• Jada Johnson

CMI Explains: The Levelling Up Agenda

Updated: Sep 10

Source: Tony Blair Institute for Global Change

When the Conservatives won the 2019 election, there was a new phrase at the forefront of their campaign: ‘Levelling Up’. Their manifesto described ‘Levelling Up’ as ‘investing in our great towns and cities, as well as rural and coastal areas’. The term championed a sense of regional pride, promising to regenerate towns, return high streets to their former glory and invest in new civic infrastructure, all in the name of rebuilding let down communities.

The agenda might be new, but the issues it seeks to address are far from it. Go back over 100 years to 1901, and GDP per person in London was 34% higher than the national average. By the time of the election, that figure stood at around 70%. Gaps in regional productivity have a significant part to play in this. The average output per job in London is 40% above the UK average, indicating an unfair distribution of productive roles. Such well-established trends have led to the UK being one of the worst nations in the developed world for regional equality. The Conservatives’ agenda, then, was widely welcomed in principle. Balancing the economy is both socially and economically advisable, with evidence that just halving the regional productivity gap could increase UK GDP by £83 billion. Moreover, it certainly got off to a strong symbolic start, with Boris Johnson appointing Neil O’Brien as minister for the agenda, and Michael Gove as Secretary of State for its newly named department.

However, ‘Levelling Up’ has since been subject to significant criticism from voters, politicians and businesses leaders alike. The accusation is that the slogan has become mere political rhetoric: a handy term for Johnson to repeat to his voters because it is active, optimistic and sufficiently hostile to the redistribution of wealth. With each repetition of the slogan, however, people increasingly questioned the substance behind that grand idea. Such scepticism is justified, particularly in ‘left behind’ communities. Over the past 50 years there have been about 40 geographic policy initiatives, introduced by a range of parties, which have failed to adequately redress economic imbalance and maintain progress. Boris Johnson is far from the first Prime Minister to focus on the issue of regional inequality, which manifests itself in a multitude of areas: education, housing, healthcare, and life expectancy disparities to name a few. Experience has shown that tackling the problem will require a clear focus, innovative policy and a solid metric of achievement, rather than broad promises. With the White Paper delayed until the end of January, CMI looks at what has already been done in the name of levelling up, and what the next steps might look like in tackling this deep-rooted issue.

Public Spending and Private Sector Involvement

The most substantial indications we have had of levelling up in action have been public spending policies. Levelling Up the skills gap is one of the areas the government addressed in the autumn budget, announcing a £2.5 billion Skills Fund. This focuses on employable technical skills and adult training, in line with the government’s agenda for ‘high wage, high skill’ jobs. Targeted sectors include engineering, digital and construction, and the investment will be welcomed by businesses in these sectors, where the talent pipeline of apprentices and graduates is often vital to a company’s productivity.

In future, fully capitalising on the levelling up skills agenda could require big businesses to share their skills expertise with education providers. Relationships like these could be vital in building regional clusters: structures designed to pool technical knowledge and new developments with education providers and SMEs. These grow businesses and increase productivity by playing to a region’s industrial strengths. Areas like Yorkshire and the Humber of proof of their success. In July, the Prime Minister drew parallels between the challenges facing the UK and the reunification of Germany, and clusters like these were vital to closing the vast productivity gap between East and West. Today’s challenge, however, will be to create sustainable, net zero clusters which will protect jobs for years to come.

Equally vital to Germany’s success was the vast amounts of spending. In addition to skills funding the government have announced a £4.8 billion Levelling Up Fund, intended to regenerate high streets devastated by COVID and online spending, upgrade local transport infrastructure and maximise use of cultural assets. This is alongside the £1 billion Town fund, the Community Renewal Fund, and the proposed ‘UK Shared Prosperity Fund’, designed to replace £2 billion of EU structural funding in the UK. Such spending is promising, and it is expected to amount to £54 billion in council funds over the coming year. By comparison however, the German reunification project spent over £2 trillion between 1990 and 2014: that’s around £71 billion a year. This example, alongside the government’s lack of focus about which departments levelling up spending should be concentrated in, suggests that current public spending trends will not to be enough to eliminate the productivity gap in the UK. Significant private investment to back up public spending projects will be crucial, but at a time where COVID uncertainty makes investors wary, the challenge of attracting them will be ongoing for the UK.

The Devolution Agenda

The allocation of funding from the Levelling Up and Towns Funds have not come without controversy, and the system has come under fire for appearing to allocate more money to councils represented by Tory ministers. Underpinning these conversations is a longstanding dissatisfaction with the relationship between national and local government. The UK is one of the most centralised advanced democracies, and for many, the discussion around building ‘regional pride’ feels incongruous to the current system. Northern Ireland, Scotland and Wales have greater devolved powers than English local authorities, though some regions such as Greater Manchester have already negotiated devolution deals. Many councils want to move away from centralised funding pots altogether, giving local councils greater power over health, housing, and education spending, and allowing them to make Levelling Up tangible for their community. This idea was alluded to in the Conservative’s manifesto.

However, Boris’ wouldn’t be the first government to advocate for regional sensitivity, and when The Levelling Up White Paper replaced the Government’s English Devolution White Paper, many were concerned that such ideas had taken a back seat. Changes may be approaching if a recent leak is at all accurate, with proposals to establish elected leaders for each authority and match political boundaries to economic geography, while increasing local authority powers. However, the extent to which the Whitehall will be prepared to relinquish power, and the effect this will have on closing the productivity gap, still remains to be seen.

Looking to the White Paper

This year, local councils will be cautiously eager to read the Levelling Up White Paper. Boris Johnson’s success at the last election came on the back of an agenda which has yet to carve out a decisive route for itself. With regional divisions more visible than ever during the pandemic, his success at the next election might rest on his ability to deliver results. If the Prime Minister’s comparison with Germany can teach us anything, however, it is that these results might be a long time coming. It took 30 years of cross-party effort to get Germany to its current position, and ministers are already warning that levelling up wages in the UK will take 10 years. Boris Johnson may have claimed the phrase, but the issue of levelling up must ultimately be one which looks beyond party politics, if it stands any chance of redressing some of the deepest and most historic inequalities in the UK.