Levelling up can’t be done top down
15 July 2021
By Professor Diane Coyle, Bennett Professor of Public Policy, University of Cambridge
The economist Robert Hall once compared cities to economic booms, the one occurring across space, the other in time.1 Across any dimension, economic activity is unevenly distributed. Differences between places tend to persist for long periods; after all, the Romans divided Britain into Britannia Superior and Britannia Inferior, and it isn’t hard to guess which is South and which North. Yet there are also many examples of the fortunes of different places taking a significantly new trajectory. While most Italian hill towns have an economic afterlife of tourism only, and mining villages less than that, the Industrial Revolution changed the economic geography of the UK for well over a century.
The underlying forces of economic change have prompted a significant revival in understanding economic geography, and trying to manage the outcomes. The deindustrialisation of the late 1970s and early 1980s has cast a long shadow over the economies of many cities and towns in the devolved nations and the north of England; today’s ‘left behind’ places are to a large extent those former manufacturing locations. Subsequent structural changes – both the shift in some manufacturing offshore but more importantly the spread of new technologies – have exacerbated the gaps between places. A growing share of jobs require different kinds of skills such that people with degrees are doing better (more jobs, higher pay) and also clustering together in bigger cities. Lucky places have been pulling further ahead of unlucky ones. Unlucky ones face inter-related disadvantages, including low pay jobs, poor public services and transport, ill health, bad housing, poor social infrastructure, and less access to green space.
This is true across all the rich OECD economies, but the gap between poorest and richest places (within and between regions) is worse in the UK than elsewhere. The reasons for this are not entirely understood but lie in the interaction between politics and economics. The UK is over-centralised, as the pandemic has again revealed. This makes it almost impossible to get the co-ordinated policies needed at local level to address the inequalities baked into the economic structure of different places. The decision-making about major infrastructure investments has exacerbated the gaps rather than narrowing them. There is also great instability in policies: when businesses are planning investments that will last for decades, government industrial ‘strategies’ are binned after two or three years. The instability applies also to the structures of local government, with frequent changes leaving a map of overlapping, unclear accountabilities, particularly in England.
Regional policy has long aimed to narrow the gaps in economic outcomes, including New Labour’s Regional Development Agencies and the city devolution deals introduced by the Coalition government. The shifting electoral map of Britain since 2016 has given the underlying ambition new impetus. So what are the policies and priorities in terms of levelling up? The range of issues that might come under this heading is wide indeed.
This makes one type of change stand out as by far the most important: devolving decision-making from the centre. This applies even when bits of the centre are moved out of London, such as the Treasury to Darlington, DCMS to Manchester and MHCLG to Wolverhampton: for all the symbolism, there will still be a national perspective applied to challenges that need local information and co-ordination. Not even the most wonderful new database of sub-national data can convey to national civil servants the specificity of the information needed to tackle stubborn problems. A new bus route or road crossing could make all the difference to people’s ability to travel to a different job or to get to the shops. Tweaks to timetables, tailoring the local FE courses to a local big employer, where to put a community café for parents and babies – all these can help weave the fabric of a more resilient local economy. Much of the discussion of levelling up has focused on government spending. While redistributing this will help, redistributing power is more important. Yet there are real tensions in this agenda, both in England and with regards to the devolved nations.
As a second priority, taking healthcare seriously as part of the national infrastructure will be even more necessary after the pandemic. The UK has experienced a bigger decline in health output than many other nations partly because of the choice of method for putting together the statistics but partly because the NHS had no spare capacity and therefore had to make bigger reductions in non-COVID19 treatments. ‘Efficiency’ is highly inefficient when there is a surge in demand and fixed capacity. If the NHS, public health and social care had been integrated and the insurance of some spare capacity had been in place, the outcomes during the past year and a half would have been less dire. It would also have contributed to a less geographically unequal society, as health and poverty and place are so tightly linked. Health is also a key part of ‘human capital’: healthy people are more productive, and an economy with a healthier population is richer. The health system is infrastructure just like the energy system: it needs to be able to supply surges in demand and supply the whole country to the same standard, which requires adequate investment.
Finally, transport and broadband infrastructure are important. They shape the way the economy spreads out and clusters over space. Commuter networks and road congestion determine the extent to which urban labour markets operate efficiently in getting the right people to the right jobs. HS2 is controversially under way, but many economists think HS3, fast and reliable connections between northern and between midlands English cities, would be a more effective option in terms of potential economic benefits. Mobile and fixed communications networks have become an essential, and universal service means public investment in uneconomic geographies is needed.
Levelling up is a misleading term in the sense that absolute economic equality between different kinds of places is not possible; there will always be some agglomeration. There is also a risk of the political agenda to level up being seen as a zero sum game, as if those northern constituencies can only gain at London’s expense. Apart from the fact that spatial inequality exists within regions and within towns and cities, the common thread in all these three priorities is the need to make it possible for people around the country to have the agency to get on and lead the kind of lives they want. Against the headwinds of structural economic change with automation and the net zero imperative, public investment will be needed, but empowering places is more important.
Professor Diane Coyle is the Bennett Professor of Public Policy at the University of Cambridge. Diane is also a Director of the Productivity Institute, a Fellow of the Office for National Statistics, and an expert adviser to the National Infrastructure Commission.