The UK government has revealed its plan to level up the country – a white paper setting out policies to tackle inequality between places.
The plan comes at a defining moment. It’s widely seen as the key to holding on to the constituencies that delivered victory to the Conservatives in the last election. But to succeed, it has to work in practice. All the signs in this respect point to failure. The plan is neither ambitious enough nor coherent enough to work.
The plan digested
To understand what the government is trying to do, we need to understand how it is setting out the problem. It identifies six “capitals”: physical capital (e.g. infrastructure and housing), human capital (e.g. skills and health), intangible capital (e.g. ideas and innovations), financial capital (e.g. business finance), social capital (e.g. community and trust), and institutional capital (e.g. local leadership). The places that have an abundance of these are in a virtuous circle, where the different capitals reinforce one another. Places that are struggling are in downward spirals. The idea is to increase the UK’s stock of these capitals and, crucially, to begin to close the gap between the best and worst performing areas by 2030.
The proposed solutions are organised into four areas.
There are policies that aim to grow the private sector to boost productivity, pay, jobs and living standards. Policies here include freeports, redistribution of R&D investment and transport improvements.
Next, policies to spread opportunities and improve public services, including 55 “education investment areas” and measures to improve skills. Improving health through changes to school meals and a new tobacco control plan are also part of this area.
Third, there are policies to restore a sense of community and local pride, including 20 town regeneration projects, along with a range of smaller projects, such as new football pitches and out-of-school activities. There are also attempts to redistribute housing investment outside of London and create minimum standards for rented homes.
Finally, there are policies to empower local leaders and communities, spreading devolution by negotiating county devolution deals led by county “governors”, and to deepen existing English devolution.
But while many of these aims are laudable, the plan is ultimately flawed – in four important ways.
Problem 1: big problem, small solutions
On the plus side, the levelling up policy is grounded in a thorough base of research on spatial inequality in the UK. There is a good understanding of the scale and nature of the challenge ahead. However, this is not matched by the scale of investment or the proposed solutions. Missing are a clear set of mechanisms that break the vicious cycles in places that are lacking in the “six capitals”.
Problem 2: where are the local strategies?
This policy is huge. The sheer range of policies shows that the government has realised that levelling up has to be truly cross-sector if it is to work.
However, this is not a cross-sector strategy for each place but a disjointed and centrally designed package. The policies target lots of issues but do not coherently target individual places. The “six capitals” and “four policy areas” may offer a coherent system of thought for those at the centre but they sit alongside an incoherent collection of policies. And it’s the latter that really matter to a town or city that feels left behind.
This kind of work has to be done at the local level because places face different challenges and have different growth potential. Our research shows, for example, that matching the supply and demand of skills at a high level is crucial for turning around failing local economies. But this only works if a local place uses a strategy that takes account of both the structure of the economy (skills demand) and the system of education and training (skills supply). Without this, our research shows that places resort to focusing on job numbers rather than quality and productivity – and risk being pulled into a low-productivity, low-skills equilibrium.
Problem 3: London is still in control
The UK is the most centralised political economy in the OECD. One of the biggest problems is that levelling up is, in essence, another centrally designed programme of interventions, some of which will be delivered by local government. The devolution plans are welcome but ultimately, levelling up is going to happen from Whitehall. In fact, devolution and reforms to local government are just one of the 12 listed missions that make up the levelling up agenda (and incidentally the twelfth). This mission should have been the central theme through which everything else would be delivered. And it needs to happen first rather than being drawn out for another decade.
Problem 4: some plans will makes things worse
The existing system for distributing money is highly complex and the plan is to simplify it – which is a positive step. However, it still entails the centre striking deals with local areas and funding projects through competitive bidding. This approach is highly inefficient, and is disliked by those in local government. The places best positioned to bid and make deals are not necessarily the places that need levelling up, so inequality could be aggravated. Instead, money should be allocated through a stable funding formula that prioritises places that are most in need.
Ultimately, our research shows that what’s needed are reforms to how local areas and regions are funded, governed, and organised to provide a more solid structure on which to build.
Otherwise levelling up is likely to lead to a scatter gun approach. Small improvements will be made here and there that do not connect together into a virtuous cycle of transformational change. It’s doubtful that this will make enough people feel that their local area has really improved – and it is on this feeling that the government’s future electoral hopes hang.