The government has relied too heavily on centralised approaches to driving up productivity and delivering more balanced regional growth in England, a major report has said.
Researchers drew the conclusion following interviews with 93 current and former politicians and civil service leaders – most of whom also said the UK’s “unusually centralised governance” has stymied economic growth across the English regions.
The resulting report, Why hasn’t UK regional policy worked? The views of leading practitioners, also found that previous policies to grow the UK’s regional economies had been “geographically biased and insufficiently ambitious”; that policy instability has led to endemic short-termism and damaged policy outcomes; and that while widening regional divisions are “not inevitable”, correcting them is difficult.
And it says “sustained, top-level political will and leadership” will be needed to overcome Whitehall's centralising tendencies and empower local government.
“Our findings so far show that decision makers regret not being ambitious enough in the plans for regional growth; this is in part due to a deep culture, created through decades of political pressure, of centralisation in Whitehall; and those centralising forces have led to recurrent waves of ‘chop and change’, preventing an alternative power base emerging and establishing itself,” the report said.
Reducing regional inequality has been a cornerstone of the Conservative government’s stated political agenda since Boris Johnson unveiled his flagship levelling up agenda in 2019. However, various initiatives under the policy have been criticised, including the way regional growth funding has been distributed through the Levelling Up Fund and the Towns Fund.
The report identified two trends dating back to the 1980s that have made it harder for the UK to respond to rising regional inequality: a process of centralisation and a corresponding reduction in funding and agency to local government, “raising the perceived risk of ‘letting go’ from Whitehall”.
Interviewees were generally in agreement that the trend towards more centralisation has been negative. David Blunkett, who was home secretary under Tony Blair, described the trend as “a two-way street: central government is too centralised and local government is too enfeebled to actually grasp the opportunity”.
And Peter Mandelson, the former Labour spin doctor and later first secretary of state, said the result is that “you can't regenerate regions or places or towns simply by a top-down manoeuvre or deployment of money. There has to be local institution building, local decision making”.
The research also identified “distrust” of local government within Whitehall as a barrier to decentralisation. At the political level, levelling up secretary Michael Gove noted “Tory attitudes towards local government were influenced by the experience of ‘loony left’ council (sic) in the 1980s” – and Dan Corry, head of the No.10 Policy Unit under Gordon Brown, said that “when we came in there was a suspicion – certainly from Tony Blair and others – that local government was a bit useless”.
Some interviewees said a level of distrust remains in the civil service, with Greg Clark recalling “general snootiness” towards “people who worked in city halls” in the Department for Education when he was a coalition minister.
He attributed this to “an institutional memory of skills policy" where "the whole history of local Learning and Skills Councils and the idea of local authorities running further education was not associated with conspicuous success".
"There was an ingrained view that giving skills policy back to local authorities […] was something that we’d done before and doesn’t end well,” he added.
Poor understanding of local conditions has also contributed to poor policymaking, according to a number of interviewees. Sir Martin Donnelly, former permanent secretary at the Department for Business, said: “Our default position was always to centralise on these grounds: it appeared (short term) to offer more transparency and better value for money. Long term, it offers neither of those things.”
‘Warring fiefdoms’
Former Ministry of Housing, Communities and Local Government permanent secretary Melanie Dawes said she had observed a “very strong vein against intervention… sitting hand in hand with what I think is a very, very centralist approach to government by the Treasury, No.10, and Whitehall departments” during her time in government.
“The centralising forces I’ve been talking about go a lot deeper than anyone in Whitehall really ever realises. It was only when I got to MHCLG that I saw it and could feel it as clearly as I did,” she said.
Several of the interviewees argued that a lack of alignment between government departments could hinder change. Leeds City Council chief exec Tom Riordan described Whitehall as “five-dimensional chess at times”.
"The problem local government has had through the years – the big systemic weakness in the system – is that the triumvirate of the Treasury, BEIS and DLUHC have rarely been aligned and had a common view about what should happen. You have to navigate your way around that,” he said.
Former Department for International Trade perm sec Martin Donnelly meanwhile described central government as a series of “warring fiefdoms” that “is never going to be able to come up with a coherent policy”.
Interviewees who took part in the study agreed that if change is to happen, it will require powerful political leadership. They argued that regional policy has only been very effective under powerful chancellors, such as Gordon Brown and George Osborne, or deputy prime ministers such as Michael Heseltine or John Prescott.
Sir Richard Leese, who led Manchester City Council from 1996 to 2021, said: “You need a prime minister who supports, and a chancellor who drives”; while Government Property Agency chair and former Newcastle City Council chief exec Pat Ritchie said that "policy has been more successful, from a Whitehall perspective...when the agenda has been driven by one powerful department, usually the Treasury, that can corral others".
A lack of full-throated support from No.10 has also undermined regional policy reform, the report said, with a lack of support from Tony Blair’s No.10 leading to “fatal consequences” for the 2004 referendum in which voters rejected a North East Regional Assembly.
The research was conducted by the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School; the Department of Political Economy and the Policy Institute, King’s College London; and the Gatsby Foundation. The Treasury supported the project by granting access to its archives.
While the report identified several areas of consensus, a number of questions proved more contentious – leaving crucial questions unanswered. There were diverging opinions on what the most important policy levers for growth are; the best model of decentralisation; and to what extent Whitehall should drive institutional reform in England.
On the latter point, the report noted: “Most think that it is increasingly urgent for government to mandate a solution from the centre to prevent widening inequalities, though the shape of that solution remains disputed.”