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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
So much for “levelling up”. In 2019 the Conservative party stormed to an election victory partly on the promise to boost Britain’s “left behind” regions and nations. Nearly five years later, the government has little to show for it. A parliamentary watchdog last week reported “no compelling examples of delivery” on the agenda through a £10.5bn kitty that was meant to deliver quick, small-scale projects. The idea was that visible improvements to local parks, town halls and markets would buy the government time to tackle long-term regional inequality issues such as poor infrastructure. Damningly, only one-third of the cash has been allocated — and just 10 per cent actually spent.
The funding process was flawed from the start. Councils had to submit bids for various centralised pots, such as the £4.8bn Levelling Up Fund. But following years of austerity, local authorities — some of which now face bankruptcy — lacked the resources to make proposals and execute them. Civil servants back in London also lacked clear criteria to assess competing projects. The Public Accounts Committee said the levelling up department, which oversees the programme, was biased towards “shovel-ready” projects which were often less ready than billed.
The administrative logjam has been exacerbated by economic shocks. The pandemic and the cost of living crisis forced the levelling up agenda to take a back seat. Surging inflation, supply-chain problems and shortages of workers, particularly in construction, led to delays and spiralling costs. Political churn has not helped: between 2021 and 2022, the levelling up department changed secretary of state five times.
The gap between the government’s rhetoric on levelling up and the reality will not go unnoticed by voters in the Midlands and northern England. Many “Red Wall” constituencies switched from Labour to the Conservatives in 2019 partly thanks to then Prime Minister Boris Johnson’s energetic pledge to revitalise struggling communities outside the South East. The wealth imbalance indeed deserved attention. Overturning decades of economic decline in Britain’s regions is essential to tackling the country’s wider growth problems. But it is a decades-long project — which only makes the lack of progress over the past five years even more stark.
Aside from the difficulties of putting local-level pots to good use, the government’s UK-wide vision for regional growth, set out in a promising White Paper in February 2022, has stalled. The decision to cancel the Manchester leg of HS2, a high-speed rail project to connect London with the North, shows the government has not been able to execute its broader vision either. Efforts to roll out 5G across the country have also lagged behind ambitions for tech-led economic growth.
There are a few bright spots. Further deals for directly elected “metro mayors” in Greater Manchester and the West Midlands have helped reinject some optimism into Britain’s second-line cities, which will be vital engines for regional growth. Devolution packages for North East England are also promising. Greater powers and funding for local authorities help ensure policy decisions tie in with realities on the ground.
Yet the next government will be picking up the regional growth agenda from a difficult position. On the current trajectory, the Institute for Public Policy Research, a think-tank, forecasts wealth per capita in England’s North East to remain around half that of the South East in 2030. Cash-strapped local councils will make further progress challenging. Skills shortages and a complex planning system also hinder the implementation of projects.
Britain remains one of the most centralised and geographically unequal economies in the OECD. That regional inequality has become a focal part of the national conversation is a good thing. But the next government must prove it can do more than just talk about it.