Rehema Msulwa, Research Associate, discusses the role of place-based and space-blind policies for addressing productivity differences across the UK.
Reducing the UK’s wide geographic inequalities in incomes and productivity is a government priority. Infrastructure investment can potentially make an important contribution to ‘levelling up’ by reconfiguring activity, but the UK has so far under-invested in infrastructure compared to other countries. Putting new infrastructure in place is a long-term endeavour that will require political consensus and a changed approach to project appraisal.
There are ongoing debates about how best to address productivity differences within the UK. As outlined by McCann (2016), policy discourse largely centres on two interrelated agendas: improvements in regional and interregional connectivity; and governance decentralisation and devolution. Connectivity, as promised by the new north-south rail line High Speed 2 now under construction, is argued to spur interregional and intra-regional spillovers through increased interactions between people, knowledge, goods, services and money. However, given persisting inequalities, the wider national benefit implications of such interventions are subject to debate. Often tied up with issues of connectivity, decentralisation and devolution are seen as necessary if emerging polycentric transport networks are to be effective. This includes well-designed and well-resourced governance arrangements that cross subnational political boundaries.
UK-wide debates echo more deep-seated and fundamental international debates advanced in part by the World Bank and OECD. As outlined in its 2009 World Development Report, the World Bank advocates for the economic integration of ‘leading and lagging’ places. Such integration is said to be achieved by providing ‘spatially blind’ services such as education, health, and water and sanitation coupled with investments in ‘spatially connective’ infrastructure including roads, railways, airports, harbours, and communication systems. Arguably, investing in High Speed 2 for UK north-south connectivity, and in strategic roads and broadband “to ensure that all places across the UK are well-connected” is in line with this approach. According to the World Bank, the combination of spatially blind public services and spatially connective infrastructure promotes inclusivity by enhancing people’s lives so that they can move freely according to market forces to the places, often cities, where they are most productively employed. Policymakers are therefore encouraged to allow ‘unbalanced’ economic growth because spatially targeting weaker regions can limit the overall economic efficiency of the national economy.
In direct contrast to the World Bank, the OECD advocates for a place-based approach to economic development and the adoption of policies with an explicitly geographical logic. Broadly, such policies comprise locally tailored bundles of public goods designed to overcome place-specific institutional bottlenecks and local under-development traps. Underpinning this approach is the OECD’s view that equity and efficiency are not mutually exclusive objectives. As such, policymakers are advised to support lagging regions with the aim of generating growth for national prosperity rather than simply to target disadvantage for reasons of social equity. In principle, the government’s £1.7 billion Transforming Cities Fund and intra-city transport settlements; the £3.6 billion Town’s Fund to rejuvenate towns and communities in need in England; and the £4 billion Levelling-up Fund are in line with this approach.
There is no comprehensive agreement on the appropriate mix of place-based and space-blind policies in the UK. Nevertheless, as relates to infrastructure, any effective combination of policies needs to include long-term strategic planning, improvements in the way projects are appraised and selected, and coordination and cooperation across the public and private sectors.
Long-term integrated strategic planning
Despite having a robust regulatory framework for infrastructure investment, the UK has an adversarial political system and electoral cycle. As argued by the Institute for Government, this environment contributes to high levels of policy uncertainty and failure to secure political consensus on major projects. The result is an insufficiently stable investment environment which contributes to the under-provision of infrastructure in the UK.
Long-term strategic planning can be used to overcome the short-term stresses from elections and leadership challenges. When coupled with strong cross-party support, clarity in strategic aims creates a degree of consistency over time that minimises haphazard, ad hoc decision-making, planning and political risk. In France, for example, there is a long tradition of sectoral strategic master planning with agreements between central, regional and local government. In the French energy sector, this approach has driven integrated regional planning and electricity transmission; and cross-border electricity network integration at the European scale. In the transport sector, it has resulted in coherent transport infrastructure programmes with 15- to 20-year timeframes, as well as planning for multimodal mobility and the energy transition.
The UK’s National Infrastructure Strategy is a step in this direction. However, there is still a way to go in terms of coordination across different infrastructure sectors and alignment across geographic spatial scales. At present, Scotland, Wales and Northern Ireland have national spatial policy planning frameworks that aid this while England does not. Thus, local and subnational action is not always taken in the context of a national or UK-wide agenda. Moreover, the absence of appropriate governance arrangements, including decentralised legal powers to enact joined-up government and control of local public spending, saving and reinvestment, poses a significant challenge to working in a concerted way across multiple subnational authority boundaries.
Project appraisal and selection
The process of selecting and evaluating infrastructure projects plays a critical role in the spatial distribution of investment. In the UK, the Five Case Model and the methods and principles of the HM Treasury Green Book guide public project appraisal. Cost-benefit analysis (CBA), an assessment of economic efficiency, is the cornerstone of this guidance.
However, the application of cost-benefit analysis does not come without its own set of biases. When used to assess infrastructure projects, Coyle and Sensier (2019) find that CBA will tend to favour projects in London and the South East. In line with this, Winch and Msulwa (2019) argue that CBA-based decisions will be biased against the North. Further, a recent review of the Green Book concluded that current appraisal practice risks perpetuating spatial disparities, thereby undermining the government’s ambition to level up poorer regions and to achieve other strategic objectives.
The Green Book is periodically updated, which allows for the exploration of alternative methods of appraisal. Relevant to the government’s levelling up agenda, for example, the most recent update requires that infrastructure investment proposals are first tested for their fit with government strategic priorities. In addition, proposals can no longer be developed without assessing the different impacts on places across the UK. These changes are intended to progress the government’s priority outcomes and wider public value agenda.
Beyond changes to the Green Book, a shift in how projects are appraised will require changes across all levels of government including updates to departmental appraisal guides such as the Department for Transport’s (DfT) Transport Analysis Guidance (TAG) tools and MHCLG’s DCLG Appraisal Guidance. In turn, effective decision-making that supports the levelling up agenda will require better-defined policy objectives and criteria against which performance can measured. The Australian Infrastructure Plan provides an example of a systematic and goal-oriented approach to appraising projects. In line with objectives to deliver productive cities and regions, this plan is underpinned by a detailed place-based analysis that projects current and future demographic and economic characteristics for 73 regions in the country. Regions with the greatest increases in direct contribution are then identified, and efforts are put into assessing what kind of investment will help drive the greatest economic impact in these places.
A more systematic approach to project appraisal is essential given that infrastructure has the potential to produce both winners and losers by reconfiguring consumption and production patterns. To that end, in the context of levelling up, social assessment should be included when considering which projects are taken forward. According to Lucas and Jones (2012), failure to conduct such analysis “undermin[es] quality of life and social well-being in our towns, cities and rural settlements”. While the UK’s DfT provides guidance on social assessment and distribution impact analysis, such analysis is only carried out once a project has already been approved. This means that social assessments do not inform the high-level decision making concerned with defining the problem to be resolved and determining whether an investment in infrastructure is appropriate to resolve it. Further, when infrastructure is deemed appropriate, social assessment is not sufficiently used to identify the complementary policies and plans needed to realise intended benefits.
Improving the way projects are appraised and selected calls for additional research into the potential impacts that infrastructure projects can have at different geographical scales. In line with the appraisal approach taken by Transport for the North, it may also call for the adoption of a range of sometimes more sophisticated modelling and data analysis techniques. Ultimately, however, reducing the UK’s wide geographic inequalities in incomes and productivity requires intentional and coordinated decision-making across all levels of government.
Coordination and cooperation
Given the persistence and extent of spatial inequality in the UK, levelling up regions is a long-term endeavour that will require collective action. As it relates to infrastructure investment, cross-party support is essential. An agreed-upon pipeline of viable infrastructure projects underpinned by policy continuity has the potential to attract private investment, encourage market appetite for procurement competitions and foster trust and buy-in from local communities. Achieving this may prove especially challenging in the current context of polarised politics underpinned by fundamentally different narratives around borrowing, taxing, spending and the size of the state.
Within government, levelling up requires a move past what the Institute for Government terms ‘departmentalism’–a lack of coordinated working across the departments responsible for different but overlapping parts of infrastructure policy. Subnational authorities – such as combined authorities, local authorities and sub-national transport bodies – may also have to assess their needs jointly. Determining how best to navigate and govern this polycentric structure of decision-making will therefore be critical.
More fundamentally, levelling up will require greater clarity about the government’s policy objectives and its intended approach to address regional inequality in the UK. Is the aim to enhance the lives of all individuals across the UK so that they can more easily access opportunities in better and more productive places? Alternatively, does the government intend to enhance the lives of individuals as relates to where they live through the provision of locally tailored bundles of public goods? In the likely case that the answer is more nuanced, how will policymakers reconcile the largely top-down, space-neutral (or ‘space blind’), sectoral approach adopted in the UK to date with a bottom-up, place-based approach focused on developing weaker and less productive regions? Establishing a clear starting point will have implications for long-term strategic infrastructure planning, the criteria used to analyse and select projects and the arrangements needed to facilitate collective action.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.