There’s going to be a General Election sometime over the next 18 months in the UK. It seems a long way off what would you like to see from a new government to help address levelling-up, local and regional inequalities, growth and economic development?
I’ve set out a few ideas below. Please be aware that this is in my usual pragmatic mode of thinking, as set out below:
- I like reading and am a policy geek as much as anyone, but there’s a desperate need to get to implementation and delivery right away from a new government. I suggest some ways in which this might be best framed
- There’s no luxury to wait for 2-3 years to have the policies, structures, and institutions right
- There’s no time to scrap, and reinvent institutions and tools
- There’s so many existing powers, capacities, knowledge – let’s use them to start delivery and evolve our thinking, structures and approaches as we go
- Delivery is tough. Its going to involve a lot of hard decisions and work, over decades. We can’t continue to avoid the problems of lagging regions and localities. It’s time to roll our sleeves up and start identifying and delivering pragmatic, practical solutions
With the current UK government, there is a huge implementation gap compared to the bold words and policy pronouncements we’ve heard. From central government there’s been a lack of resources, and dedication to do the hard work over the long term to implement local and regional levelling up and economic development.
There is also no consideration of the spatial implications of national policy. Which is a problem when the UK is the most centralised governmental system of the G7 and probably the OECD nations.
Here’s a few ideas.
Challenges facing the UK economy
The challenges are significant and long-standing. Some of the main challenges include:
UK economic performance and resilience is poor. The UK suffers from a low rate of economic growth, and poor future prospects. There is a historic lack of investment (public and private) and low and declining productivity. On average, rates of innovation are lower than our G7 peers. This has all led to declining pay and living standards and GDP per capita growth is forecast to be poor.
UK economic growth and prospects are poor – recent projections by the World Bank suggest that Poland’s GDP per capita will overtake the UK’s by 2030.
Inequality and poverty is widespread throughout the UK and worsening, and there are some sharp concentrations geograpically and according the ethnicity and health. Compared to other developed countries the UK has a very unequal distribution of income, with a Gini coefficient of 0.351. The UK has one of the highest levels of income inequality in Europe, although it is less unequal than the United States.
Declining international trade performance. The tradeable economy tends to be where the main value added industries operate in the UK, showing where we have comparative advantage and can trade competitevely in foreign markets. But UK export performance in the last decade is worse than any G7 country except Japan. In its most recent forecast, the Office for Budget Responsibility said it expected the weakness in UK overall trade to persist for the next two years, with export volumes forecast to fall by 6.6% in 2023 and by 0.3% in 2024. The effects of Brext and the Covid-19 pandemic have been significant. Preparation for Brexit, and new international trade agreements and conditions has been poor.
North-south imbalance. North-south divide in economic performance, living standards, poverty – has worsened over time. By the 2010s, the UK had become one of the most regionally unequal of the world’s industrialised economies in terms of GDP per capita, productivity, and disposable income (McCann).
Lack of ‘joined up thinking’ about economic levers, and economy and society as a ‘system’. There are many instances of the silos of UK government at work. Eonomic inactivity has increased markedly due to illness and waiting for NHS care. This has contributed to the recruitment crisis and shortage of labour. There were predictions of a labour shortage due to Brexit and the overnight change in immigration laws. This could have been a defining moment to invest in education, training and work readiness for hundreds of thousands of UK people – but there was absolutely no policy or resources put behind this. Climate change mitigation and increased renewable energy use is dependent on increasing capacity in the electricity grid substantially, yet there are no policies or mechanisms to do so. And the list goes on.
Very poor progress on low carbon / climate change. The UK Government Commissioned Independent Review of Policies on Climate Change concluded that the UK was “not matching world-leading ambition with world-leading delivery” – in other words – its all talk, no action. When I reviewed policies and implementation as part of my work in the North East of England, nationally there has been a lot of progress in offshore wind, but this is just one area of many that we need to progress. There is small progress in most other areas – e.g. – housing, retrofit, low carbon energy, community energy, electrical grid, vehicle charging, heavy vehicle drive trains and alternative fuels, public transport, active transport, circular economy, skills. In my view, the low carbon economy is still at ‘pilot project’ stage and has not scaled up sufficiently to be anywhere near becoming mainstream
Business is part of the solution, but not all of it. Businesses as vehicles of change – they have a role. But they do not always follow policy priorities – e.g. 40% of businesses have no plans to address climate change. There will undoubtedly be calls for businesses to be involved in economic policy and levelling up, which they should be, but this needs to be a partnership with government. And government needs to get its act together too. There are far too many business consultation exercises and that inflate expectations, and have no resources behind them to change policies and delivery.
Overall there is a reluctance to face facts about the UK economic decline and deficiencies as outlined above
The recently reported projection that Poland’s GDP per capital will exceed UKs in 2030 is a stark illustration of this. There is nothing so exceptional about the UK economy. In the past 40 years it has found some success in knowledge-intensive industries and services, but is in danger of losing its competitive position.
As Torsten Bell recently argued, the UK has caught the distraction disease – with no willingness to take a hard look at ourselves, and start to discuss the policy solutions needed, we cannot hope to make a dent on the poor economic growth, and address the high levels of inequality and poverty that are experienced.
Some ideas – levelling-up policy for a new national government
Folks – these are some issues I’ve been ruminating on for the past 12 months. They are by no means comprehensive or detailed enough, but there are some simple messages I would hope that anyone involved in formulating regional and local policy in 2023 and 2024 would at the least, give pause for thought.
#1 – Have some clear objectives for levelling up, and local and regional development policy
Folks – I couldn’t really say what the current government’s objectives are for regions, localities and cities. They are a mish mash of confusing ambitions, statements, tasks, many of which contradict each other. Too much current policy (across all fields) is fragmented, riddled with conflicts, and has little sense of purpose. Green and White Papers have become lists of sloganised ambitions rather than comprehensive, tested and appraised legislative documents.
So – set a small number of objectives for levelling up, or whatever you want to call it. This could be about:
- addressing inequalities in economic performance
- addressing inequalities in socio-economic performance
- aiming to boost economic performance
- reversing some aspects of centralisation and implementing devolution
- unleashing economic and policy innovation in the regions
- delivering the green economy
Just choose some clear objectives! ones you can stick with for 5-10 years!
Its worth remembering that businesses like strategic objectives and plans – and this will help to encourage more private investment. Businesses don’t know what to do if the government’s objectives are not clear or are not confusing. This constrains business investment.
#2 – A delivery bias for government and for levelling-up
Let’s change the goal of Whitehall – to deliver the government’s objectives, rather than elegant policy solutions or fudges. Too often, over recent years, government pronouncements and white papers have read like an 8-year old’s christmas list. Full of unrealistic, unworkable ambitions with no basis in reality. Let’s get real, be pragmatic and realise that delivery is hard hard work. And let’s get on with it and we’ll adapt and improve as we go.
#3 – The first 100 days of levelling up for a new government should be about delivering for the next 4 years
Don’t wait for the right structures or approaches – start on day 1 in government. How many governments have wasted 2-3 years by pondering the best structures and setting them up?
Use existing institutions and means. Initially this will be local government and block grants. There is a need to get moving fast on local and regional inequalities and lagging economic performance. The institutions and capabilities will take time to develop, and we could build in review and evolution stages – e.g.
- Develop and evolve approaches – in partnership with regions and localities
- Could have block grants in Years 1-3, then move to more devolved fiscal arrangements
- Have a good mix of revenue and capital funding. Capital funding – is lengthy in forming plans, appraisals, awards, then business case etc. There are few short term electoral benefits (under 3 years). For maximum electoral effect, try:- significant single pot revenue funds; and capital projects that will be complete by Year 3-4 of government
#4 – Significant challenges need bold responses
If the focus is solely on “Economic stability” for the UK, this means we continue to go backward.
We need to put spatial, and levelling up concerns at the heart of every policy decision and major expenditure decision – e.g. HS2, NHS, education, infrastructure, R&D. We need to ask – what are the implications for levelling up and underperforming regions?
We need to start putting more ‘value added’ government expenditure into the North – e.g. R&D. Much of the government expenditure on R&D in AI, fusion, nuclear, life sciences – is made in the Greater South East.
We have to realise that some of the Whitehall and local approaches have not worked, we need new ideas, and we need to implement them fast.
At the same time we know what has worked well in the past – so we can mobilise this and resource it properly
#5 – begin to break out of a funding and policy regime dominated by the electoral cycle
The electoral cycle means that long-term policy solutions and investments for local and regional economies are all but impossible. Over the past 13 years, all grants, funding, and policies – are aimed at short-term electoral cycles of 2-4 years.
Funding for regional and local economies is poorly conceived, structured and delivered, with the following features:-
- Short-term (1-2 years)
- Past 12 years – has focused primarily on capital grants. These have been too small and poorly integrated, or narrowly specified. Plus – electoral ‘bounce’ takes a long time to realise from these
- Fragmented (i.e. rarely joins up or complements public policy objectives spatially)
- Mandated to narrow range of uses
- Narrow expenditure period, compounded by late guidance and late issuance of funds
- Not oriented towards place-based problems or solutions
- Much funding oriented towards activities with low impact or high displacement – e.g. cultural projects in lagging towns; high streets; large scale SME grant funds
- Funding for business – doesn’t tie in with major public policy objectives – e.g. climate change, living wage, insecure employment, apprenticeships, T-levels etc
As I’ve discussed in other articles and major reports – we had a similar experience in the 1970s and 1980s and ended up with the ‘Single Regeneration Budget’ and ‘Single Pot’ for a reason – budget integration makes for better delivery and impact.
#6 – put local and regional impact appraisal at the heart of Whitehall’s policy process
The UK economy and policy institutions are too centralised. Compared to other advanced economies – the UK is overly centralised in its government structures, decision making and control over public policy and finances.
So I suggest:
- having local and regional impact and inequality appraisal as part of every green and white paper
- having local and regional impact and inequality appraisal as part of HMT budget process
- every government department reviews local and regional impact and inequality every three years
The UK is “almost the most centralised developed country in the world” – Sharon White, Second Permanent Secretary to HM Treasury.
#7 – Better align policies
In my view business support, programmes, and grants – should be prioritised into public policy goals – such as climate change transition, living wage, young people, and apprenticeships.
Major policy areas – should align with government objectives – e.g. planning, energy, trade, labour, education, skills.
There will need to be some hard choices – such as prioritising public transport over road expansion; and prioritising green construction over standard methods. But there are other benefits to consider – e.g. public transport investment helps to address inequalities.
#8 – A devolution menu of policies, powers, tools and resources
As the Institute for Government reported – England’s policy geographies are incoherent. Devo arrangements differ by geography, there are overlapping spatial initiatives such as Enterprise Zones, Investment Zones, Innovation Zones, Freeports. It is confusing, and there aren’t enough resources or civil servants to effectively deliver and manage these.
There is a need to set clear objectives and pathways to devolution. Set out powers that localities can draw down as they progress with their own institutional and political development.
We need a devolution toolkit and set of vehicles, that is much more than “central government block grant”. Although the block grant will have do early on in government, rather than wait for the perfect institutional arrangements.
I set out ‘seven tests for successful devolution’ in 2015 – and they remain valid.
#9 – Invest in, and develop the community of practice
There has been little progress in policy or practice since 2010, largely due to resource constraints and a 2/3 cut in government funding for local and regional economic development and regeneration. This manifests itself in the capacity and capability of local authorities and mayoral combined authorities (they are good and pronouncing aims and strategies, but not good at articulating solutions). Both a very under-powered in terms of staffing levels and funding.
In my experience, typically a UK city or locality ignores useful lessons from the rest of the UK and abroad. I get a fair bit of consultancy work from this – reviewing and synthesizing lessons from policy and practice from other territories.
If we move to an era where Whitehall is more about an ‘enabling’ role for local and regional institutions, then developing and investing in the community of practice is an essential part of ensuring success.
#10 Encourage policy experimentation
I don’t think we can change the economy nor address the rampant inequalities in this country without exploring new policy ideas. This will involve:
- Openness to ideas
- Developing a vibrant community of practice to share experience
- Transparency – so we know what worked well, and what didn’t
- Pilots, evaluation, with routes to mainstreaming
#11 – Make the economic development case for addressing poverty and inequality
Development economics and policy practice – provide a rich source of evidence that supports routes out of poverty and addressing poverty as key strand in achieving economic development and contributing to economic growth
Development economics principles apply to all countries – just being an advanced economy at one point in history does not mean that there are completely different sets of economic theories, evidence, rules, experiences or practice to draw on that are separate from the rest of the world
Net exchequer benefits and managing public services (if you reduce poverty, you can improve health) are also key reasons to address poverty and inequality.
#12 – Smart government that builds success and reduces the chance of failure
There are a range of well-known mechanisms and approaches here which we seem to have lost sight of in the past decade. The tools of Green Book appraisal, fiscal rules, public sector audit, and evaluation are all useful and relevant.
We should make programme and project evaluation mandatory every 3 or 5 years, in lockstep with funding approval cycles.
As mentioned, developing and investing in the community of practice and professional standards will pay off. A cadre of well-trained professionals will help deliver better results and impacts, and also contribute to the continual development of policy and practice.
Having the mechanisms in place to get funding the places needed, and ensure effective delivery within 5-year timeframe – means that we will need good civil servants and officials in Whitehall. Don’t underestimate how much talent, particularly for practical issues of policy and expenditure, has been lost since 2010. We’ve had a cohort of civil servants brought up on small grants and fragmented initiatives
Perhaps we need a needs and capabilities assessment for Whitehall and an improvement plan?
I’ve focused on getting the right objectives, processes, and sense of direction in place. I feel that localities can do a lot themselves – if they are given a more fertile and supportive policy environment to work within.
- Green economy
- Enterprise support and here
- Industrial Strategy
- Skills improvement plans
- Using economic forecasts
- Local Investment Plans
- Managing and Restructuring Economic Development Organisations
- Data and intelligence
- Learning from global tech regions
What do you think?
There’s a window of opportunity to inform the debate – what are your ideas, what would your priorities be? do comment below and let us know.
Glenn runs his own consultancy, Mylocaleconomy. We help local leaders translate their economic ambitions into winning advocacy and solutions that get funded. We work all over the UK – from the Highlands of Scotland to Wales, Bristol, Teeside, North East England, Gloucestershire, London, Cambridgeshire and Sussex.
We love challenging assignments, complex opportunities, and intractable problems. Our vocation is to help city, region and local economies succeed and for prosperity to be sustainable and shared.
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