What does successful levelling up look like in practice? What conditions are necessary for policies to deliver the economic and social advances many places in England so badly need? Jeffrey Matsu explains how the Chartered Institute of Public Finance and Accountancy (CIPFA) and the University of Birmingham’s City-Region Economic Development Institute used some international exemplars to help address these questions for an English context.
Can four areas in England, each with distinct levelling up challenges, learn from the successful economic development in four cities overseas? In new research, we look at Dudley in the West Midlands, Enfield in Greater London and two mayoral combined authorities — South Yorkshire and Tees Valley – to see if there are transferable lessons from our previous case studies in Japan, the US, France and Germany.
Our previous research, first published in 2022 turned the spotlight on four cities — Fukuoka in Japan, Cleveland in the US, Nantes in France, and Leipzig in Germany — all of which were faced with a similar range of issues to cities in the United Kingdom and have pursued successful ‘levelling up’ strategies. Following a deep dive into each place, we identified nine common success factors:
Our English comparators present a range of socio-economic strengths and challenges. South Yorkshire and Tees Valley are former industrial heartlands that have experienced significant decline but have a fresh governance approach in the form of the mayoral model. Enfield is a diverse borough that presents a mixed economic picture, but has some acute pockets of unemployment, while access to quality jobs has been identified as a specific issue. Dudley’s strong manufacturing heritage remains in evidence with the number of manufacturing jobs being above both the regional and national average. However, the city suffers from relatively poor connectivity to key regional centres of employment.
There are some bold and creative approaches in play across all four areas. For example, Dudley has worked successfully with the local further education college on diversification and skills. The city has also worked imaginatively to repurpose some legacy assets such as the transformation of a disused rail line into a test track for very light rail. In Enfield, the council is leading an ambitious housing project – Meridian Water – which aims to deliver 10,000 homes and 6,000 jobs over 20 years. Meanwhile, South Yorkshire is overcoming a political legacy of inter-authority mistrust and tension, helped by its Devolution Deal and the strong leadership provided by the metro mayor who is pursuing a strategy structured around citizen health and wellbeing. By contrast, Tees Valley has a stronger history of cooperation between local authorities – something that was formalised by the creation of the combined authority in 2015 – and is seeking to overcome its industrial decline by attracting and nurturing new sectors and employers.
As our new report sets out, there is compelling evidence indicating that local authorities in England are adopting strategies employed by the international cities considered by our first study to effectively address social and economic disparities. However, the higher degree of centralisation in the UK has meant that local areas have faced challenges in making long-term investments and carrying out effective monitoring and evaluation.
So, if some of the nine factors are present in England, what has gone wrong with English levelling up? A lack of funding that is both adequate and flexible, alongside capacity limitations, is a major hindrance to local ambitions and a common concern across all four areas.
First, fragmented and limited funding is a specific challenge for England. Too many funding pots that are short-term in nature and subject to frequent changes in policy frustrate local authorities engaged in levelling up efforts. For instance, councils such as Dudley are constrained in their ability to engage in innovative fields such as medical technology when project delivery timescales are set at one to two years – compared to an average of 10 years in the European Union. Funding streams need to be better coordinated, made more adaptable and have longer durations if public sector organisations are to be able to plan.
Single pot funding would offer local authorities greater flexibility to respond to place-based priorities and plan for the long term rather than multiple smaller funds that need to be committed to specific and prescribed uses. The Funding Simplification pilot and a commitment given in the Autumn Statement to test single funding models in Greater Manchester and the West Midlands are welcome, but deeper devolution is required. In the meanwhile, leveraging other funding streams to drive change has been evidenced through innovative vehicles such as South Yorkshire’s JESSICA Fund and the Pensions Authority’s Place Based Impact Investment Porfolio.
Next, there is the question of funding scale. When set against international comparators, the amount of funds available to regions in England is not sufficient to meet the specific tasks and responsibilities at hand. Although local government currently receives a higher number of grants than in the past, the overall funding has diminished, marked by significant disparities in grant sizes. Financial obligations that cannot be sustained are counterproductive to sound policy.
Local authorities have of course been hit hard by fiscal consolidation, losing 60% in central government funding since 2010. Coupled with rising demand and higher costs, this has produced a climate of considerable financial strain highlighted by the significant rise in the issuance of Section 114 ‘insolvency’ notices. The changed landscape has meant a pivot away from preventative spending to crisis management. This is hardly the recipe for achieving good value for money.
If government policy aims to reduce regional disparities, then access to funds should be adequate and shared equitably – not favouring larger or better-resourced local authorities. Moving away from competitive funding would help, as would a greater reliance on financial equalisation mechanisms such as that benefitting cities such as Leipzig (covered in our previous international case study report). South Yorkshire Mayoral Combined Authority frequently distributes funding among its local authorities based on a per capita basis rather than employing a competitive method.
Third, capacity and capability within local government has waned. Some of the councils we spoke to struggle to get in bids for funding without the support of external consultants. By diverting already limited resources, a failed tender can hinder responses to the launch of new government funding rounds. Importantly, monitoring and evaluation activities that are crucial to successful outcomes suffer when there is a lack of continuity in funding commitments, staffing and expertise. The international experiences of Fukuoka and Nantes emphasise how long-term stability in public sector organisations can pay dividends.
Given these constraints, it is important that local and combined authorities take a strategic approach to measurement. Accountability is essential but this must be for the big consequential things. There may also be advantages in authorities working together on evaluation when similar programmes are being assessed in different places. For example, as a member of the Local London subregional partnership, Enfield has benefited from access to its Data Warehouse and team of data scientists.
Partnership working between authorities and across levels of government is crucial. As the UK government’s first policy campus, Sheffield will help to strengthen South Yorkshire’s presence as a hub for policymaking and talent development. Similarly, the Levelling Up Partnerships announced for Middlesbrough and Redcar and Cleveland in Tees Valley offer the potential flexibility to design interventions that respond to local priorities.
Through our four English examples, we have identified a tenth success factor which appears to be important in the English context. Although there is an appetite to share and reflect on experience across places, capacity and funding constraints mean resources for transferable learning and knowledge exchange is rarely prioritised. Learning is clearly valued by local authorities and their partners but finding sufficient ‘head space’ can be a struggle.
Throughout these case studies, public finance professionals have played an important – often behind the scenes – role in enhancing total performance. By advocating a whole system approach to the management of public finances, the sector recognises the interdependence of governance across different spatial scales and alignment of resource management in public service delivery.
We hope the observations and recommendations contained in our report will contribute to this learning culture and provide local authorities and other civic actors engaged in the wider public finance system with the means to reflect usefully on policy and practice.
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.
