Government must be more ambitious on devolution and investment to ‘level up’ the UK

By on 10/12/2020 | Updated on 10/12/2020
Investment in skills, education and health needs to be commensurate with that planned for physical infrastructure, according to the IPPR. Credit: Snapwire/Pexels

The government needs to invest more in people – not just infrastructure – and distribute power away from the centre to address regional inequality, writes Anna Round of the Institute for Public Policy Research

A year after UK prime minister Boris Johnson and his Conservative party won the general election on a manifesto that pledged to “level up” every part of the country, the need to address Britain’s long-standing regional divides is even more urgent. The COVID-19 pandemic has deepened old inequalities, for example in income and wealth, and opened up new ones such as digital access.

Johnson has joined the roster of politicians pledging to “build back better” after the pandemic. But shifting the dial on social and regional inequalities requires two things: investment on a more ambitious scale than we have seen so far, and a new distribution of power – as well as funding – to give England’s regions a stronger voice in decisions about how that money is spent.

The government’s investment

It will take an economic stimulus substantially greater than that envisaged in the government’s spending review, announced last month, to rebuild the economy. It would take a stimulus of around £164bn (US$218bn) to return the economy to near its potential by spring 2022 and address the bulk of the economic damage done by the pandemic, according to analysis by IPPR. This needs to target employment and support families at risk of poverty.

In addition, investment in people – including skills, education and health – needs to be commensurate with that planned for physical infrastructure. The spending review included additional funds for training and skills development including, for example, £375m (US$499m) for the Lifetime Skills Guarantee programme, which offers some adults free development courses.

Skills investment is vital for building a recovery that is sustainable over the long-term, for example, through investment in “green” jobs. But to get maximum value from these new budgets they need to be at least partly devolved – an approach to skills policy that matches supply to the needs and opportunities of local economies.

The need for devolution

Next year will bring the long-awaited white paper on devolution – and a real opportunity for the government to level up power. Done properly, devolution has the potential to deliver responsive, accountable, transparent and efficient policies that make the best use of government money, according to IPPR analysis.

But the spending review proposals so far present a very centralised version of “levelling up”. The new Levelling Up Fund, for example, offers £4bn (US$5.3bn) for local infrastructure projects in England, allocated through a process of competitive bidding for proposals costing up to £20m (US$26.6m) to be completed by 2024. While many of the projects funded will undoubtedly support quality of life and economic regeneration in their local areas, decision-making rests in Whitehall. This means opportunities for strategic co-ordination across places and policy areas could easily be missed.

Similarly, it looks as if the new Shared Prosperity Fund (UKSPF) will be controlled by central government. This replaces European structural funding that supported initiatives such as skills and training, green infrastructure, and research and development. This funding stream was specifically designed to respond to regional priorities – and the value of the UKSPF could be maximised through genuine devolution.

There are some welcome developments, including a national infrastructure bank based in the north of England. Such a bank could provide patient public sector investment for projects that align with priorities for regional growth in the long term, such as decarbonisation or building green sectors and employment. But its base in the North must be more than just a geographical one. It must allow local leaders to access sufficient investment for a genuine long-term infrastructure revolution. That means an equitable approach to allocating funds across regions, and regional voice in how that funding is used once allocated.

‘Green book’ reform, which is designed to ensure decisions about government investment do not favour certain regions, is a step in the right direction. This move acknowledges the long-term neglect of too many places outside London and the South-East – an approach that has benefited no-one.

But, again, it needs to be accompanied by the political will to invest in the North and to devolve substantial power and resources to England’s towns, cities and rural areas. Effective devolution supports regionally responsive policy, as well as greater transparency and accountability, and – with a stronger link between decision-makers and the people who elect them – higher levels of public trust.

A look to 2021

The spending review promised that further details on several key funding streams will be published early in 2021, including much-anticipated white papers on devolution and further education. These are crucial opportunities for real devolution of powers to England’s regions, as well as investment on the scale needed to drive a recovery from COVID-19 that’s sustainable – economically and environmentally.

These further announcements must provide a long-term and sustainable basis for local government funding. The announcements in the spending review provide some temporary relief from the worst impacts of COVID-19, but are insufficient to put councils on a secure footing for the future – or to rebuild the resilience that has been eroded by a decade of austerity.

Anna Round is a senior research fellow at the IPPR. She participated in our webinar series about ‘levelling up’, joining a panel to explore the government’s desire to move civil servants out of London and the South-East. You can read our report on that discussion, and watch the video, via our website.

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