politics

It’s smart to give Lisa Nandy the levelling-up brief. But what’s most needed is money | Larry Elliott


Two years ago this month Boris Johnson successfully wooed voters in the north of England with a promise to “level up” the UK economy. The Conservative victory was based on a simple message: we get why you voted for Brexit and we’ll do something about it.

Progress has been slow, for obvious reasons. Within a few months of the election, the UK was gripped by a global pandemic. Lockdowns and other restrictions deemed necessary to limit the spread of the Covid-19 virus have provided the government with a cast-iron excuse for its failure to back rhetoric with action.

But Johnson knows holding on to the “red wall” seats won in 2019 requires more than warm words, and the government says its long-awaited white paper on levelling up should be out before Christmas. This will show whether Johnson really is serious, or whether levelling up will join the long list of failed attempts to reshape Britain’s economic geography.

So far there is little evidence that anything truly transformative is in the offing, primarily because the scale of proposed government investment is inadequate to meet that of the task ahead. Rishi Sunak has allocated £4.8bn to be spent on a levelling-up fund over the rest of this parliament, and the government has committed to matching former EU funding for struggling regions with a new shared prosperity fund worth £1.5bn a year.

Contrast these relatively modest sums with what the German government has spent in the years since reunification to level up the eastern regions. When the Berlin Wall came down, living standards in East Germany were 60% of those in West Germany. The gap has been closed considerably – living standards in the east are now 85% of those in the old West Germany (and higher than many parts of northern England and Wales) – but this took €2tn over 25 years.

To be sure, East Germany’s economic problems were a lot more severe than those of Britain’s former industrial heartlands, and some of that spending went on welfare payments. But the message is clear: if you are serious about levelling up, you have to spend serious amounts of money. There will be much in the white paper about devolving power to a local level and the experience of Manchester, where a combined local authority and elected mayor shows that getting the governance structure right makes a difference. Yet power without money is no real power at all.

This is a challenge for Labour, as well as the Tories. It was a smart move by Keir Starmer to give the Wigan MP Lisa Nandy the levelling-up brief in this week’s shadow cabinet reshuffle, but winning back red wall seats is going to take more than criticising Johnson’s proposals as flawed. The opposition will need to show it has some better ideas.

A good starting point would be the Plan for the North, a paper from Steve Fothergill and Tony Gore, of Sheffield Hallam University, earlier this year. This proposal comprises four basic elements: have a clear idea of what you are trying to achieve and a yardstick for measuring success; devolve power as well as money; make a commitment to long-term, reliable funding that genuinely makes a difference; and take action on a broad front, including infrastructure, business support and skills.

That’s not to say levelling up is going to be easy. Governments of both left and right have been experimenting with different forms of regional policy since the 1930s. There was a time when the north was the cradle of the first Industrial Revolution, and it was the rural south that needed levelling up, but that was more than a century ago.

Manufacturing clusters have withered away and not been replaced. Talented young people leave for university and never come back, because the jobs they want are elsewhere. The row over scrapping the eastern branch of HS2 largely misses the point, which is the much greater need for investment to upgrade local rail services.

With both main parties competing for red wall seats, rarely has so much attention been paid to the older industrial regions. Decarbonising the economy represents an opportunity to rebuild manufacturing. Levelling up is possible, as the Germans have shown. The question for both Johnson and Starmer is whether they really want to address the problem or just tinker with it.



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