Monthly Archives: June 2020

The UK is sometimes viewed as having one of the most geographically unequal economies in the world – where London and the South East are seen as some of the most productive and prosperous places in Europe with other regions and places lag far behind. ‘Levelling up’ is a term being used by Government to describe its ambitions for addressing these longstanding local and regional inequalities. What does the term come from, how is it being implemented and can we ensure rural places are not ‘left behind’? Jessica Sellick investigates.

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What is ‘levelling-up?’In recent times the term first came into prominent use when Boris Johnson used it in a speech to launch his leadership campaign back in June 2019. Then he pledged to “level up” disadvantaged regions and focus on social justice ensuring that there would be no community left behind: “we must fight now for those who feel left behind. We need now to level up, not to neglect our capital — of course not — but to put in the infrastructure that will lift every region.” When he became Prime Minister Mr Johnson went on to deliver a  speech to delegates at the 2019 Conservative Party conference describing how “indeed the best way to level up and to expand opportunity is to give every kid in the country a superb education so that is why we are levelling up education funding across the country…so that every child has the chance to express their talents.”

In October 2019 the Centre for Policy Studies (CPS) published a report detailing how wealth, talent, trade and investment are concentrated in London and the South East. Launched by Communities Secretary, the Rt Hon Robert Jenrick MP, the report also contained a blueprint setting out what Government could do to address this imbalance. The blueprint was centred around (i) a ‘devolution evolution’ in suggesting a base level of devolution across the country with fiscal devolution for Local Authorities , local transport and trade investment and policy-making, moving Government departments out of London, and a re-examination of the role of Local Enterprise Partnerships (LEPs).  (ii) The establishment of a new National Infrastructure Fund, taking advantage of record low interest rates to invest in transport, digital, energy, space, electric vehicles and beyond. (iii) The creation of Opportunity Zones to give the country’s most deprived areas the opportunity and incentives to succeed (potentially alongside a programme of ‘Opportunity Towns’). (iv) Flexibility on the Apprenticeship Levy and wider changes to skills and education policy to ensure that the UK has the pipeline of talent available for the industries of the future and has a workforce more widely spread throughout the country. In launching the report the Communities Secretary stated that “this Government has been clear that its mission is to level up our regions, boost economic growth and ensure we all benefit from the opportunities Brexit brings. And under this Government, public investment is set to reach levels not sustained for 40 years.”

The Prime Minister’s commitment to levelling up led the Department for Education (DfE) to highlight Government efforts to ‘level up education standards across England’ by providing every secondary school with at least £5,000 per pupil and primary schools with £3,750 per pupil from 2021-2022 thus guaranteeing a minimum level of funding for every child. This was accompanied by Government announcements of a £24 million Opportunity North East Programme and £780 million to support children with Special Educational Needs and Disabilities (SEND) in 2021-2022. 

Around infrastructure, the Prime Minister’s focus has been on boosting connectivity in the North and Midlands. Here HS2 is viewed as ‘the spine of the country’s transport network’:  “delivering better, faster and more reliable transport connections is the way to close the opportunity gap across this country. But it is not and never will be an ‘either/or’ between big projects and local services. Dramatic improvements to local transport and the decision to proceed with HS2 will shift this country’s centre of gravity away from the capital and transform connectivity between our towns and cities. I am drawing a clear line under the mismanagement of the past – HS2 must be delivered more efficiently and cost-effectively so that communities feel its benefits more quickly, particularly those in the North.” 

The Government’s Industrial Strategy, published back in November 2017, set out five foundations of economic policy. It is under the fifth foundation ‘places’ that the document explicitly references the need to tackle entrenched regional disparities – including in education and skill levels. Three key policies were outlined in the Strategy: (a) agree Local Industrial Strategies that build on local strengths and deliver on economic opportunities; (b) create a Transforming Cities Fund to provide intra-city transport; and (c) pilot a Teacher Development Premium. 

In February 2020 the Industrial Strategy Council (ISC) published its review into productivity differences across UK regions. They measured regional productivity by looking at the total income in an area (i.e., wages, rental income, and profits) divided by the total number of hours worked there. The evidence review covered 41 UK regions, including small groups of counties, unitary authorities and council areas. The ISC analysis reveals that in 2017 the most productive region was West Inner London, with productivity 2.1 times higher compared to Cornwall (the least productive region). Looking at the productivity of 9 UK regions relative to the UK average since 1900, the ISC found in 1901 London was 30% more productive than the UK average, and Wales 16% less productive. The review shows how these numbers remain very similar today – finding that while the productivities of UK regions had converged significantly by the middle of the 20th century, they have diverged again in the decades since 1980. Over the past decade,  for example, cities such as London, Edinburgh, Bath and Bristol have been characterised by above-average productivity growth. And yet not all cities have performed well – with Leicester, Nottingham and Sheffield described as falling behind in terms of their productivity. 

According to the ISC review, high-productivity regions tend to have a better-skilled workforce, better local governance and management culture, attract more investment, and are more likely to specialise in high-value economic activities. And it is the combination of these factors rather than any one variable that has contributed to their success. In focussing on the fifth place based component of the Industrial Strategy, the ISC suggests policies should have three features: (i) UK regional policy has been in a constant state of flux and a new degree of continuity is needed. (ii) Given the difficulty of diagnosing the root causes of a region’s productivity performance, proposed policy interventions should be robust to take account of different interpretations of the evidence, and they also need to be realistic in realising change will require action across a range of policy areas. (iii) We need to keep the spotlight on regions underperforming on their potential so as to balance productivity growth across the UK, and ensure that interventions are directed towards places where they have the best chance of making a difference. 

The Office for Budget Responsibility (OBR) initial assessment of the potential impact of the COVID-19 on the economy and public finances was published on 14 April 2020. When asked whether austerity might be required to control the budget deficit, the Chancellor Rishi Sunak said the Government was still committed to its levelling-up agenda: “when we come out of this in terms of righting the ship, we’ll have to look at it then. Obviously this has cost a lot. But as I’ve said before, the best way out of this for all of us is to just grow the economy, which is why trying to keep as much of it as intact as possible at this moment allows that bounce-back when we come out of it and allows us to hopefully snap back to normal as quickly as possible.” We now see the term being deployed in the work of the Department of Health and Social Care (DHSC), NHS England and health providers around their ‘recovery, reform & renewal and recalibration planning’ which is focussing on addressing health inequalities; and by the Business Secretary Business Secretary Alok Sharma with the creation of 5 new business-focused groups to help the economy bounce back from the COVID-19 pandemic. Other recent Government interest has sought to level-up through cities and towns.  

The current Government’s policy aim of addressing ‘disadvantaged regions’, of ‘spreading prosperity’, and/or of creating ‘opportunities for all’ and ‘economic bounce back’ across the country is not new. Under New Labour, for example, the emphasis was on English regions and Regional Development Agencies and regional Government Offices were established. In 2002 the Government announced a new Public Service Agreement target to: “make sustainable improvements in the economic performance of all English regions and over the long term reduce the persistent gap in growth rates between the regions, defining measures to improve performance and reporting progress against these measures by 2006.” This led the then Housing, Planning, Local Government and the Regions Select Committee to conduct an inquiry into reducing regional disparities in prosperity; resulting in several recommendations around prioritising less prosperous regions rather than developing policies and investments for the benefit of all regions.  

The coalition government from 2010 moved away from traditional ‘regions’ to focus on smaller ‘city-regions’ instead. The Government at that time created a framework for sustainable and balanced growth which sought to shift away from a model reliant on a narrow range of sectors and increasing government spending towards a vision of a dynamic economy where it would be easy to start up and grow a business and where every company can reach its potential. The emphasis here was that the private sector should come first – with entrepreneurs, businesses, and social enterprises seen as the creators of prosperity.  

In a much broader context, Article 174 of the Treaty on the Functioning of the European Union (TFEU) states that the EU’s goals include ‘strengthening of its economic, social and territorial cohesion’ and “reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions”. The social scoreboard, which monitors the implementation of the European Pillar of Social Rights, includes income inequality alongside several other indicators closely related to providing more equal chances. According to a 2015 European Commission study inequality has been on the rise in many Member States in the past three decades, and was further exacerbated by the 2008 economic crisis. In some countries, income inequality is not particularly high, but wealth inequality has been on the rise. More recently the issue of inequality has gained renewed attention in European policy circles, with debates opening up around structural reform and to what extent decision making should take place at a Member State level and/or whether decision making to address disparities and cohesion should also take place at a supra-state level. 

The World Health Organization (WHO) began using the term in 2006 as part of discussions around tackling social inequalities in health. Their efforts sought “a gradual reduction of all systematic differences in health between different socioeconomic groups; with the ultimate vision being to eliminate such inequities, by levelling up to the health of the most advantaged’. 

The term ‘levelling up’ has been used widely by Governments and public bodies at country, regional, city and town levels over time as part of attempts to reduce inequalities between deprived or less favoured areas so that no area is left behind.  Which areas are being ‘left behind’?  To what extent are policy makers addressing the root causes of inequality? And should we focus our investment and support on those areas experiencing disadvantage or in all areas?    

Which places matter (and which places are being left behind)?In 2015 the European Commission launched a Catching Up initiative [also known as the ‘Lagging Regions initiative’]. This was a pilot initiative examining the factors holding back growth and investment in less favoured regions. The Commission defined catching up regions as regions whose level of development was significantly lower than the EU average. The Commission distinguishes between two types of catching up regions: (i) Low-growth regions – those experiencing a persistent lack of growth (i.e., regions with a GDP per head up to 90% of the EU average and that did not converge to the EU average between 2000 and 2013); and (ii) Low-income regions – those that remain far below the EU average GDP per capita (i.e., they have a GDP per head below 50% of the EU average in 2013). Low-income regions include countries such as Hungary and Poland; with low-income regions comprising countries such as Greece, Italy and Portugal. The Commission concluded that “moving to the next level of economic development cannot be accomplished by a one-size-fits-all policy, but will require regionally differentiated investments and policy responses. It is clear that comprehensive and well-timed development strategies are therefore needed not only to address some of the basic problems of lagging regions, but also to enhancing their capacity.”   

In September 2019 the Office for National Statistics (ONS) began publishing a quarterly measure of regional GDP for the nine regions of England and for Wales. The latest data, published in May 2020, looked at regional growth in the third quarter of 2019 (July-September). London showed the highest growth in this quarter at 1.4%, with other regions showing positive growth including the North East at 1.3% (reversing a fall of 0.9% in the previous quarter), Yorkshire and The Humber (1%), the East of England (0.9%), the West Midlands (0.6%) and the South West (0.3%).  Three regions experienced negative growth during this period: the East Midlands (-0.3%), North West (-0.2%) and South East (-0.2%).  Regional quarterly GDP is still designated as ‘experimental statistics’ which means it is newly developed and innovative statistic and needs to be interpreted with some caution. 

Regional GDP on an annual basis however has been produced for several years and is a ‘national statistic’. The latest release (published in December 2019) presents data from 2018. This showed the highest rise in GDP was in London and the West Midlands (both at 2%). London also had the highest GDP per head (£54,686) while the North East had the lowest per head (£23,569).    

This data has opened up debates around how and whether to define a region; with Robert Chote, the outgoing Chair of the Office for Budget and Responsibility, suggesting that the regions of England are the consequences of now defunct regional offices and not based on any concept of regional economies as such. Indeed the ‘place’ component of the Government’s Industrial Strategy focuses upon geography, local culture, governance and infrastructure as being important factors in determining the economic activities of a region.  

In March 2020 the County Councils Network (CCN) published a report to provide evidence and insight into place-based growth through the lens of county authority areas. The report reveals how growth, measured by Gross Added Value (GVA), in county areas has lagged behind the rest of the country by 2.6% over the last five years. GVA in the 36 county areas grew by 14.1% between 2014 and 2018, compared to 16.7% for the rest of England. In total, 25 of these counties have grown at a rate slower than the rest of the country. The research finds no north-south divide, as the county areas experiencing some of the smallest economic growth include Herefordshire (5.3%), Oxfordshire (5.6%), Cumbria (8.2%), Gloucestershire (9.2%) and Wiltshire (9.7%). 30 of the 36 county authority areas have workplace productivity levels below the England average. At the same time, counties have witnessed sluggish business growth, with county authorities averaging 7.9% growth over the last five years – almost half of that of the rest of the country’s figure of 15.1% over the period 2014 to 2019. Figures contained in the report reveal that councils in London are able to spend over 50% more per person compared to counties (£506 compared to £333) on growth related services such as roads, junctions, enterprise parks, and business support. 

Public spending analyses clearly show not only how such spatial inequalities exist but also how they have done so for decades. In July 2019 HM Treasury published its Public Expenditure Statistical Analyses for 2019. Table 9.4 (page 126) shows the expenditure per head in real terms for the period 2017-2018 revealing England to have the lowest outturn at £9,080 compared to £10,397 in Wales, £10,881 in Scotland and £11,190 in Northern Ireland. By English region, for the same period, expenditure on services per head varied from £10,378 in London to £8,299 in the South East. The North West (£9,807) and North East (£9,805) received slightly more funding than Yorkshire and the Humber (£8,966), the East Midlands (£8,388), the West Midlands (£8,967), the East of England (£8,359) and the South West (£8,628). This opens up debates around whether to ‘level up’ i.e., so every region receives a similar level of expenditure per head; and whether this will require some regions to ‘level down’ and receive less funding?  

Between 2010 and 2018, total employment in the UK rose by 3.6 million. Analysis by Oxford Economics reveals that of the 396 Local Authority areas in the UK, 20 accounted for one-third of this growth. 10 of these Local Authority areas were London boroughs, with the remainder large cities including Birmingham, Bristol, Edinburgh, Leeds and Manchester. 

The Bennett Institute for Public Policy (University of Cambridge) has been undertaking a Townscapes project to provide a deeper analysis of how towns are faring across the regions of Britain and elsewhere – showing a finely grained picture of how different towns relate to their wider regions and nations, as well as to their nearest cities. This work reveals the merits of a more granular and regionally rooted perspective for our understanding of geographical inequalities and the kinds of policy needed to address them. On the basis of findings from their work in Scotland, Wales and the North East of England, the Institute argues that policy makers need to consider multiple town categorisations, to get beneath the broad groupings that have become so dominant in this debate such as ‘university’, ‘coastal’, or ‘post-industrial’ towns. Instead they suggest adopting a data-driven typology developed by the ONS in 2019 to contrast the fortunes of ‘working’, ‘partially residential’ and ‘residential’ towns in different parts of the country. 

In academic circles emphasis has been placed on the importance of cities (and dynamic agglomerations). Edward Glaeser in his book ‘Triumph of the City’ (2011), for example, describes cities as “our greatest invention” that makes us “richer, smarter, greener, healthier and happier”. Pierre‐Philippe Combes and his colleagues posited that firms are more productive, on average, in larger cities because they toughen competition (allowing only the most productive to survive). The view that often emerges here is that cities, being larger and denser than towns and rural areas, have a comparative advantage relative to any other places which means businesses benefit more from being located there.  Other academics have sought to highlight the uneven playing field between regions in bidding for inward investment and its implications for devolution where different structures between regions and countries can enhance the prospect of some regions more than others.

The UK2070 Commission is an independent inquiry into city and regional inequalities in the UK. Chaired by Lord Kerslake, it has been set up to conduct a review of the policy and spatial issues related to the UK’s long-term city and regional development. Its latest report, published in February 2020, described a need ‘to think about North and South, Towns and Cities, and Urban and Rural. The issues of economic underperformance and wellbeing affect all parts of the UK including coastal towns in the south east of England. Past attempts to remedy the fundamental spatial imbalances in the UK have failed. They have been too little, too late, too fragmented and too short-lived. Radical change is required. We need to comprehensively increase and sustain the scale and breadth of action over the next twenty years through a coordinated plan”. The report calls for a devolution of powers and resources from central government to local communities as part of a wider drive for long-term National Spatial Plans to provide confidence for investment and to help the UK deliver on its international commitment to the UN’s Sustainable Development Goals.

Historically, policy attention on regional inequalities has tended to emphasise a ‘north-south divide’, however more recent work is starting to focus upon collating data and information to offer a more granular and forensic understanding of how inequalities can affect all kinds of places. 

What does levelling up mean for rural places?Many RSN members are all too familiar with these figures and debates. In terms of investment for example, analysis for the RSN’s Fairer Funding Campaign shows how urban Local Authorities in 2020-2021 will receive 62% (equating to £109 per head) more in the Settlement Funding Assessment compared to rural Local Authorities. Similarly, rural residents pay, on average, 22.7% (equating to £105 per head) more in Council Tax than their urban counterparts. 

In terms of data, the Statistical Digest of Rural England, collated by Defra, allows for comparisons between different types of rural and urban areas on a range of social and economic subject areas. For example, predominantly rural areas contributed 15.9% of England’s GVA compared to 45.6% from urban areas (excluding London), 27.4% from London and 11.2% from urban areas with significant rural areas. The contribution from predominantly rural areas to England’s GVA declined slightly between 2001 and 2018 – from 17.3% to 15.9% – due to an increase in London’s contribution to GVA over the same period. When London is excluded from the analysis, predominantly rural areas contribution to GVA declined from 22.7% to 21.8% between 2001 and 2018. In April 2017 the ONS published an article exploring the productivity of rural and urban areas in Great Britain. This revealed that the overall average labour productivity (Gross Value Added per worker) of the business economy in 2014 for urban areas [excluding London] was 86 (on a Great Britain equals 100) basis, which was 5 percentage points higher than for rural areas (81 on a Great Britain equals 100 basis). This gap was larger in the south of England than in the north and Midlands and in some regions, such as the North West of England, average GVA per worker in rural areas was actually found to be higher in rural areas compared to urban areas.

A Government Office for Science / Foresight report on the future of mobility describes how limited community and public transport in rural areas has been hindering participation in social and economic activities, thereby putting people at risk of exclusion from the labour market. Similarly, the removal of the Education Maintenance Allowance has further disadvantaging young people in rural areas that tend to be more reliant on higher-cost public transport trips. In September 2019 a report from the Environment, Food and Rural Affairs Committee highlighted the continuing digital divide between urban and rural areas. Despite significant improvement in both rural broadband and mobile coverage in recent years, it has only barely kept up with increasing demand. Accordingly, poor connectivity continues to hinder rural businesses and is preventing people from engaging with online public services the rest of the country take for granted. Ofcom research revealed almost 600,000 “forgotten homes” in rural areas across the UK who are still unable to get sufficiently fast broadband to meet a typical family’s needs. In England and Wales 6.6% of premises do not receive the 10Mbps internet service the government has mandated as the bare minimum to cover a family’s modern digital needs, compared with just 0.7% in cities and towns.

In terms of shifting authority away from London and devolving power, according to the RSA, towns and rural areas in England must benefit from the next wave of devolution. Without an elected Mayor, they argue rural areas, towns and smaller cities in England risk being left-behind on growth, public sector investment and the freedom to develop local solutions to problems.  A poll carried out by Populus for the RSA looked at what the public wanted to see next. On most social policy issues, people want to see issues decided more locally: just 18% agree the balance between local and national government is ‘about right’. Broken down by issue, people want to see housing decided at a local level (61% say it should be more locally decided, versus 18% who say more national), followed by schools (52%-23%), transport (50%-24%), policing (49%-26%), social care (48%-28%), planning/economic development (46%-23%), training/skills (37%-27%) and culture (36%-22%).  Only on healthcare (36%-40%) and climate change (12%-61%) were people supportive of a national approach.  Mayors were generally supported with 54% of respondents willing to support or would support a Mayor for their area, with 26% opposed. Of the different models on offer, 25% preferred the ‘Greater Manchester’ model, where the Mayor makes decisions jointly with local council leaders; 18% back the ‘London model’ of a strong Mayor with a directly elected scrutiny body; while 11% support a citizen-led approach.  However, the poll also found that there was little ambition for Mayors to be imposed – with 50% of survey respondents say that Local Authorities and Government must agree a devolution deal for it to go ahead.  In March 2020 the Housing, Communities and Local Government Committee relaunched its inquiry into progress on devolution in England. The Committee will scrutinise the impact of recently agreed devolution agreements and ask if the transfer of further powers to England’s regions can boost local economies and provision of public services.

As the economy emerges from COVID-19 and Government begins to taper its support packages and businesses seek to open and rebuild, the Business, Energy and Industrial Strategy (BEIS) Committee has launched a new super inquiry on Post-Pandemic Economic Growth. A briefing from the University of Newcastle published in May 2020 provides a rapid assessment of current and likely future impacts of the COVID-19 outbreak on rural economies: ‘the impact of COVID-19 on public finances, personal freedoms, international trade and public debates will be substantial, with changes at national, European and global levels affecting rural economies. One long-term ramification of COVID-19 may be the acceleration of firms substituting capital for labour in order to reduce vulnerability to future pandemics (particularly in an environment where the costs of capital investment through low interest rates and government loans will be low). This may affect things like social care, where there may be a further push to develop technological aids to help older people stay in their homes and remain independent rather than enter residential care or require daily care visits. It is possible that COVID-19 will make rural areas more attractive for the future, given the space they afford. This raises questions over trends to centralise health care and other services. An open question concerns the extent to which changes in household, business or supply chain behaviours brought about by the pandemic will return to their original state once it has run its course.’ 

The BEIS Select Inquiry will consider how to level up regional economies so that communities and individuals no longer feel left behind to solving old problems such as poor productivity, sluggish exports and disorganised devolution and embracing new opportunities to modernise the UK economy.  How should Government adopt/prioritise its recovery package for rural areas? What support will rural communities and businesses require to stimulate growth (e.g. digital connectivity, remote working)? What role might Local Authorities and other agencies (e.g. Local Enterprise Partnerships, voluntary and community sector etc.) play in delivering growth (e.g. community support)? And what might be the unintended rural consequences (positive and negative) from this renewed emphasis on economic growth be? Will these initiatives ‘level up’ rural areas or will they be left behind? The Inquiry Committee’s call for evidence closes on 17 July 2020.   

To date, it has been assumed that central Government [the national level] is the administrative unit necessary to address this issue.  In terms of investment, the Green Book is used by Government departments to determine which policies, programmes of activity and projects public funds should be invested in. This often discriminates against those parts of the country that need the most targeted support and investment.  Government has committed to a review of the Green Book and as we continue to emerge from COVID-19 ensuring the framework is in place as soon as possible to support the recovery is important.  Similarly, there has been a lack of continuity and consistency of regional and place-based policies– rural areas need local strategies with interventions that embrace their spatial, socio-economic and environmental contexts and we also need to avoid a one-size-fits-all approach as what works in one rural place may not be appropriate in another rural place. We need to bring together place shaping leaders in rural areas (e.g. Local Authorities, voluntary and community sector, faith groups etc.) and provide them with the governance, funding and capacity to undertake this levelling up process.  And finally, if levelling up is to be more than a policy motto, we should be concerned first and foremost about the effect of policies on people in these (rural) places.  For the extent to which coming out COVID-19 and exiting the European Union will make local and regional (rural) imbalances better or worse remains unclear. 

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Jessica is a researcher/project manager at Rose Regeneration and a senior research fellow at The National Centre for Rural Health and Care (NCRHC). Her current work includes supporting health commissioners and providers to measure their response to COVID-19 and with future planning; working with 8 farm support groups across England on a Defra funded resilience programme; and helping Local Authorities to measure social value. Jessica also sits on the board of a Housing Association that supports older and vulnerable people. 

She can be contacted by email jessica.sellick@roseregeneration.co.uk. 

Website: http://roseregeneration.co.uk/ https://www.ncrhc.org/ 

Blog: http://ruralwords.co.uk/ 

Twitter: @RoseRegen