The levelling up conundrum

The UK suffers from chronic and enduring regional inequalities. That much is well established.

While ‘levelling up’ is the latest rhetorical umbrella to confront this fact, there has been a plethora of initiatives over decades, from devo deals to new deals, from regional development to regional economic strategy, from community renewal to High Street revival, from abortive regional assemblies to combined authorities all firing at narrowing geographical inequality. In terms of narrowing geographical inequality, to describe the record as patchy would be generous. How can this time be different?  

Quite simply, the reason for failure is that there are competing accounts of the drivers of inequality, all of which point to policy failure, but no consensus on what a model of systematic ‘levelling up’ that can endure over the longer term looks like. So this area of policy oscillates between a focus on economic development, to a focus on social cohesion, to a focus on community renewal and power.

Resources ebb and flow, duplicate, and fragment. Governance and state structures morph and contort in response to policy disruption. During the past decades the UK has, with obvious exceptions in Scotland, Wales and Northern Ireland, become broadly a more centralised polity. Combined authorities and devo deals make the picture uneven without quite disrupting its centripetal form. Brexit has transferred even greater power and resources to the central state. Ironies are not lost.

Our contention is that regional inequalities are, at the very least, exacerbated by governing mindsets, institutions, discontinuities and flows of resource and power. They don’t simply exist because of divergence in natural resources or comparative advantage. There is more to it than that. These inequalities will persist without addressing governing objectives, strategies and structure. And ‘levelling up’ will fail, as previous attempts have done, without a compelling model of consistent change with governing and institutional logic aligned to that model.

In the coming weeks, the RSA will be presenting thinking on what levelling up could mean from different voices. We share the first today from the North of Tyne’s Mayor, Jamie Driscoll, arguing for a strategy that supports regional wealth generation. We will be sharing more insights and original thinking following the publication of the government’s Levelling Up White Paper. It will be of note that Jamie Driscoll’s report contains a highly supportive foreword from Lord Jim O’Neill, a former Treasury Minister in a Conservative government (as well as Chair of the RSA’s City Growth Commission). We will be sharing viewpoints from across the political spectrum, from local and sub-regional government, and from within public services and from communities. Watch this space.

Our intention here is not to provide a blueprint but, at this stage, to frame some leading possibilities for viable strategies. There are three plausible areas of fundamental focus for levelling up, all of which take the policy in different directions: economic development, social cohesion, and community power and identity.

The triple challenge

An economic development approach would emphasise that future policy ‘should be to help places to achieve their productivity potential, which will differ from place to place, rather than trying to get every place to achieve the same level of productivity’. That will address the long-standing challenge as to why ‘all large countries which are richer than the UK appear to be more balanced’.

Such an approach asks, how do we create healthy local economies that build on and invest in the development of local skills and assets? How can technological adoption support good work and higher productivity right across the country? What would it look like if across all areas we commit to building a greener future and taking a regenerative approach? And what are the governance models that can help foster local and regional prosperity?

A range of public institutions would need to embrace strong levelling up developmental strategies to support this approach. These include UK Research and Innovation (UKRI), Homes England, NHS England, the UK Infrastructure Bank, the British Business Bank, the Education and Skills Funding Agency, government departments and de facto public bodies such as the lottery funding bodies. In fact, the new Parliamentary Under-Secretary of State for Levelling Up, Neil O’Brien MP, has argued for a greater distribution of UKRI funding away from the almost fifty percent that goes to the ‘golden triangle’ of London, Cambridge and Oxford for the Onward think tank.

Naturally, this approach would home in on particular sub-regions with latent and emergent economic potential and so focuses on clusters of innovation, institutional maturity such as in research and innovation transfer capacity, investable potential, social capital and transferable skills. Economists have a predictably ugly work for this: agglomeration. The strategy naturally picks locational ‘winners’ even if they are away from the economic epicentre which, in productivity terms, has tended to be London and nearby regions.

A strategy focused on social cohesion would, in contrast and as a priority, tackle persistent disadvantage experienced by certain clusters of communities, both across and within geographies. It would respond to the identification of needs related to specific areas, such as coastal regions and the fact that ‘little has been done to rectify the issues faced’. Social cohesion would recognise calls by The Health Foundation and others to improve ‘the disparities in healthy life expectancy’, which still stand at a reduced life expectancy of nine years for men and over seven years for women who live in the most deprived areas, compared to those in the least deprived areas. Health, wellbeing, economic security and human development would be at the heart of a social cohesion approach.

For many who experience the ongoing impact of unaddressed inequalities, their situation may have been further intensified by the Covid-19 pandemic. Evidence of which has become increasingly clear when looking at the relationship between local deprivation and Covid-19 death rates, and further supported by recent research by the RSA and Impact on Urban Health which found that ‘33 percent of people living with multiple long-term conditions are economically insecure compared to 21 percent of those with no long-term conditions’ resulting in an 'average difference in income between these two groups of over £4,000’.

Levelling up could also be a route to addressing continuing gaps between genders. Giving women the same sense of financial security as men during times of crisis and across the life course, where even pre-pandemic, 54 percent of women didn’t feel they had sufficient savings to maintain a decent standard of life in retirement compared to 37 percent of men, and 43 percent of women would struggle to pay an unexpected bill of £100 vs 30 percent of men. Ensuring economic equality irrespective of ethnicity so there is no longer an ‘unexplained disparity between the median hourly pay of ethnic minority workers and White British workers’ would be a core goal.

Certainly, the pandemic has created huge backlog issues across public service systems, placing our collective ability to recover under threat. Levelling up might therefore address people’s daily challenges – be they financial instability, ongoing poor health, precarious housing, limited work opportunities, unmet educational needs or loneliness and isolation. Ignoring the human experience would be unacceptable in the social cohesion approach given that we run the risk of a persistently poorer social and economic future for disadvantaged areas.

While on the face of it, these are challenges relate to income inequality, the reality is that the way in which disadvantage is clustered also becomes a driver and experience of geographical inequality. It should be said, however, that these inequalities are experienced as much within regions as between them.

And, indeed, the nature of such inequalities are part of the impulse for approaches to support community identity, voice and power. This approach centres more deliberately on locality and the ability of places – and local communities – to develop their own capacities to support quality of life and wellbeing. The mechanisms, for example, explored comprehensively in the recent No Place Left Behind final report of the Commission into Prosperity and Community Placemaking, involve developing community assets such as community businesses and social enterprises, creating community democratic processes such as participatory budget-setting, and evolving community-led services such as local patient-centred and co-designed care. Indeed, the RSA has been experimenting with these approaches, for example, in our work in Nechells in Birmingham on local housing needs.

Listening to and working with a greater diversity of voices is central to this approach. If unmet needs continue to go unheard, we risk producing inflexible, short-term solutions that encourage apathy, especially at a time when public trust is fragile. There is real potential for models of levelling up committed to strategic approaches that embed deliberative democracy and participatory action, with the opportunity to invest in untapped community power and assets. Some of the key questions in this approach are: How can we support a sense of belonging and connection within localities, including through promoting access to local heritage and shared public assets and spaces? How can we support local businesses to become a community asset, a route for investment and opportunity across all areas? What do young people want for their future, that we all have a responsibility to help address now?

Three plausible governing strategies

An economy first approach is likely to require a developmental state that focuses on areas across the UK that have established comparative advantage with growth potential – particularly in the ‘industries’ of the future green, digital, health and care.

Social cohesion as a strategy requires a solidarity state, in which the focus is to support people through integrated public services, stronger social security and social investment approaches, including in skills and access to better work.

The final approach – community power and identity – requires a civic state, one which values community involvement and deliberation, and investment in community capacity and assets; which seeks to enhance public spaces, and supports communities to create a sense of place, identity, heritage and local services.

In reality, all these strategies are connected and overlap and the final approach will combine elements of each. It is impossible to imagine a levelling up strategy that doesn’t seek to crowd in private investment through public investment priming (and, indeed, the government’s Net Zero Strategy is explicit in seeing the role of UK Investment Bank as just this), linked to targeted skills provision, integration of health and care, and support for community investment in the public realm and a diversifying mix of local businesses. Nonetheless, this doesn’t imply that each approach will or can be pursued with equal intensity.

A strategy that pursued all three simultaneously would require a governing model very different to the UK’s current system. The scale of the public sector would have to radically increase, power would have to be created both at the centre (to redistribute at scale) and locally (to support community voice and asset development), new forms of local, regional and national leadership would need to be evolved. Such an approach, a kind of distributed strategic transfer state can be imagined in concept but seems like an enormous leap in practice.

So, it seems likely that the government will have to choose which of the three imperatives – economic development, social cohesion, and community identity and voice – to pursue most vigorously. Choices will have to be made.

While the above is an attempt to map out some of the terrain the government will be faced with, rather than an attempt to develop a blueprint, we do think one thing is particularly important. That is for the government to be clear where its priorities in meeting the levelling up challenge will be – whether on economic development, social cohesion, or community identity and voice. The purpose is not to exclude other approaches nor to deny their inter-connection. Rather it is to have a clear pathway to change that can be pursued and evolved over time: a clear signal of direction to the sub-national state, civil society and the market.

As for the RSA, we intend to bring people together to consider these questions, and to share best practice and innovation, highlighting opportunities for change in the areas that matter most. Do get in touch with either of us if you want to be involved.

For over 260 years the RSA and its Fellowship have sought to address the biggest social challenges of the time, through research, policy, design, innovation, convening and platforming the best ideas. Over the coming months, we will be providing the space for a diversity of voices to debate and discuss these critical questions. We want to hear from a range of perspectives to help explore how this most complex of challenges – levelling up – can be confronted. 

We would like to thank Adarsh Ramchurn for core research in support of this work. We would also like to thank Hannah Webster, Alan Lockey, Fabian Wallace-Stephens, Ruth Hannan and Jake Jooshandeh for their contributions.