The big idea: why we shouldn’t be levelling up | Politics books

Last autumn, Boris Johnson brought the Department for Levelling Up, Housing and Communities into being. Naming a ministry after a catchphrase seems to suit our age of rhetoric as policy. How long before we see a Department for Getting on Your Bike, or a Department for Unleashing the British Entrepreneurial Spirit?

The levelling up initiative was born out of the Conservatives’ 2019 election victory, in which many former Labour constituencies in the north and Midlands – the so called “red wall” – changed sides. The thinking was that these acquisitions, the fruits of the war over Brexit, could not be kept once Brexit was “done” unless their needs were addressed. The idea of levelling up – finding policies to reverse regional gaps in income, health, education and jobs – was part of a wider narrative of a “realignment”, moving left on economics, right on questions of social policy. It was a way to consolidate the coalition brought together by Brexit so that it would have a life beyond Brexit itself.

The problem is, levelling up is running into difficulties and looks as if it is getting nowhere. For a start, the government has been distracted by both Partygate and the Russian invasion of Ukraine. While these distractions may be temporary, other obstacles will remain. The small-state, libertarian faction of the Tory party, which wants low taxes and a government that stays out of the economy, is no fan. Neither are those in the “blue wall”: MPs from traditional Tory constituencies that don’t want to lose funding to more deprived areas. Internal opposition aside, the pressure to keep taxes as low as possible, and the other calls on the government purse, greatly limit the cash available to make levelling up a reality.

But if the policy fails, we should not mourn its passing. Why? It’s not likely to work, and there are initiatives more deserving of money that probably will.

It’s hard to diagnose the dysfunctions that create regional disparities. They can be rooted in the people of a particular place, or caused by an accident of history. There may be as many causes as there are people or firms in a particular place. Accidents of history also play a role. Things like fancy amenities or infrastructure may well be part of the reason for a town’s success, or they could be the fruits of it (or both). This difficulty in diagnosing root causes is part of the reason why regional inequality is so entrenched. It’s also why income gaps between nations across the world are so hard to close.

If you don’t know with any certainty why one place is succeeding and another isn’t, then you are likely to waste money by building bridges or transport links that will be underused, or producing housing or industrial estates that are unwanted.

In my view, there is no ethical defence of the disparities in incomes and life chances that market forces help to generate. In an ideal world, they would not exist. But the pure socialist systems that try to prevent them have such bad side effects – corroding incentives and personal liberties, and being vulnerable to exploitation by powerful members of the party hierarchy – that we have no choice but to tolerate a certain level of disparity. What applies to people also applies to towns, cities and regions. Part of the problem is that people are drawn to a place to do business because of who else is going to be there; yet who else is going to be there is determined by what they think others will do, creating a chicken and egg situation. Governments can help convince people that a place is viable by providing good attractions, amenities, or a university or a transport node. But a city’s viability can unravel quickly and unpredictably, as seen in Detroit, which, from a high of about 1.85 million people in 1950, lost almost two-thirds of its population.

Levelling-up enthusiasts see regional devolution as a way to help crack these problems of diagnosis and prescription. But devolution carries it own risks. Devolving tax and spending limits the possibility of redistribution from richer areas to poorer ones; it unravels the fiscal union, setting the scene for the kinds of difficulties the euro area experienced after the financial crash. In addition, local politics is more vulnerable to corruption. Local politicians won’t have national interests at heart, so may engage in unproductive fights simply to move economic activity from one place to another.

None of this is to say that every levelling up initiative is a bad idea. But right now, there are a lot of other things governments could do that would be better value for money. We need to tackle the cost of living crisis by moving money from those who can pay to those who are experiencing hardship. We have got to address the Covid legacy of long NHS waiting lists, and put the service on a more resilient footing to deal with future pandemics and other challenges. Government has to deal with the crisis in social care. The gap between real funding per head in state and private schools is widening. And we have to wean ourselves off fossil fuels, something made all the more urgent by the imperative of weaning ourselves off Russian fossil fuels. There is other post-Covid work to do in broadening access to high-speed internet and making food and other distribution networks more resilient.

This is a long list of policies that are expensive but essential, and will stretch government capacity and the electorate’s tolerance of taxation to its limits. Many of them, if they work, will also help with the broad set of objectives put in the bucket marked “levelling up”. For instance, better funding for the NHS and social care will help close one of the worst aspects of inequality, the gap in life expectancy between rich and poor.

Even at the best of times, we need to recognise the limits of a generous and muscular state. Offering everyone the chance to do the job of their choice at the same wage wherever they live is well beyond those limits. Providing decent education, health and social care and green energy is not – and we should focus on those things instead.

Tony Yates is a former professor of economics and head of monetary policy strategy at the Bank of England.

Further reading

Inequality, what can be done? by Anthony B Atkinson (Harvard, £16.95)

Brexitland: Identity, Diversity and the Reshaping of British Politics by Rob Ford and Maria Sobolewska (Cambridge, £15.99)

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit Banerjee and Esther Duflo (Penguin, £9.99)

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