Levelling up lessons: how to make regional development work

By on 22/02/2022 | Updated on 22/02/2022
Fukuoka in Japan, where CIPFA studied the success of regional development. Photo shin307-pixabay

Levelling up has become the UK government’s top priority, but it is not alone in considering how to boost its overlooked cities and regions. Jeffrey Matsu, CIPFA’s chief economist, shares the global lessons

The UK government has made levelling up its primary mission. It is an effort to address the country’s longstanding regional inequalities, which have become embedded over many years – the industrial and digital revolutions of the past two centuries highlight the fact that the spoils of progress are unevenly distributed.

Yet since the 1920s, a lack of ambition and action from successive governments to address inequality have resulted in a state of paralysis on this vital issue. At a time when soaring inflation is fuelling a cost-of-living crisis and inequality looks like it is worsening in real time, the ambitions to level up are both more important to realise and much harder to meet.

How, then, can the gap between the haves and the have-nots be narrowed when the goalposts keep shifting and the task to level the playing field moves up another degree of difficulty? If productivity is the key to higher standards of living, then should the aim of public policy be to offer greater opportunities for everyone? To what degree can government intervention really help?

To answer this question, CIPFA recently took a look at lessons from four cities that have had considerable success in addressing inequality to gain a better understanding of what works and what doesn’t. Learning from innovative examples, even in economies and governance frameworks different from your own, is highly instructive as the language of best practice and success is an international one.

The four cities we considered in the report are Fukuoka in Japan, Nantes in France, Leipzig in Germany, and Cleveland in the US. What we see across all of them is a shared recognition that the task is a complex one, and that for a policy to be effective and impactful, a long-term outlook and funding at scale is required.

What works

In Cleveland, for example, the city’s flagship investment project for regeneration has a 20-to-30-year time horizon, considerably longer than the UK government’s eight-year timeframe to level up the entire country – and indeed the four years that the 2017 Industrial Strategy was given. The UK’s tendency to rebrand its initiatives – from the Industrial Strategy to ‘levelling up’, for example – creates uncertainty that ultimately erodes public trust.

Designing and delivering a strategy that has a long-term outlook requires collaboration and cross-party political commitment. Stakeholders in Nantes, for example, have a long history of proactive engagement in international networks such as a European programme linking areas with similar challenges, the Atlantic Arc group of local authorities, and the Eurocities Network. This engagement has been important in sharing and disseminating innovative experiences. Moreover, newly-elected parties in Nantes have a long tradition of not undermining previously implemented policies.

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There must be a clear recognition at the outset that policy outcomes will need to be given time to mature and bear fruit, so the return on investment may not be immediately obvious. On this score, the UK strategy’s 12 missions to reduce inequality are ambitious but lack detail, and indeed the considerable funding needed to realise them effectively. Meanwhile, productivity cannot be increased overnight. Delivering high paying, high quality jobs requires attracting the right kinds of businesses and investment to an area first.

Add to this a comprehensive evaluation framework that can help shape future strategy, identify areas of success and failure, and ensure that value for money is being delivered, and you have a powerful toolkit for designing effective policy.

Our report identifies a framework of six foundations which can be used to evaluate outcomes in a way which moves beyond the traditional measures of economic success. Using a range of metrics, covering human and social capital, the environment, and innovation, governments can better gauge the quality-of-life gains delivered by a policy or increased funding to a region.

Six foundations for economic development

Economic foundation
: analyses metrics commonly used to monitor economic growth, activity, and efficiency.
Human capital foundation: outlines skills measures that can be used to evaluate regional economic development; builds upon the OECD definition of skills that emphasises the development of knowledge and abilities that aid the completion of tasks.
Innovation foundation: contains metrics that measure current and potential innovation within an area.
Infrastructure foundation: outlines metrics that can be used to monitor infrastructure and the wider delivery of opportunities to address regional inequalities.
Environmental foundation: focuses on metrics of green growth at the regional scale.
Social and wellbeing foundation: promotes indicators of social capital and wellbeing that can be used to monitor the prosperity of local communities.

Levelling up does not occur in a vacuum either. The strategy must align with other government ambitions. Yet the UK white paper made only passing references to how the government sees levelling up intersecting with themes like Net Zero, Global Britain – its vision for the country post-Brexit – or the overall challenge to boost UK skills. The traditional top-down vertical siloes that the UK government operates in encourage the status quo and inefficiency, and should give way to a more cohesive approach that embraces joint-working in the co-design of public policies.

Levelling up will take time, money, and commitment – there are no shortcuts or easy answers. Clarity of vision and strong leadership, at both the local and national level, is a necessary start. The difficulty of this issue for many governments over a century represents its complex nature. Improving economic outcomes alone is not sufficient – there are social, environmental and even governance considerations at play. The greater reliance of poorer people and places on public services in areas such as health, social care, education, and the criminal courts means that performance standards will also need to be improved. Evaluating this performance, as we do in our annual Performance Tracker report, helps to ensure that taxpayer funds are being used to effect real change.

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

The timing of this agenda does little to alleviate the pressures currently facing millions of families across the UK who are struggling to cope with rapid increases in the cost of living and forced into making difficult choices. The government’s promises to level up regions for a better tomorrow offers very little comfort today.

The UK government’s missions to level up the UK

1. By 2030, pay, employment and productivity will have risen in every area of the UK, with each containing a globally competitive city, with the gap between the top performing and other areas closing.
2. By 2030, domestic public investment in research and development outside the greater south east will increase by at least 40% and at least one third over the Spending Review period, with that additional government funding seeking to leverage at least twice as much private sector investment over the long term to stimulate innovation and productivity growth.
3. By 2030, local public transport connectivity across the country will be significantly closer to the standards of London, with improved services, simpler fares and integrated ticketing.
4. By 2030, the UK will have nationwide gigabit-capable broadband and 4G coverage, with 5G coverage for the majority of the population.
5. By 2030, the number of primary school children achieving the expected standard in reading, writing and maths will have significantly increased. In England, this will mean 90% of children will achieve the expected standard, and the percentage of children meeting the expected standard in the worst performing areas will have increased by over a third.
6. By 2030, the number of people successfully completing high-quality skills training will have significantly increased in every area of the UK. In England, this will lead to 200,000 more people successfully completing high-quality skills training annually, driven by 80,000 more people completing courses in the lowest skilled areas.
7. By 2030, the gap in Healthy Life Expectancy between local areas where it is highest and lowest will have narrowed, and by 2035 it will rise by 5 years.
8. By 2030, well-being will have improved in every area of the UK, with the gap between top performing and other areas closing.
9. By 2030, pride in place, such as people’s satisfaction with their town centre and engagement in local culture and community, will have risen in every area of the UK, with the gap between the top performing and other areas closing.
10. By 2030, renters will have a secure path to ownership with the number of first-time buyers increasing in all areas; and the government’s ambition is for the number of non-decent rented homes to have fallen by 50%, with the biggest improvements in the lowest performing areas.
11. By 2030, homicide, serious violence, and neighbourhood crime will have fallen, focused on the worst-affected areas.
12. By 2030, every part of England that wants one will have a devolution deal with powers at or approaching the highest level of devolution and a simplified, long-term funding settlement.

About Jeffrey Matsu

Jeffrey Matsu is chief economist at the Chartered Institute of Public Finance and Accountancy (CIPFA)

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