Levelling Up: Expectations Meet Reality

For decades, British regional economic policy has been dogged by stop-start funding, chop-change decisions, and shifting ideology.

But after two years of Brexit and Covid, a government led by a Prime Minister who has faced criticism for his perceived lack of willing to engage seriously with policy has finally published a regional strategy that aims to be more than a quick electoral bribe.

The recent history of Britain’s regional economic policy is a history of economic ideology: the approach of successive governments to regional divides has reflected their ideological approach to distribution across society.

The launch of the ‘northern powerhouse’ in 2014 caught Labour nationally by surprise. It marked a major shift in the government’s approach: an actual regional economic policy beyond cuts and vague talk of ‘localism’; a major shift towards devolution; the explicit endorsement of local leadership.

“The argument I think was persuasive was that sense we’ve got a number of middle-sized northern cities, places like Manchester and Leeds, that have in fact been doing well for some time, but if you could bring those together then you have the potential of reaching a size that you get real agglomeration benefits,” says David Gauke, financial secretary to the Treasury at the time.

However, the project was very much driven at national level by then-chancellor George Osborne – and his departure in 2016 took the wind out of its sails. The Brexit vote elevated ’left behind’ English towns to the forefront of a panic-stricken national conversation – and on to the radar of political strategists. They also chimed with new Prime Minister Theresa May’s idea of ordinary Brits forgotten by the Westminster elite.

May had spoken publicly about the need for an industrial strategy as far back as 2013, and she favoured a more proactive approach to the economy. While her government was soon engulfed by the Brexit wars, initiatives that began on her watch came to fruition later.

“Some of the things Johnson’s doing are actually culminations of things we started,” says Giles Wilkes, senior fellow at the Institute for Government who spent two and half years as special adviser to Theresa May on industrial and economic policy. “We started the work looking for a gigafactory, for example. But (a) it always takes several years to do these things and (b) people weren’t paying attention when Brexit was threatening the stability of the government.”

The Stronger Towns Fund was also launched on her watch. New Labour had run similar schemes, but the fund reflected the newfound prominence of towns among Conservatives. “People were concerned about towns. I wasn’t sure there was an intellectual basis, because a lot of the good economic geographers say, ‘Start with making sure your cities work’,” says Wilkes. “And I was worried we were just dissipating attention. But certainly the interest in towns started up around then.”

That sense things can’t just be left to market forces has persisted. Michael Gove, the white paper’s intellectual cardinal, recently gave a stark speech in which he admitted Thatcherite trickle-down economics had failed to deliver for large parts of the country.

“What government needs to do is make sure the economic soil is irrigated, it needs to make sure that the climate as far as possible is conditioned for growth,” he said in a public rebuke to laissez-faire ideology. But few believe he has secured enough money to do more than sprinkle the surface, and there is little mention of how to ensure the gains from regional growth are distributed equitably.

There has also been a decoupling of government attitudes to regional and individual inequality – Gove is responsible for the former while the latter remains in the punitive purview of the Department for Work and Pensions, with a frugal Treasury applying its deadening hand to both.

Towns versus cities?

Devolution in Scotland, Wales and Northern Ireland means Westminster’s regional policies have most influence in England. And England’s new, town-oriented electoral map has focused debate on whether economic policy should focus on agglomeration-led growth in cities which then ‘trickles out’ and raises up nearby towns – as favoured by many economic geographers – or alternatively try to develop those towns as economic growth centres in their own right.

“A lot of the way towns are spoken about is totally economically illiterate. The idea that towns have got a separate economic destiny to the cities they sit in makes me feel violent, frankly,” says Nicola Headlam, an economist who was head of northern powerhouse at the government’s Cities and Local Growth Unit. “It’s not towns or cities, ever – it’s all part of a functioning geography under which mechanisms can be deployed strategically within city regions.”

“Do I think Oldham’s best future is as part of Greater Manchester? Absolutely I do,” adds economic commentator Tom Forth. “Oldham could easily have its own specialisms and its own strengths within Greater Manchester, but I don’t see any way in which it thrives separately and as its own thing.”

The fears are that satellite status will reduce towns to commuter hubs, and city growth won’t be enough to raise the economies of towns outside metropolitan regions, in any case. For all Manchester’s much-hyped economic development, eight of Greater Manchester’s 10 boroughs became relatively more deprived between 2010 and 2019 according to the Index of Multiple Deprivation (IMD). Manchester itself was England’s second-most deprived local authority area in the 2019 IMD, after Blackpool.

It’s not towns or cities, ever – it’s all part of a functioning geography under which mechanisms can be deployed strategically

The white paper talks boldly of “every place in the UK” having a “rich endowment” of every form of economic capital, “giving more people the opportunity to find a career or vocation in the place they grew up”. The rather cacophonous mood music is of ‘agglomeration everywhere’ – that all places, be they city or town, will enjoy the much-vaunted ‘Medici Effect’, in defiance of economic theory, the meaning of agglomeration, and quite possibly the history of the Medicis themselves.

“The thing that worries me about some of the government’s rhetoric, at least on this, is the idea there will be great jobs everywhere, and you’ll never have to move. And that just isn’t realistic I’m afraid,” says Gauke. “It’s easy to win applause by making great promises, but you won’t meet those expectations.”

But looking through the maps at the back of the white paper, showing what initiatives are being funded where, it seems city regions are the main focus – the Tees Valley rather than Northumberland; Greater Manchester and Merseyside over Cumbria; 27 different initiatives in the metropolitan West Midlands compared to three in Herefordshire. Many left behind towns – and their corresponding ‘red wall’ seats – are within these city regions, but those outside are mostly allocated funding pots such as the Towns Fund and Levelling Up fund, which aim to improve community assets rather than economic productivity.

“There’s this kind of ‘hanging baskets’ levelling up, I think I heard someone call it – ‘We’re going to put a little bit of money into these key red wall seats and make the high street look a bit nicer’. It’s not really about raising living standards for the majority of people who live there,” says Manchester-based writer and researcher Christine Berry.

English devolution

If the government has decided to focus its strategy and spending on city regions, it has done so via subtext rather than statement – thus avoiding ugly headlines about leaving red wall towns to wither on the vine. But advocates of city-led growth don’t see it as abandonment.

“I think of it more as making sure everywhere has an adequate baseline,” says economist and former Treasury adviser Diane Coyle. “What assets do places have so people can lead the kind of lives they want to lead? What powers do their local authorities have to enable them to bring that about, and [ensure] that’s a minimum standard of all of these capitals, including social infrastructure like education and health?”

Forth argues that building prosperity everywhere means enabling people to live in their hometown and build a successful career in a nearby city – or perhaps moving to that city but returning to visit family – while providing good public services.

“I don’t think we have an answer to Blackpool. I think the answer to Blackpool is New Labour,” he says. “You just have to say we don’t actually know right now how to make Blackpool a fantastically thriving economy, but you will have a fantastic school for your kid, you will have a leisure centre that is clean, open and affordable, you will have housing that’s sorted.

“I don’t think it’s realistic to say, ‘We will create a nanotechnology smart specialisation hub in Blackpool; we will create the next Silicon Valley in North Wales’. I understand why people want them to be true, I get that, but where is the evidence they can be true?”

Andrés Rodriguez-Pose of the London School of Economics, whose research on economic geography is cited in the white paper, says Britain’s entire approach to city growth is wrong.

“The idea is you have to be big and you have to be dense. And I always say it’s not a question of size or even density. It’s a question of what you put in your city.” In other words: infrastructure, skills, generating and absorbing innovation, and developing strong institutions, each time tailored locally and building on what is already there.

“You have many cities in Sweden or in Germany – Ingolstadt, Karlsruhe, Freiburg, for example. They are the size of Blackburn, or Blackpool, or Middlesbrough, or Hartlepool. And they are far more dynamic. They are dynamic because they’ve got the skills, they’ve got the investment, they’ve got the capacity to make decisions on their own.”

Rodriguez-Pose also has a warning for the government’s devolution plans. “The problem doesn’t come with decentralisation per se,” he says. “The problem is with how decentralisation and devolution are actually conducted across the world, in which normally they are top-down processes that happen in periods of crisis, when governments are about to collapse either politically or economically, or are in serious difficulties, and they often do it reluctantly and they do a decentralisation of powers and not of resources, leading to what are known as unfunded mandates.”

If that sounds like English devolution – that’s because it is.

But the unfolding story of English regional devolution provides more evidence of a city focus to the government’s levelling up strategy. The government’s plans both devolve power and centralise it at the same time – devolving down from Whitehall, but centralising up from district and borough councils.

Unlike Manchester, Preston has seen a substantial reduction in relative deprivation since 2010, assisted by a strategy of relocalising procurement and prioritising tackling inequality over attracting inward investment or stimulating productivity. Preston city council leader Matthew Brown is concerned the government’s devolution proposals, which focus on counties when not covering city regions, leave councils like his out in the cold.

“The white paper is saying that to get powers similar to [those of] Andy Burnham [in Greater Manchester] and Sadiq Khan in London, you would need to have an elected mayor. The elected mayor would then exclude, to a degree, district councils … so we’d be excluded from that process, we’d be a consultee.”

The funding question

Then there’s the funding question. Hamstrung by the Treasury, the white paper offers little in the way of new money – although that shouldn’t erase the impact of the money already announced. Forth says the government should have just given £150bn to regions outside London and the south east to spend on bringing public transport up to scratch – the sort of transformative expenditure the Treasury is shying away from post-Covid.

As it is, funding constraints are already undermining the levelling up agenda. Virtually the only time the levelling up white paper mentions adult care is to promote the government’s proposed reforms, which – inadequate as they were – the Tories then tweaked to throw homeowners across the north and Midlands under a bus as a penny-pinching exercise, while still offering a hefty financial boost to much wealthier homeowners in the south east.

And while the white paper talks repeatedly of the importance of improving public transport, laundering a list of previously announced spending commitments, the long shadow of austerity has left bus and train services at risk from Treasury tight-fists and council spending cuts. And, of course, the eastern leg of HS2 has been scrapped.

Amid varying decibels of applause or derision about the white paper’s intentions and analysis, there is a general gloom about its practical prospects. Oxford Economics has announced it won’t be revising its forecasts for the UK’s nations and regions given the lack of new money or policies.

Gauke is one of the few to defend the level of spending, but fears too much of it will be spent on vote-winning pork barrel projects in key marginals rather than economically productive investments.

It’s easy to win applause by making great promises, but you won’t meet those expectations

But given it was electoral shocks that drove regional inequality up the Westminster agenda, how would success or failure play with the electorate?

The first part of answering that is to explode the myth of southern voters resentful of spending in the north.

“The idea the south won’t wear it is probably overplayed. To my mind, the biggest obstacle to this kind of policy isn’t north versus south. It’s probably more Conservative MPs and activists versus Conservative voters,” says political scientist Rob Ford.

“The promises made to the north were going to be in tension with Conservative members’ and many MPs’ instincts,” adds political sociologist Paula Surridge. “They make the wrong calls over and over because they’ve relied on analysis that is a bit US-centric. The voters the Conservatives won over aren’t small-staters.”

What does success look like?

Nor is levelling up necessarily a vote-printing machine for the Tories. Recent research co-authored by Surridge suggests many of the Conservatives’ new red wall voters aren’t clear what levelling up means. Moreover, Ford warns that even among the minority of these voters whose electoral choices are actually motivated by the promise of levelling up, many won’t notice any improvements made to their local area, and of those who do, a sizeable chunk won’t credit the Conservatives with it.

“The link between what happens in an area and how its voters behave in subsequent elections is extremely weak,” he says.

Worst of all, the recent collapse in Johnson’s poll ratings means voters no longer trust him – meaning they’re less likely to give him, or the party whose brand his continued leadership is trashing, the benefit of the doubt.

“If you tell voters, ‘This government that you don’t like, a good thing happened while it was in charge’, they’ll just say, ‘Well, it wasn’t anything to do with them’,” says Ford. “If you have a deeply disliked and toxic leader, you can propose 100 policies that everyone says they like, but they’ll turn to ash because of their attachment to a leader people don't like.”

There’s one under-remarked aspect of the white paper, politically speaking – how the breadth of its stated ‘missions’ grants the imprimatur of levelling up to a disparate swathe of economic and social policy outcomes, many of which have hitherto commanded insufficient political or electoral attention.

Suddenly issues such as regional pay levels, inequalities in healthy life expectancy, and skills training are brought withing the fold of the government’s central policy programme, which will be measured and publicly reported on each year.

The government will doubtless make progress on some of its missions – it would be hard not to see progress in wellbeing levels compared to the first year of the pandemic, after all – but it is likely to fail in others, partly due to a lack of resources, and partly because some kind of failure is near-guaranteed in politics.

A failure to make progress in any of these areas will now be a failure to make progress on levelling up on the government’s own terms – what might once have passed unnoticed is now liable to come under the microscope.

The government may find it has written political cheques to key voters that it does not have the fiscal courage to cash, leaving it risking the worst of both worlds – loudly making promises it loudly fails to deliver.

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