On the level: What does the government mean by levelling up?

Written by Colin Talbot and Carole Talbot on 20 February 2020 in Feature
Feature

Prime minister Boris Johnson has pledged that his government will lead a ‘levelling up’ of prosperity across the UK. But where does he mean and what would count as success? By Colin Talbot and Carole Talbot

Photo: PA

It’s the new government buzzword, but what does “levelling up” really mean, and how could it be done? The first question is: levelling up of what? The glib answer is usually: rebalancing the economy between soar-away London and the rest of the UK. But what is the unit of analysis?

Most official analyses of the economy and public spending take a regional approach. This uses the countries of the UK – England, Wales, Scotland and Northern Ireland – and then sub-divides England into nine regions (north east, north west, Yorkshire and the Humber, east Midlands, West Midlands, east of England, greater London, south east, south west).

But what are often referred to as the “left behind” areas do not correspond to these regional divisions of the UK. Within greater London there are areas of economic and social deprivation which cannot be captured even at London borough level. Similarly the socio-economic health of parts of Wales are highly diverse, as a recent analysis of Welsh towns by Cambridge academics shows.


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Devolution has also complicated the picture because Wales, Scotland and Northern Ireland have local responsibility for many of the levers of government with which “levelling up” might be achieved within their boundaries. But UK-wide policy still matters for them too – they can’t easily “level up” with Greater London by themselves.

Government policy has shifted its focus several times in recent decades. Under New Labour the emphasis was very much on the English regions – with their regional development agencies and funds, and their integrated government offices for the regions.

Indeed, that Labour tried to go even further with an attempt to introduce a new regional tier of government to facilitate socio-economic development. But their first referendum to set one up, in the north east, failed badly in 2004 and the policy was abandoned. Incidentally, one of the main organisers of the “no” campaign was a certain Dominic Cummings.

The coalition government from 2010 and the Conservative governments since 2015 shifted the focus away from the traditional regions to smaller “city-regions” – Manchester being the prime example – and the “mega-region” of the so-called “Northern Powerhouse”.

But at the same time these governments were slashing local government budgets, regional development funds and many other public services and benefits. We estimated in 2011 that almost £1bn was being taken out of the Greater Manchester area through austerity, for example.

So where is the focus of the new government policy going to be – English regions? City-regions like Manchester? Mega-regions like the Northern Powerhouse? Or even towns?

Another question is whether “levelling up” is really about areas at all. In a recent post on the ConservativeHome website, Conservative MP Neil O’Brien suggested a number of individual-level metrics like employment, income and wellbeing to determine whether government is evening out inequalities. In other words, levelling up should not be just about geographical areas but about people.

A focus on individual-level inequality instead of, or as well as, a spatial emphasis would produce very different sorts of questions and policies, though most discussion remains centred on place, not people.

A further big question is how might “levelling up” be achieved? What tools can government deploy? The first tool government has is money, and that is where a lot of attention tends to focus.

Spatial inequalities in public spending clearly exist and have done for decades. In 2017-18, according to government’s latest Public Expenditure Statistical Analysis, England had the lowest figure at only £9,080 per head – while Wales has £10,397, Scotland £10,881 and Northern Ireland topped the table with £11,190 per head.

Within England, public spending per person varies across regions. London gets the most money at both local and general government levels – more than £1,000 per head above the cross-England average.

Perhaps surprisingly, both the north-west and north-east are also above average, while the other six regions all receive below average funding. So levelling up without any “levelling down” for London, the north west and north east, would actually imply substantial extra spending per head in much of the country.

We estimate that – within England – to level up to London levels of spending per citizen would need a 6% rise in identifiable public spending: an extra £72bn at 2017-18 rates.

There may be good reason why per capita spend in the east of England is 24% less than in London, but those advocating “levelling up” need to explain what those reasons are, and why the combined north seems to do relatively well.

One final point about money: all the above is about general public expenditure on services and benefits. There is lots of talk about extra capital investment in infrastructure and research and development, but the short-term economic impact of such spending is slight compared to the much, much bigger numbers involved in austerity in public spending – which has not ended.

Of course, government has other tools with which to level the playing field. There may be opportunities, for example, to skew the regulatory environment towards “levelling up” as part of leaving the EU, but it is not very clear how.

There is also talk about changing the organisational structure of government – moving more functions to the “left behind” areas. But central government is less than 10% of the public sector workforce, most of whom are already local. So even moving one in 10 central government workers would barely make a dent in the distribution of public sector jobs. And most of what could be done has already happened in previous decades anyway.

“There is lots of talk about extra capital investment in infrastructure and research and development, but the short-term economic impact is slight”

Finally, government could do far more to use its powers over information to better understand, and shape, policies. For example, as post-Brexit re-regulation gets under way, regulatory impact assessments could be expanded to examine in much more detail the impact on spatial and individual inequalities.

Levelling up also needs changes from non-government actors. If businesses – UK or foreign investors – choose to locate in London or the south it becomes that much more difficult to level up the rest of the country, so policymakers also need to consider how they can influence these choices.

Levelling up is a key commitment for the new government but the strategy faces serious challenges, not least on where the bulk of public spending goes. Levelling that up would be a huge task.

So for now there seem to be more questions than answers around the policy. And there is a clear danger that raising expectations by simplistic talk about levelling up will be taken at face value. And when it proves impossible to actually level up things like public spending, possibly for good reasons, the policy will rapidly be seen as a failure.

At the very least, as MP Neil O’Brien says, the government needs to be much clearer about what “levelling up” actually means and on what metrics it will be judged.

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Colin Talbot and Carole Talbot
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Prof Colin Talbot and Dr Carole Talbot are board members of the Radix think tank, and research associates at the University of Cambridge

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