One year on from the publishing of the levelling up white paper, Will Lord, former Senior Policy Advisor in the Levelling Up Taskforce at the Department for Levelling Up, Housing and Communities (DLUHC), debates whether its 12 missions are still on track.
Two years and seven months since Boris Johnson’s commitment to “unite and level up” the UK, and one year since the publication of a flagship White Paper, levelling up is once again high on the political agenda. Although by no means the first time a government has sought to tackle the inequalities between the UK’s most and least prosperous places, it deserves an honest appraisal.
Where has it succeeded?
Firstly, the White Paper helped shift the debate on regional policy in government. The UK’s spatial divides are profound, but addressing them is all too often seen in government as an optional extra, rather than fundamental to how the country works. The 2016 Brexit vote was a jolt to Whitehall and the political class, but both took time to absorb the scale of the problem and its solutions. ‘Place-based’ policy was viewed by some departments with suspicion and seen to undermine national outcomes. Treasury orthodoxy tended to take a narrow view, arguing the problem could be explained by insufficient levels of human capital.
The White Paper – developed under Neil O’Brien, Andy Haldane, and Michael Gove – sought to change this. For all the attention on the history of Jericho, it has an extremely thorough, well-evidenced narrative on why the UK’s spatial disparities are a drag on economic growth and life chances. The framework of six interlinked capitals – informed by the Bennett Institute’s Wealth Economy Framework – was a vital challenge to the idea the problem was only human capital, and the White Paper rightly pointed out how decades of centralisation and policy churn have been barriers to progress.
True success can be seen in the unspoken consensus between Labour and the Conservatives. Both agree centralisation is holding the UK back, and that greater devolution, long-term ‘missions’, and investing in innovation clusters are the building blocks of the solution. Lisa Nandy’s commitment to replace the White Paper’s 12 long-term missions and their underpinning metrics with a set of metrics that contribute to long-term targets suggests there is more uniting the two than either lets on.
Secondly, accelerating English devolution. Powerful, democratically accountable local government structures are crucial vehicles for growth. From recent evidence that health devolution to Greater Manchester has helped boost healthy life expectancy in the city region, to Andy Street’s successful £4bn investment deal with Legal & General, devolution is leading to better governance and outcomes in major city regions.
After an initial burst driven by the then Chancellor George Osborne’s “devolution revolution” launched in 2015, reform of English governance had slowed down and a promised framework to standardise the process was repeatedly delayed. The efforts of a set of ‘true believers’ of devolution in Whitehall, the Levelling Up White Paper’s devolution framework, and sustained political commitment across Secretaries of State Gove, Clark, Clarke, and Gove again helped unblocked this. New deals have been signed, bringing 36 per cent of England’s land area, 52 per cent of its population, and 58 per cent of its economic output under a devolved structure, with more to come.
Finally, bending (some) spend. The decision was made early on by No.10 and the Treasury to not have a levelling up ‘top slice’ in Spending Review 2021. For better or worse, this meant funding for the White Paper would have to come from tilting core departmental budgets to places with the greatest need. As the Institute for Fiscal Studies noted, public funding allocations often exacerbate rather than reduce inequalities, creating scope for tilting to make a difference.
Research & Development (R&D) policy saw material change. Driven by Neil O’Brien’s focus on redirecting “growth-enhancing spending”, the White Paper was unapologetic about the role of R&D in addressing spatial disparities and how investment at high-potential clusters like Manchester and Glasgow would boost national growth. The 2030 mission to boost R&D investment outside the Greater South East does not redistribute funding away from the ‘Golden Triangle’ (London, Oxford and Cambridge). But it still represents a multi-billion pound commitment to less prosperous parts of the country. Together with three Innovation Accelerator partnerships, a new organisational objective for UK Research & Innovation (UKRI), and significant departmental funding commitments, this represented a big step for a policy ecosystem that traditionally saw ‘place’ as hostile to funding ‘excellence.’
There are some promising signs, including a 16.5 per cent increase in ‘quality-related’ university funding outside the Greater South East and a £250m boost for biomedical research outside London, Oxford, and Cambridge. An early test of whether the Government is on track will be when UKRI publishes the regional breakdown of its funding for 2021/22.
Where has it fallen short?
There are also areas where delivery of the White Paper’s ambitions falls short. Despite its clear message on the ever-growing complexity of the local growth funding landscape, national government has yet to curb its obsession with competitive funding pots and control freakery over projects.
Bidding rounds were launched for the funding of public parks and toilets, through to active transport. There is mounting evidence this is an inefficient way of delivering funding, particularly when central government is in turmoil. Policy has become far more fragmented and micro-managed than Michael Heseltine’s original vision of a single growth pot for local leaders. But three factors continue to make competitive bidding attractive to decision-makers. Politically, competitions give Ministers the right to ‘cut the ribbon’ on projects in a way that is much trickier when they are funded through block grants. Procedurally, distributing funding through a slow but publicly-explainable competition is often seen as less vulnerable to successful judicial review than picking places. Culturally, an ingrained but poorly evidenced view that it drives up the quality of bids persists in corners of Whitehall.
The process for identifying Investment Zones – an Expression of Interest opened with very short timescales to an unlimited number of bids from anywhere in England – represented a big step back from the White Paper’s promises. Reports that HMT has banned the Department for Levelling Up and Communities (DLUHC) from new capital spending without additional scrutiny will only bog down the flow of funding and make it harder to make progress this side of a general election. The Government’s promised fund simplification plan is a golden opportunity for a reset.
The amount of investment committed to levelling up remains a barrier. While the 12 missions are ambitious, fundamental investments such as the Integrated Rail Plan and funding for bus improvements have been trimmed by the Treasury. Local government finances continue to sting from a decade of real-terms cuts, with the recent Local Government Finance Settlement hopefully being the start of a longer-term recovery. The looming risk of local R&D projects previously supported by European funding being wound down raises questions about the funding quantum and delivery model for the UK Shared Prosperity Fund.
In the long run, levelling up will require significant, sustained investment targeted at places that need it most. In practice, this will mean moving towards more fiscal devolution and Barnett-style funding formulas, calculated by need or productivity potential depending on the investment in question. It is not yet clear if either Labour or the Conservatives have the stomach for the German-level of spending and tough trade-offs needed to truly meet their rhetoric. The response to a modest redistribution of Arts Council England funding – largely represented in the media as a “cuts to London” story despite major uplifts in places like Rotherham – suggests the UK’s political culture remains immature on this.
What next?
The Government’s space to introduce new policy before a General Election is limited. But delivering the White Paper remains a positive agenda. In the short term, the Government should prioritise:
- ‘Deeper devolution’ deals with the West Midlands and Greater Manchester, granting bold new powers over skills, housing, business support, Net Zero, and transport – underpinned by new fiscal devolution and flexible single pot funding settlements. These should be swiftly rolled out to other Mayoral Combined Authorities.
- Delivering the R&D mission: The new Department for Science, Innovation and Technology must be a department for the whole UK. Levelling up should be integral to its aims and culture, with the 2030 R&D mission set from the get-go as one of its key deliverables.
- Passing the Levelling Up & Regeneration Bill to bed in the requirement for governments to set and report on levelling up missions.
- Repurposing the remaining Levelling Up Fund to either mitigate inflationary pressures on existing projects or act as a capital pot for the refocused Investment Zones programme.
In the longer run, governments of any stripe should commit to:
- More permanent institutions: The long-term goal of addressing spatial disparities needs to be woven into the fabric of British governance. The Levelling Up Advisory Council should be upgraded into a permanent, fully staffed body that publishes regular reports alongside the Office for Budget Responsibility at fiscal events.
- Significant, long-term investment: Government should be comfortable making investment commitments outside the lifespan of a Spending Review period. ‘Deal-making’ must eventually be replaced by a more consistent drumbeat of funding allocations to places. As recommended by the National Infrastructure Commission, major city regions should be given flexible, long-term transport settlements. Ideally complemented with the power to raise a versement transport-style levy on employers. In turn, Mayors should be bolder in using the powers in their own gift, such as development corporations and statutory spatial planning over transport and planning.
Tackling the UK’s spatial inequalities is the work of a generation, not a single Parliament. The levelling up agenda has shifted the debate and kick-started genuine reforms to local governance and growth-enhancing spending. But has also fallen short of its commitment to genuine local empowerment. Rather than abandon it in its entirety, the next government to take up the baton should learn from the best of the agenda as much as move on from the worst.
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.
