Level 21

There is an argument to be made for regional levelling-up, even in the pages of On London. Poverty and ill-health may be spread throughout the country, but the productivity gap between London and other UK regions and cities is wide and has been growing. In 2018, London’s workers generated an average of £46 per hour worked compared to an average for £32 for England’s other city regions. And that gap is wider than in most other European countries.

This productivity gap results in significant fiscal transfers from London to the rest of the UK – nearly £4,000 per head each year. Building higher productivity in other UK regions should, in the long-term, help rebalance tax and spending across the country, as well as improving the lives of citizens. As the Prime Minister said in his levelling-up speech this morning, making every UK region as productive as London would make a huge difference.

And there are ways of stimulating productivity outside the capital. One is to invest more in research and development (R&D) in universities outside the golden triangle of London, Oxford and Cambridge, as was recently recommended in a report for NESTA. Another would be to accelerate development of Northern Powerhouse Rail, connecting the major cities of northern England and complementing the north-south connections of HS2.

But there are at least two problems with this approach. One is cost. However much the PM asserts that “this is not a zero-sum” game, commitments cost money. Northern Powerhouse Rail would cost around £40 billion and levelling-up R&D spending would require about £4 billion extra each year. Both projects could generate significant returns in terms of productivity and tax revenues, but over the less electorally-helpful longer term.

That connects to the second problem, which is that both of these projects would directly benefit larger cities, helping to create and connect hubs of economic activity and growth in places such as Manchester, Leeds, Newcastle and Birmingham, which already have strong research universities. But few of these places vote Conservative in large numbers (the West Midlands is an exception, which may explain the choice of Coventry as the PM’s speech venue), nor is building their HE-led knowledge economy guaranteed to secure more votes.

The “red wall” votes that the PM is keen to shore up are from smaller towns, outlying areas, places that feel more left behind. It is true that if investment in cities was successful indirect benefits would spread much wider. Just as towns like Brighton and Basingstoke benefit from their proximity to London, smaller towns and cities clustered around the norther cities would gain.

There would be jobs directly created to support new city enterprises, commuters and hybrid workers spending more money locally, and new opportunities opened up so that, as the PM said, people wouldn’t have to move away from where they grew up (though speaking as someone who grew up in villages and small towns, I can tell the PM that getting away was my priority, not a terrible burden).

But I’m not sure the government is ready to make the case that urban investment helps everyone. The urban-dominated ‘Northern Powerhouse’ didn’t get a mention, nor did investment in R&D, nor did major rail infrastructure. Instead we had a breathless litany of initiatives – Football pitches! New roads! Cycle Lanes! Hydrogen! Will Jennings and colleagues recently described this as “governing as political spectacle”, committing to projects that make a quick, visible and maybe superficial difference, rather than a longer-lasting and systemic one. We’re back to Tony Blair calling, in a leaked memo, for “eye-catching initiatives with which I can be personally associated.”

It was positive that the speech turned to devolution and local leadership towards the end, though galling to hear the PM complain about how centralised the UK is, given how Sadiq Khan has been treated in recent months. It sounds like the forever-delayed Devolution White Paper may yet inform the Levelling Up White Paper expected in the autumn – though talk was of county-level devolution deals where local leadership aligned with government objectives, rather than a new settlement between the centre and localities.

Levelling-up itself remains elusive. There were nods to closing the productivity gap in the PM’s speech, but too much was given over to a generic but worthy list of ways to make places and people’s lives better across the country. These are important, but while they may mitigate regional imbalances, they don’t really address them. We’ll have to wait for the White Paper to see how the PM’s levelling up plans balance the serious and strategic, with the superficial and electoral.

First published by OnLondon, 15 July 2021.

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