reducing inflation and ensuring the economy is growing – rather than the local.

Like the net zero commitment, levelling up is an issue that most Cabinet ministers think they can put off until another day. That’s a mistake they may live to regret.

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