Group Instinctif Partners Public Policy

July 13, 2021

Levelling up

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The Queen’s Speech said that the Government would “level up opportunities across all parts of the United Kingdom”. However, until now, the Government has struggled to define what levelling up means and how it will be measured.

What is Levelling up?

Levelling up is not yet well defined, even inside the Government. What is clear is that levelling up reflects the Government’s increased emphasis, both in terms of financial support and focus on its new coalition of voters in the peripheral towns, especially in the North and Midlands. Levelling up is not a technocratic or ideological mission. Instead, as Will Jennings from the Centre for Cities has argued, it is a reactive and inherently political agenda with the purpose of presenting the Conservatives as the party of redistribution, thus securing their new voters’ support in a more permanent way.

Levelling up is not just designed to redistribute between social classes or between regions, but instead primarily seeks to redistribute within regions. Levelling up funding is therefore highly targeted to improve specific communities which residents feel are in decline, and which are increasingly important to the Conservatives’ electoral prospects.

Levelling up is about improving the lives of residents as much as it is about economics. For the communities that levelling up targets, the goal is not just increasing productivity, stimulating economic growth or attracting more graduates. Improving local bus services, High Streets and local road infrastructure are often more valuable, popular, and realistic ambitions for towns like Burnley or Stoke.

The Levelling Up Fund

The main mechanism for achieving levelling up is the £4bn ‘Levelling Up Fund’, to which any area can bid. The stated core objective of the fund is improving local communities through investing in local infrastructure. The fund aims to achieve this through investment in:

  • Town centre and high street regeneration, including remediation and repurposing of vacant and brownfield sites,
  • Improving local transport connectivity and infrastructure, including upgrades to local bus, road and cycle infrastructure, and
  • Maintaining and regenerating cultural, heritage and civic assets.

The Levelling Up Fund’ is led by the Treasury and brings together the Department for Transport (DfT) and the Ministry for Housing, Communities and Local Government (MHCLG). In doing so, it aims to remove silos between departments, allowing areas to focus on the highest priority local projects.

While the fund is open to every local area, it is especially intended to support investment in ex-industrial areas, deprived towns and coastal communities. It is also designed to help local areas select genuine local priorities for investment by putting local stakeholder support, including that of the local MP, at the heart of its mission.

For this fund, local authorities are divided into categories 1, 2 or 3, depending on their identified level of need, with category 1 representing places deemed most in need of investment. This leaves plenty of room for decisions to become highly politicised, and open to accusations of ‘pork barrel’ politics.

While initially aimed at local infrastructure, use of the term ‘levelling up’ has now expanded to refer to plans for a wider range of reforms in the areas of law and order, education and climate change. Levelling up also includes the Plan for Jobs, the Freeports Programme and the UK Infrastructure Bank. This ambiguity reflects a lack of clarity around the term.

The recurring theme is a focus on increasing investment and funding outside of London, the Southeast and other major English cities. The Prime Minister Boris Johnson recently said, ‘Making sure our children get the best possible education, transforming our town centres and correcting the regional imbalance of public sector roles – this is levelling up in action’.

Delivering levelling up

Boris Johnson has recently appointed Neil O’Brien MP, founder of think tank Onward, as his levelling up adviser to drive forward work on a forthcoming White Paper. Tellingly, the White Paper will be led by the Prime Minister and a new joint No10 / Cabinet Office Unit has been set up to drive progress.

The unit is made up of 15 civil servants and is led by Tom Walker. It reports directly to Johnson on the development of a set of policy proposals covering public spending, devolution, inward investment, industrial policy, manufacturing growth and regeneration.

In a recent post on the ConservativeHome website, O’Brien suggested a number of individual-level metrics such as employment, income and wellbeing should determine whether government is reducing inequalities. Levelling up, he said, would not be just about geographical areas, but about people.

At a recent Institute for Government webinar on how to turn the promise of levelling up into reality, Lord Mandelson argued for the creation of a levelling up index, based on spending power, benefit dependency, an index of multiple deprivation related to poverty, crime rates and education outcomes, health, access to mortality rates and empty shop rates. This would allow the progress of the Government’s initiatives to be measured more concretely.

A group of Conservative MPs, many from the recently gained “red wall”, have also formed a levelling up taskforce. This group of more than 40 MPs are calling on the Government to set out a geographical analysis of how tax and spending changes affect different areas, with a view to ensuring the country’s most ‘left behind’ areas are at the forefront of Government’s priorities.

A local approach  

The Government has shifted the focus away from the northern big city regions which were initially championed by the “Northern Powerhouse” concept and were the early recipients of devolution deals. Northern Conservative Party members and councillors never warmed to the Northern Powerhouse idea, which they viewed as too metropolitan and not focused enough on their voters.

The move towards a more localised levelling up better reflects the desires and expectations of Conservative voters and members and represents a move away from the era of Cameron and Osborne.

This parochial approach may prove very astute. In Deborah Mattinson’s book ‘Beyond the Red Wall’, it is revealed the surprising extent to which “red wall” voters often live their whole lives around just a few streets where they live, work, shop and socialise. These people are often stubbornly proud of their local town and don’t feel connected to nearby cities.

The other localised funding, administered by MHCLG and associated with levelling up include:

  • The Community Ownership Fund – this is a £150 million fund helping communities buy assets deemed to be of community value,
  • A Towns Fund – this is a £3.6 billion fund investing in towns, and
  • The UK Community Renewal Fund – this is a £220 million precursor to the UK Shared Prosperity Fund designed to compensate for the loss of EU funding.

On May 19th, it was revealed that 57 local areas have been confirmed as recipients of £830 million worth of investment to transform high streets into vibrant places to live, work and shop. On May 8th, the Towns Fund allocated a further £725 million of funding for 30 towns.

The Government claims these investments will help these towns grow their local economies, while also breathing new life into neglected areas. For the most part, these areas flipped to the Conservatives in 2019, with further consolidation of that support realised at the 2021 local elections.

Moving civil service jobs north

Another feature of levelling up is the movement of public sector jobs to the towns of the North and Midlands. More than 3,000 civil service jobs across the Home Office and Department for Business, Energy and Industrial Strategy are to be relocated to hubs in Stoke-on-Trent, Edinburgh and Belfast by 2025.

At the most recent Budget, the Chancellor announced the Government would be opening a new Treasury campus in Darlington, an infrastructure bank in Leeds and eight freeports. While some may argue this is shifting jobs, rather than creating new jobs, these are things voters will be able to easily see and we should expect this trend to continue.

Getting Brexit Done

The Government said that it will launch its UK Shared Prosperity Fund in 2022 with an aim to replace the funding pools that cities, towns and regions no longer have access to after the UK’s departure from the EU. The Government has published details of the UK Community Renewal Fund (UKCRF), which will aim to bridge this gap.

The concept of levelling up was borne from the 2016 EU Referendum. Brexit should make it easier for the Government to “level up” the UK, giving it greater flexibility around industrial support and funding mechanisms. On first becoming Prime Minister, Boris Johnson promised his government would answer:

“The plea of the forgotten people and the left-behind towns by physically and literally renewing the ties that bind us together so that with safer streets and better education and fantastic new road and rail infrastructure and full-fibre broadband, we level up across Britain with higher wages, and a higher living wage, and higher productivity”.

This is who ”levelling up” is for. For Brexit supporters, levelling up is an attempt, not only to deliver on the referendum result, but to solve the underlying reasons which drove that vote. By understanding the modest and often parochial ambitions of his voters, Boris Johnson shows considerable political acumen.

Criticisms of levelling up

The Government has received criticism that the levelling up agenda does not offer a coherent vision for empowering the North. Levelling up funding has so far been piecemeal, on a small scale, controlled from the Treasury and highly targeted for maximum political dividends.

However, the lack of vision is arguably not a drawback, but a deliberate feature. Unlike its Northern Powerhouse predecessor, the ambition of levelling up is not to transform the economy of the North so it is a new rival for London. Rather, rising house prices, demographic change, overcrowded transport networks and the disruption of thousands of new houses already suggest that replicating the London model will not necessarily be popular.

Rather than seeking to close the productivity gap between the Southeast and the rest of the UK, levelling up is a more fundamental attempt to reduce the pressure of ‘agglomeration’ which has created a divide between the large conurbations and more peripheral towns. The purpose of levelling up can be understood as a modest attempt to improve the high streets, bus services and general lived experience of residents in middle England’s small towns.

Another criticism is that levelling up, without any “levelling down” for London, and South East, where there are a lot of Conservative MPs, implies substantial extra spending per head in much of the country. It is not clear how the Government would square this circle. Moreover, southern Conservative MPs have raised concerns about the ‘unfashionable south’ missing out opportunities as attention turns north. Some have pointed out the Southwest in particular has substantial pockets of poverty and levelling up must therefore be transformed into a national project with economic growth plans for every British region.

Levelling up through state intervention outside the Conservative Party’s core constituencies of the home counties represents a radical shift in policy compared to the Thatcher years. While we might be impressed by the Conservative Party’s capacity to ruthlessly and pragmatically shift its ideological direction, the contradictions of levelling up are already visible and pose a challenge to a government wanting to hold its broad coalition together moving forwards.

Will levelling up work?

Whether levelling up will work will depend largely on how it is measured. The lack of ambition or coherent vision means it will likely fail to meaningfully rebalance the economy away from London. The preference for piecemeal investment designed mainly to be visible and popular will never be favoured by technocrats and will inevitably be criticised as short-termism. Moreover, the relatively small quantities of money available in the various funds means that investment is unlikely to leave any embedded long-term legacy to the recipient communities.

While levelling up will therefore disappoint those with loftier ambitions for a radical reshaping of the northern and midlands economy, the Labour opposition would be wrong to conclude that it will be a failure.

Levelling up, after all, was always a political project rather than a transformative economic one. If we measure levelling up not by economic impact, but by whether it supports the government’s electoral ambitions, we may conclude it has been much more successful.

In the short term, levelling up will provide a series of powerful symbolic projects and investments that will enable the Conservative Party to present itself as being on the side of the once neglected areas. The Prime Minster will probably succeed in his core mission of modestly improving the lives of people in left-behind towns. In doing so he has the opportunity to convince many new Conservative voters that this Government is on their side and so deepen the realignment of British politics in his favour.

 

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