Snap Analysis 3 February, 2022

Reform analysis: Levelling Up White Paper

Yesterday the Government finally published its long-awaited plan for levelling up. At 332 pages plus a technical annex it's quite the tome, but it must also be one of the most comprehensive and coherent white papers we’ve had in some time.

In fact, it might be more accurate to call it a Programme for Government. There are few areas of domestic policy left untouched by the paper. Some instant reactions yesterday seemed to imply this was a negative, that the Government was simply collecting all the things it’s doing and badging them levelling up, but isn’t that the very point? Levelling up becomes the defining purpose of public policy (”hardwiring spatial considerations” into every aspect of government decision-making, as the paper puts it). And given the scale of the challenge, which is detailed at length (chapter one is 100 pages!), it would be absurd to think anything less than turning the entire government machine to the task of levelling up would be enough.

That, of course, doesn’t mean there are no gaps — we highlight a few below — or that more detail isn’t needed — this White Paper references another seven white papers that are forthcoming — but as a foundational document it’s pretty impressive.

The proof, to state the blindingly obvious, will be in the delivery, and, as the paper itself highlights, this isn’t the first attempt to rebalance the economy and regenerate communities (see the ‘100 years of local growth policy’ timeline on pages 108-109). Chapter 2’s theoretical analysis of why past attempts have failed, and the lessons for succeeding this time round, will be familiar to policy wonks, but it’s nonetheless good to see recognition of the need for “systems reform”. The paper calls for “wholesale changes to the information, incentives and institutions which underpin spatial decision-making in the UK”. That approach should apply to all decision-making in government! The pillars underpinning this new policy regime are:

  1. medium-term missions;
  2. reshaping central government decision-making;
  3. empowering local decision-making;
  4. data, monitoring and evaluation; and
  5. transparency and accountability.

Maintaining a laser-like focus on delivery will be key, and alongside using new data tools (see, e.g., this excellent new subnational indicators dashboard from the ONS), the Government will introduce a statutory requirement to report annually to Parliament on progress, and is setting up an independent Levelling Up Advisory Council. These latter two reforms are welcome, but are essentially a copy of the approach taken with the Social Mobility and Child Poverty Commission (now just the Social Mobility Commission) which at this stage is having questionable impact. For this approach to work, the Government has to be comfortable having its feet held to the fire...

On empowering local decision-making, we have some thoughts below so please read on. But it’s good to see a renewed commitment to devolution, even if, in our view, it isn’t bold enough.

So what is the Government actually doing? Four overarching missions have been identified, which in turn are underpinned by 12 medium-term targets (all starting “By 2030...”; see pages 120-121). Those high-level missions are:

  • Boost productivity, pay, jobs and living standards by growing the private sector, especially in those places where they are lagging
  • Spread opportunities and improve public services, especially in those places where they are weakest
  • Restore a sense of community, local pride and belonging, especially in those places where they have been lost
  • Empower local leaders and communities, especially in those places lacking local agency

Chapter 3 details the policy programme (90 pages worth of it), most of which is a summary of previously announced polices. All are tied to boosting one or more of six capitals (physical, intangible human, financial, social and institutional) as the technical annex which accompanies the paper details.

Below you can find our assessment of the economic, public services and social infrastructure approaches, as well as our policy M.I.A.s.

Going for growth

Launching the White Paper yesterday at the dispatch box, Michael Gove, Secretary of State for Levelling Up, Housing and Communities, said: “how do we achieve success? First, we do so by backing business. The economic growth that we want to see across the UK will be generated by the private sector, by businesses and entrepreneurs investing, innovating, taking risks and opening new markets.” The Government knows that levelling up, when it comes to economic revival, must be private sector led. The main policies underpinning their first mission relate to skills, R&D, capital, and physical and digital infrastructure.

Last October’s Spending Review committed £20 billion of public R&D investment by 2024-25. The White Paper promises a 40 per cent increase in public R&D investment outside the Greater South East. As things stand, only six of the UK’s 41 regions spend more than the OECD average on R&D, as a proportion of GDP — all of them in the Greater South East. A long-standing challenge in left behind communities is that, where jobs in manufacturing and production have declined, they have often been replaced by low-skill, low-pay jobs. The hope is that focusing on R&D will attract the kinds of high-value businesses which create higher-value jobs — thereby leading to the productivity and pay boosts the Government is targeting.

Taking a spatial approach to R&D is sensible. However, public investment only accounts for a quarter of the UK’s total R&D expenditure. Businesses spend twice as much (54 percent) whilst non-profits make up much of the remainder, which is why the White Paper also points out that public sector R&D often stimulates research and innovation investment from the private sector. Realising this will require successful delivery of the White Paper’s missions on skills and education.

Maximising the impact of public sector R&D also has institutional implications. The UK underperforms, for example, on the number of commercial spin-offs our universities produce. One reason is British universities tend to demand an aggressive equity share from start-ups — of 25 or 50 per cent. By comparison, US exemplars, such as MIT and Stanford, are prepared to play the long game, with equity shares rarely surpassing 10 per cent. For the UK to produce “fourth industrial revolution foundries”, which “replicate the Stanford-Silicon Valley and MIT-Greater Boston models”, as the White Paper promises, this will have to be addressed.

In addition, high levels of R&D investment don’t automatically lead to higher living standards. If it did, global R&D capitals such as London and San Fran’ would be beacons of social equality — which they are patently not. Which is why the broad approach to boosting economic growth and driving investment in left behind areas is key.

One very positive commitment is the White Paper’s pledge to leverage Government Pension Funds, so that up to 5 per cent of their assets are invested in projects which “support local areas”. Given the size of these pots (£337 billion in March 2021), this could unlock a remarkable £16 billion in new investment — more than six times the size of the Government’s Shared Prosperity Fund.

However, essential to this vision of a business-backed economic rebalancing are the cultural, institutional and social reforms. Financial incentives are not enough on their own, people must want to live in these areas. Proof that the Government is right to take such a wide approach to levelling up, but also proof that it has to deliver on all aspects to make any one aspect really work.

Not quite a public services revolution...

Alongside seeking a more even distribution of economic and social capital, developing human capital is a big focus of the White Paper. Economic productivity and rising living standards require a high-skilled and healthy population. As the Government recognises, improving and modernising public services is key to unlocking potential and tackling inequalities in this area.

Skills and education rightly a lot of attention and it’s great to see a strong focus on improving opportunity across the life spectrum. Alongside ambitious targets to improve primary schooling and some (too limited) additional support for early years, the importance of lifelong learning is emphasised. Providing opportunities to reskill will be vital to levelling up’s success, so improving the offering in this area can only be a good thing.

But it is in improving health that the Government has perhaps its most ambitious target. Of all of the paper’s (voluminous!) statistics illuminating inequalities, those relating to health are the most striking: people living in the least deprived areas live almost two decades longer in good health than those in the most deprived areas. However it is also the area where the plans for how to achieve the target are the least ambitious.

The White Paper pledges to increase healthy life expectancy by 5 years by 2035 and narrow the gap between the richest and poorest by 2030. This was first floated in the 2017 Industrial Strategy’s “Grand Challenges”. The challenge of achieving this is even more daunting now. A year before the pandemic, it was estimated that on current projections the UK wouldn’t increase healthy life expectancy by 5 years until 2094. And following the huge and unequal toll that the pandemic has taken on our physical and mental health, progress is likely to be even harder.

Which is why it’s such a problem that the ambitious headline missions on health are not match by bold policy. Big increases to NHS spending and promised future white papers, strategies and plans do much of the heavy lifting. Commitments to roll out community diagnostic hubs, tackle challenges in care access and quality, and improve drug rehabilitation and treatment services are all positive, as is a greater focus on tackling obesity. But it’s not nearly enough to move the needle.

Despite paying lip-service to the importance of “place-based” approaches to health, many will be alarmed that the local government overseen public health grant is to be maintained at its current level, rather than restored to its much higher historic level (the grant has fallen by 24 per cent in real terms since 2015-16). But when it comes to the role of local authorities, the Government has missed opportunities to go much further. It is surprising that in a White Paper so dedicated to shifting the locus of power away from the centre, there is little attention paid to putting local government much more in the driving seat on health policy — not least given it controls many of the levers with the most influence on the social determinants of health.

As we at Reform have long stressed, building a sustainable health system and reducing health inequalities requires tackling the drivers of ill-health and an honest conversation about the relatively modest role healthcare plays in doing so. If government truly wants to grasp the nettle in this area, it will require far more ambition and systemic change than looks to be on the cards so far.

Repairing the social fabric

Andy Haldane’s influence on this White Paper is clear to see, perhaps nowhere more so than in its focus on the importance of social infrastructure to levelling up the country (see his Local Trust lecture from last Summer, and his Reform essay from 2020). Building a productive economy, a healthy population, and thriving communities requires economic investment and effective public services. But these are underpinned by the social connections and institutions that bind us to one another. In short, relationships are at the heart of individual and community flourishing, and they need much more attention in policy discussion.

It’s great to see pride in place, satisfaction with town centres and engagement in local culture and community as key metrics of success for levelling up. These are reinforced by a raft of sensible proposals to build social capital and community pride — ensuring that per capita cultural funding is more evenly shared across the country, extending the Community Ownership Fund, and delivering a new National Youth Guarantee to support young people volunteering in their local community.

The White Paper also reiterates the Government’s earlier announcement that wealth tied up in Dormant Assets will be used to develop social infrastructure – though it’s another area in which we will have to wait for a future publication (this time a consultation on the Dormant Assets Scheme, including a Community Wealth Fund) for the detail. The commitment to ensure the Shared Prosperity Fund has a social infrastructure lens is also welcome.

The success of all this, however, depends on giving communities themselves ownership over assets and decision-making. Testing new models for community partnership including community covenants and setting out a new Strategy for Community Spaces and Relationships may prove transformative in this area. As ever though, real community empowerment will require governments both central and local to overcome their deep-seated instincts and embrace letting go. More on this below…


Fiscal devolution

While the White Paper makes a big thing of devolving power and responsibilities to local authorities, fiscal devolution remains the elephant in the room. Looking at international evidence, the White Paper identifies “local tax-raising powers and private contributions” as a “critical component of successful attempts at local growth”. But aside from a brief foray into council tax precepting and business rate supplementing, the Paper’s proposals make no mention of deeper devolution of revenue raising powers. If the White Paper seeks to give local authorities more flexibility to shape their own priorities, it’s hard to see why fiscal devolution remains off the table.

People power

The White Paper stresses the importance of empowering communities and restoring local agency — number 3 of those policy pillars: “empowering local decision-making” — but local government and local people are not the same thing. Deepening devolution is presented as a route to transforming the relationship between citizens and government, but it is not clear that merely shifting power from central government to the local government is the panacea. As can be seen in the graph on page 85, people living in areas with advanced devo deals — the North East, North West and West Midlands — don't feel any more able to “influence decisions affecting their local area” than those in other parts of the country. Addressing the democratic deficit and restoring that crucial sense of agency means having a real plan to give local people a say in the decisions that affect them every day.