Levelling Up Left Behind Places

EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS

The nature of the problem:

* Geographical inequalities in the UK are a longstanding and persistent problem rooted in deepseated and cumulative processes of local and regional divergence with antecedents in the inter-war years and accelerating since the early 1980s.

* This spatial divergence has been generated by the inability of some places to adapt to the emergence of the post-industrial service and knowledge-based economy whose geographies are very different from those of past heavy industries. As a consequence, the "left behind" problem has become spatially and systemically entrenched.

* Challenging ideas of market-led adjustment, there is little evidence that real cost advantages in Northern areas are correcting and offsetting the geographically differentiated development of skilled labour and human capital and the quality of residential and business environments.

* A variety of different types of "left behind place" exist at different scales, and these types combine common problems with distinctive economic trajectories and varied causes. These different types will need policies that are sensitive and adaptive to their specific problems and potentialities.

* Contemporary economic development is marked by agglomeration in high-skilled and knowledge-intensive activities. Research-based concentrations of high-skilled activity in the UK have been limited and concentrated heavily in parts of London and cities in the Golden Triangle, especially Oxford and Cambridge. Even in London, the benefits have been unevenly spread between boroughs.

* Existing analyses of the predicaments of left behind places present a stark division between rapid growth in "winning" high-skilled cities and relative decline in "losing" areas. This view is problematic because it oversimplifies the experience in the UK and other countries. A false binary distinction is presented to policymakers which offers only the possibility of growth in larger cities and derived spillovers and other compensations elsewhere.

* Yet, the post-industrial economy involves strong dispersal of activity and growth to smaller cities, towns and rural areas. However, this process has been highly selective between local areas and needs to be better understood.

The institutional and policy response:

* Past policies in the UK have lacked recognition of the scale and importance of the left behind problem and committed insufficient resources to its resolution. The objective of achieving a less geographically unequal economy has not been incorporated into mainstream policymaking. When compared with other countries, the UK has taken an overcentralized, "top-down" approach to policy formulation and implementation, often applying "one size fits all" policy measures to different geographical situations.

* Political cycles have underpinned a disruptive churn of institutions and policies. In contrast with other Organisation for Economic Co-operation and Development (OECD) countries, particularly in Europe, there has been limited long-term strategy and continuity, and inadequate development of local policymaking capacity and capabilities, especially for research, analysis, monitoring and evaluation.

* Past policies have been underfunded, inconsistent, and inadequately tailored and adapted to the needs of different local economies. We estimate that, on average over the period 1961-2020, the UK government invested on average GBP2.9 billion per annum in direct spatial policy (2020 prices), equivalent to around 0.15% of gross national income (GNI) per annum over the period. European Union Structural and Cohesion Policy support has added around 0.12% GNI (2020 prices) per annum to this over the period from the late 1970s.

* These broad estimates suggest that discretionary expenditure in the UK on urban and regional policy when both domestic and European Union spatial policy was in operation was equivalent to 0.27% per annum of UK GNI (2020 prices). This is dwarfed by mainstream spending programmes (by comparison, the UK committed GBP14.5 billion (0.7% of GNI) to international aid in 2019). The level of resources devoted to spatial policy has been modest given the entrenched and cumulative nature of the problem.

* Policies for "levelling up" need clearly to distinguish different types of left behind places and devise a set of place-sensitive and targeted policies for these types of "clubs" of left behind areas. This shift will need a radical expansion of "place-based" policymaking in the UK which allows national and local actors to collaborate on the design of appropriate targeted programmes.

* A key priority for "levelling up" is revitalizing Northern cities and boosting their contribution to the national economy. Underperformance in these urban centres has been a major contributor to persistent geographical inequality in the UK.

* Addressing the UK's geographical economic inequalities and the plight of left behind places requires substantially more decentralization of power and resources to place-based agencies. This would enable the current UK government's "levelling up" agenda to capitalize on the many advantages of more "place-based" policymaking to diagnose problems, build on local capabilities, strengthen resilience and adapt to local changes in circumstances.

* Crucially, place-based efforts need to be coordinated and aligned with place-sensitive national policies. The key challenge of a levelling up mission is to integrate "place-based" policies with greater place sensitivity in national policies and in regulation and mainstream economic spending.

* It is important to develop policies that spread the benefits from agglomeration and ensure that the income effects and innovations produced by high-skill concentrations diffuse to the wider cityregional economies and their firms (especially small and medium-sized enterprises) and workers. There is a clear need for more policy thinking on how this can be achieved.

* Policy for levelling-up needs to align and coordinate with the other national missions for net zero carbon and post-pandemic recovery. This suggests that a strong "place-making" agenda focused on quality of life, infrastructure and housing in many left behind places is important for post-industrial and service growth.

* Genuine place-making is a long-term process involving public, private and civic participation which allows local responses to those economic, environmental, and social constraints and problems that most strongly reduce the quality of life in local areas. A truly "total place" approach is required. The quality of infrastructure, housing stock and public services is crucial for the quality of place as well as the ability to secure and attract more dispersed forms of growth. There is little hope of delivering "place-making" if public sector austerity is once again allowed to cut back public services more severely in poorer and more deprived areas.

The way forward:

* The scale and nature of the UK's contemporary "left behind places" problem are such that only a transformative shift in policy model and a resource commitment of historic proportions are likely to achieve the "levelling up" ambition that is central to the current government's political ambitions.

KEY RECOMMENDATIONS

In summary, our recommendations are that the UK government should:

* Grasp the transformative moment for local, regional and urban development policy as the UK adjusts to a post-Covid-19 world and seeks a net zero carbon future.

* Establish a clear and binding national mission for "levelling up".

* Realize the potential of place in policymaking.

* Decentralize and devolve towards a multilevel federal polity.

* Strengthen subnational funding and financing and adopt new financing models involving the public, private sector and civic sectors to generate the resources required.

* Embed geography in the national state and in national policy machinery.

* Improve subnational strategic research, intelligence, monitoring and evaluation capacity.

A failure to learn from the lessons of the last 70 years of spatial policy risks the UK becoming an ever more divided nation, with all the associated economic, social and political costs, risks and challenges that this presents.