Rebalancing the UK: ‘Levelling Up’ in the era of COVID-19

By on 09/07/2020
Tipping the scales: the ‘Levelling Up’ agenda aims to spread economic growth and development across the country. Illustration by Katy Smith

With Boris Johnson’s electoral fortunes resting on ‘Levelling Up’ the North and Midlands, the agenda still has legs. At a GGF webinar, panellists including a former HMT special adviser, DEXEU perm sec and Northern Powerhouse chief discussed the pandemic’s impact – and the ways forward

Ever since the pandemic arrived in March, the UK government has had little time or money for anything beyond crisis response; much of its remaining bandwidth has been absorbed by Brexit. But one other key policy survives: that of ‘Levelling Up’ deprived areas, boosting incomes and productivity outside the South-East. Speaking at a Global Government Forum (GGF) online conference last week, former Treasury special adviser Tim Pitt – who served two Tory chancellors, before leaving government alongside Sajid Javid in February – explained the government’s continuing commitment to its manifesto pledge.

When Boris Johnson became prime minister last July, Pitt recalled, Parliament was deadlocked over Brexit: the PM’s team “knew there was a high chance they’d need an election to break that deadlock. And if that happened, they were going to have to win Leave-voting Labour constituencies in the North, Midlands, North Wales: places that, in many cases, hadn’t elected a Tory MP in decades.”

So when the election came, Johnson generated “a barrage of high-profile spending commitments, designed primarily to make headlines and target swing voters in Tory-Labour marginal seats. Now, policy is always driven by politics to some degree – but that was particularly true during those months. And the result was a Conservative manifesto with a whole series of policies vaguely connected to Levelling Up”.

The strategy secured Johnson an 80-seat majority. And the PM knows that to win the next election, he must persuade his new voters that he’s delivered on his promises: the government has a hard political interest in closing the ever-widening gap in wealth and opportunities between English regions.

A worsening problem

That growing gap “has been a preoccupation of UK governments for decades, and self-evidently previous efforts haven’t succeeded,” commented Philip Rycroft, the former Department for Exiting the European Union (DEXEU) permanent secretary – who, as head of the Cabinet Office’s UK Governance Group, also oversaw constitutional and devolution issues. “Rather than decreasing over time, the gap between London and the South-East and other English regions has increased: between 2006 and 2016, London was the only region to improve its position relative to the UK average,” he added.

Why so? In the view of Chris Murray, director of the Core Cities Group, “after de-industralisation, the core cities lost a lot of the things that made them resilient to economic shocks, while London managed to build those things into its economic ecosystem” – he cited labour market skills and infrastructure as factors behind the capital’s success. And now the COVID-19 pandemic presents the whole country with a fresh set of economic challenges: this four-part webinar – whose latter sessions will be covered in future articles – was organised both to explore how civil servants can realise the government’s goals on Levelling Up, and to consider how the agenda should change in response to the pandemic.

Chris Murray’s presentation slide illustrates the decline of core cities

Coronavirus, said Nicola Headlam – an expert in regeneration and economic development, and a former head of Northern Powerhouse in the business department – “is like a trump card over the intersections of race and class and region and poverty and ill health that combine to form deprivation.” Hitting the weakest hardest, its “risks go into the points of extreme vulnerability.” And Murray noted that Office of National Statistics figures are “very, very clear that the health impacts are twice as bad in big, urban areas as non-urban, and much worse for deprived than more affluent communities.” It would, he added, “be a miracle if the economic impacts don’t follow the same pattern.”

A new economic storm

Katie Rose, a programme manager at non-profit foundation the Centre for Public Impact (CPI), warned that COVID-19 risks exacerbating public anger and disillusionment in the North and Midlands. The CPI has been carrying out research in areas badly affected by COVID-19, she said: people here “already felt unheard and unrepresented – and this virus is creating a fresh wave of resentment towards government.”

However, Tim Pitt thought poorer regions might not suffer disproportionately. “The real story may be at a local rather than a regional level,” he said. “Early data suggests the regional impact may be quite evenly spread, because some of the hardest-hit sectors – retail, hospitality and leisure – are quite evenly geographically distributed.” London’s dependence on public transport and office property, he added, present the capital with “some fairly unique challenges.”

Nicola Headlam

The economic harm caused by the pandemic isn’t yet clear: “Once the job retention scheme unwinds, that’s when you’ll start to really understand which areas are going to be hardest-hit,” said Pitt. But in Headlam’s view, the damage will be vast: analysts Cambridge Econometrics predict a 5.2% drop in GDP, and other research suggests that across the North “1.8 in 10 workers will not end the year in the job they had in January. Reducing the transaction cost of getting those people into new jobs is the biggest public policy challenge of our lifetimes.”

So employment is likely to climb up the priorities list – and about time, said Pitt. “One of the weaknesses of what we’ve heard about Levelling Up so far… is the big focus on infrastructure: there hasn’t been enough focus on human capital,” he said. And Murray noted that “the connections between health policy and economic policy have been laid bare” by the pandemic: poor public health hits employment and income rates, so “if we’re not dealing with deprivation and underlying health issues, productivity is always going to remain low – no matter what we do about infrastructure.”

And then there’s Brexit

It fell to Rycroft, the former DEXEU chief, to point out the Brexit mammoth in the room. “The UK, pretty much uniquely in the world, has another self-imposed economic transition point to cross in the not too distant future, which will have a very big impact on a bunch of sectors that haven’t necessarily been hard-hit by COVID,” he said. “So if you put those two things together, you’ve got COVID hitting hospitality, leisure, tourism. And you’ve got Brexit coming down the track, which is going to impact more on businesses that are trading with the EU, integrated supply chains: in other words, manufacturing. And that’s more concentrated in the Midlands and the North of England as well as Wales, Northern Ireland and Scotland.

“So this is a combination of challenges that is unique and unprecedented,” he said. “Over the course of the next 24 months or so, the UK economy is going to go through a very significant adjustment which will impact on all sectors and parts of the UK.”

Tim Pitt

Above all, said Pitt, the government needs to stop making “piecemeal policy announcements” and come up with a proper, over-arching plan. “We’ve had politically-motivated policies driving this agenda, and what we now need to do is step back and come up with a coherent, long-term strategy to tackle regional inequality, founded on an evidence-based assessment of what is driving it and what policies are most likely to reduce it – rather than what is going to poll successfully and be popular with voters in the short term,” he said. As Headlam put it: “It’s a spectrum between straight pork-barrel and comprehensive plan. Pork barrel gets people much more excited, and we’ve yet to see where this government ends up.”

The centre cannot hold – but the regions can

As the government develops a strategy, said Rycroft, it should avoid trying to control delivery at the local level. Ever since Margaret Thatcher abolished the metropolitan counties in 1986, he argued, central government has dominated local actors: Labour’s regional development agencies (RDAs) “were essentially administrative vehicles with boards largely appointed by central government,” while the Coalition’s local economic partnerships “had far less power and influence than the RDAs.

“Only slowly has something emerged at greater scale through the creation of metro mayors and the Northern Powerhouse,” he added; and “one suspects that was also a convenient way of devolving responsibility for implementation of austerity without necessarily devolving real power and resource.”

But “all the signs are that [this administration] will seek to manage it, as previous governments have, through policies driven from the centre – where the various local actors become largely delivery vehicles for central initiatives,” Rycroft warned. “The handling of COVID – and the engagement, or lack of engagement, of metro mayors, the mayor of London, and to some extent also devolved governments – at critical stages of the COVID planning process is perhaps indicative of the centralising instincts of this government.”

Chris Murray

In Murray’s view, such a top-down approach would be entirely counter-productive: an OECD study, he said, found that the problem of “low productivity in big cities outside the South-East is clearly linked to over-centralisation.” To create workable policies, he added, “you’ve got to let the people who are going to deliver the policies design them.”

The CPI too has evidence that central government’s role “should be one of coordination, enablement and acceleration – not controlling management and the putting-up of restrictions or regulations,” commented Rose. Having “looked around the world for prominent examples of regions and communities which have responded well to significant economic downturns in the past,” she explained, the CPI explored how seven areas managed to “fight, recover and rebuild.” Its report, said Rose, found that in each case “local actors were given the power, the ownership and the budget to drive progress” – working through existing local structures, and unconstrained by central direction.

Take control of letting go

Nonetheless, Whitehall has an important role to play: the agenda “does need hard driving from the centre of government, to get departments to fall in line,” commented Rycroft. “And that’s what we’re going to have to see happen over the next few months – because there isn’t time, let alone the political will, for a more thoroughgoing shift in the way we think about the governance of England and the wider UK.”

Philip Rycroft

As Pitt pointed out, “having the Treasury buy into this is absolutely vital. If you look at the industrial strategy, for example, under the previous [Theresa May] government, there was some Treasury scepticism about that – and that made delivery difficult.” Currently, he added, “there is a lot of Treasury buy-in.” But he warned departments not “just to come up with shopping lists of their pet projects to try to get cash out of the Treasury”: they should instead produce “coherent packages, with lots of non-fiscal measures.”

Equally important – at least for Boris Johnson – is “the political need to show tangible progress by the time of the next election in 2024,” said Pitt. “We really need to get the balance right between quick wins to meet the political demands for progress, and putting in place the long-lasting building blocks to deliver permanent change.”

Assembling the tools for regeneration

In Rycroft’s view, those building blocks must include “some proper budgetary and policy devolution.” Centrally-driven policies haven’t worked in the past, he argued; and while “the idea of regional assemblies is not popular in the abstract with English opinion, the experience of both Wales and London would show that once established, serious assemblies with real power and influence… do grow in public esteem.”

Katie Rose

Metro mayors have “very limited ability to raise their own resources” and devise policies, he added. And “given what the politics of the last few years have demonstrated about the sense of political disenfranchisement in much of England – particularly in the North and Midlands – perhaps a more devolved policy might address that sense of a democratic deficit, as well as supporting more locally-grounded economic policies to contribute to the Levelling Up agenda.”

Even the language of ‘Levelling Up’ is wrong, said Rose, “as that implies using a lever or raising up by a central, god-like hand,” when the agenda should be “about enabling and letting go.” Government should “change the structure of power to bring it closer to the people who need it,” she added. “And if we fail, government’s position will be really, really damaged. Inequalities will get worse, and we’ll see much more hostility and tension in society.”

Previous regeneration initiatives, noted Headlam, have demonstrated that concerted action can succeed in reviving local economies. “Never let people tell you that places can’t change radically,” she said, citing the renaissance of Newcastle and Liverpool. And what if we don’t succeed in fostering the revival of England’s former industrial heartlands? “Then it’s Mad Max out there!”

The CPI’s report ‘How the UK can respond to COVID-19’ can be downloaded at the foot of this short explanation. You can also watch the whole panel discussion:

This webinar was the first session in a four-part online conference on ‘Levelling Up in the era of COVID-19’. The second session explored the government’s goal of redistributing civil servants away from London and the South-East. The third session considered the role of infrastructure in levelling up. And in the fourth session, panellists discussed how combined authorities can achieve far more than individual councils.

About Matt Ross

Matt is a journalist and editor specialising in public sector management, policymaking and service delivery. He was the editor of Civil Service World 2008-14, serving an audience of senior UK officials; and the features editor of Regeneration & Renewal 2002-08, covering urban regeneration, economic growth and community development. He has also been a motoring and travel journalist, and now combines his role as editorial director of Global Government Forum with communications consultancy, marketing and journalism work for publishers, public sector unions and private sector suppliers to government.

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