There is a problem with ‘levelling up’ – the government has run out of money

Within a few days we are promised the detail behind the government’s signature policy: “levelling up”.

We have waited a year for the government to work out what the slogan means. To do the working out, Boris Johnson has deployed his de facto deputy, Michael Gove, a very clever if unloved colleague. The prime minister is desperate to distract from stories about parties and sleaze. The promised white paper can’t come soon enough.

Mr Gove does, however, face two challenges that were not so obvious a year ago. First, the government has run out of money. The chancellor is desperate to retrieve spending control, which was lost in the early stages of the pandemic. His priorities are to keep national debt from exceeding the magic number of 100 per cent of GDP and to create room for tax cuts to restore his reputation as a genuine Conservative. So Mr Gove must perform a modern miracle of the loaves and fishes, or pretend that “levelling up” isn’t to do with money at all and is really about structures of government decision-making.

A second problem is that the policy is to be launched against the background of an impending severe squeeze on living standards caused by a sharp rise in energy costs, inflation in general and higher taxes on income. The squeeze will be felt most acutely by those on low incomes – those on low pay and benefits, precisely the people who would expect to benefit from something called “levelling up”.  In the middle of a painful income squeeze, any benefits from the project may go unnoticed.

Conservatives have not traditionally worried about “left behind” people or places. Their political base was amongst the relatively well off, the elderly and the upwardly mobile. The Brexit referendum and the 2019 election, however, revealed a new constituency of support from traditional working-class voters in former Labour strongholds in the north and Midlands: Mansfield Man and Workington Woman. “Levelling up” was essentially a political formula involving rewards for their loyalty and recognition of their communities.

Beyond the self-serving politics, it isn’t straightforward to identify who or where is deserving of being “levelled up”. There are rich people in poor northern places and poor people in rich southern places. The streets of London may be paved with gold but some of the most deprived people and communities are in the capital. Glasgow and Stoke are among the poorest cities in Europe but both have prosperous residential areas (usually built upwind of industrial smells and soot). Some of the most acute deprivation is to be found in coastal towns in the south, such as Thanet in prosperous Kent or Lowestoft and Harwich in Suffolk and Essex. Some of the places with the lowest wages are in idyllic rural Somerset and Devon: not on most people’s deprivation maps.

Granularity matters. At the lower end of Maryhill Road in Glasgow, an area I once represented on the city council, life expectancy is more than a decade shorter than in the prosperous suburbs a mile away. In my home city of York – a cosmopolitan city of two universities, culture, start-ups and sustainable living – there are extremely deprived areas harbouring hardship which would have shocked Seebohm Rowntree when he did his poverty studies there more than a century ago.

The government is clearly concerned with place rather than people. If it were the latter, the focus would be on improving universal credit, social housing and enhancing the pupil premium or student grants to promote equality of opportunity. These are not government priorities.

Instead, the government is preoccupied by energising northern towns rather than energising already energetic cities: Bury and Oldham rather than Manchester; Batley and Bramley rather than Leeds. The rationale appears to be that cities have a lot going for them – a wide range of jobs; high productivity, high wage, job opportunities; universities; leisure activities; varied shops. By contrast, depressed, deindustrialised towns which have lost their main employers and have little to offer need something to inspire hope and civic pride.

One problem with this analysis is that the evidence suggests one of Britain’s problems relative to economically more dynamic countries is that – except for London and Bristol – cities are less productive than the country as a whole. In other words, it would make more sense to support cities to be more successful and to make it easier for residents of nearby towns to get access to them through better public transport.

If the problem of “levelling up” is defined in terms of place, we should be looking for good examples of how to do better. The problem is that geographical inequalities are remarkably persistent. The German government unleashed a tsunami of money to revive depressed East German towns but they are still depressed. The disparity between the north of Italy and the Mezzogiorno is as painful as it was generations ago. The American “rust belt” is still rusty and a gift to the angry, populist politics of Trump. It is possible to point to a few areas that have seemingly stopped being “left behind”, such as the Basque country and the Ruhr, but the UK has few obvious examples.

By contrast, city centre regeneration has a track record of success. Take infrastructure like the metro systems in Manchester and Tyneside; co-financing industrial investment as in the Coalition’s Regional Growth Fund; supporting creative industry clusters as in Salford or Dundee; franchising good, accessible bus networks, as in London; civic universities and support for spin-offs. But most of these require government money, now in scarce supply. The Treasury has already axed promised rail improvements.

If little money is on offer, Mr Gove will be tempted to play around with the structures of government and call it “levelling up”. The diagnosis that the UK has too many levels of government but too little power beneath Whitehall is a good one, but the prescription to sort it out looks suspect.

It is rumoured Mr Gove wants to extend the elected mayor system to other parts of local government, creating county and town mayors. The problem with moving around the machinery of government is that it has done little to boost local decision-making. The city mayors have to negotiate “city deals” to secure Whitehall agreement to their plans. Autonomy must be earned. There is a veneer of decentralisation but no real devolution.

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Andy Burnham in Manchester and Andy Street in the West Midlands have undoubtedly given their regions a voice and respect, but their powers to act are very limited. And behind them is a constant power struggle with other elected local bodies who resent being cut out of decisions.

It is also rumoured Mr Gove wants to clear up the clutter of local bodies by creating lots of single tier councils under the elected mayors. This will mean culling many (often Tory) district councillors. Good luck with that. More mayors and more unitaries will not of themselves foster prosperity or level up northern towns. If anything, they concentrate power further in the hands of fewer people.

There is now a risk that without serious money behind the strategy, “levelling up” becomes a bloody power struggle with local government, and aspirations to elevate depressed towns simply fade away.

Sir Vince Cable is the former leader of the Liberal Democrats and served as secretary of state for business, innovation and skills from 2010 to 2015. He records a regular podcast ‘Cable Comments’, expanding on the themes from this column