Michael Gove has announced the government’s plan for levelling up, with a focus on devolution, transport, education and raising the pay and productivity of towns and cities outside London and the south-east.
It follows decades of attempts by successive governments to spread prosperity across the country, most recently with George Osborne’s northern powerhouse plan and Theresa May’s industrial strategy.
The focus on living standards has been welcomed, but it comes after a decade of austerity that has made the task harder.
“The lack of new funding announced today, and an approach to devolution that appears to be quite centrally controlled, suggest more needs to be done before the reality of these plans meets the rhetoric,” said Katie Schmuecker, deputy director of policy & partnerships at the Joseph Rowntree Foundation poverty charity.
Funding
At Rishi Sunak’s spending review in October the chancellor announced an expansion in government funding to end austerity. However, the Institute for Fiscal Studies said many areas would still have funding lower than in 2010 by 2025, despite a steady rise in pressures for public spending from an ageing population and the climate challenge to hit net zero.
Local authority funding, regarded as a key mechanism for levelling up, has been cut particularly hard. Central government grants – including retained business rates – have been reduced 37% in real-terms over the decade to 2020, an effective cut worth £15bn in real terms, according to the Institute for Government.
Britain’s poorest local authorities have been hit hardest. Salford has suffered the deepest cuts in the UK, with a 48% reduction since 2010 according to the Centre for Progressive Policy. Red wall areas such as Wigan, Gateshead and Rochdale are also in the top 10 for cuts, with budget reductions of more than a third.
Poor regions that benefited from EU funding – such as Cornwall, Wales and north-east England – are likely to get less after Brexit, despite Boris Johnson promising to match support allocated by Brussels. The Commons’ Treasury committee warned last week the UK’s post-Brexit “shared prosperity fund” is worth 40% less, with an average annual budget worth £1.5bn compared with £2.5bn from the EU.
Wages
Gove has set out targets for pay, employment and productivity rises in every part of the UK by 2030, with the gap between top and bottom places narrowing. It will require making a start at fixing among the worst productivity gaps in Europe, with regional differences the worst since 1901. It’s a long-running issue, stretching back at least to deindustrialisation in the 1980s and 1990s.
It’s also a task that comes amid the cost of living crisis, with workers’ pay expected to fall in real terms in 2021 due to inflation hitting the highest rates in three decades. Real average weekly earnings across the UK remain below the peak recorded in February 2008, in the worst period for wage growth since the Napoleonic wars.
The IFS has warned real wages are unlikely to rise significantly by the middle of the decade, leaving the average worker £13,000 worse off than under pre-2008 financial crisis pay growth trends.
Narrowing regional gaps will be hard. The thinktank said workers in London were paid £20 an hour on average, more than 60% higher than £13 an hour in Scarborough and Grimsby – although the differences at the top end are starkest. While wages are similar across regions for the poorest 10% in Britain, the top 10th of earners in the capital get 80% more an hour than the top 10th in Scarborough.
Cuts to benefits will make the task harder. Poorer areas have higher proportions of benefit claimants. Analysts warned when the government cut universal credit by £20 a week in October that “red wall” constituencies would be hardest hit.
Inequality has actually widened since Johnson’s 2019 election victory. According to the New Economics Foundation, the poorest 50% of families in Britain are on average £110 a year worse off in real terms, while the richest 5% are £3,300 a year richer between December 2019 and December 2021.
Education
Levelling up targets include increasing educational attainment, skills and training. However, it follows an unprecedented period for cuts in the education budget. According to the IFS, per pupil spending in schools will have returned to 2010 levels by 2024, highlighting “a remarkable lack of priority afforded to the education system since 2010.”
The thinktank said the extent to which schools’ funding is targeted at schools with the most deprived pupils has declined since the early 2010s. Since 2013, the average funding per pupil for the fifth of schools with the highest levels of deprivation has dropped from 35% higher than for the fifth with the lowest levels of deprivation, to 23% higher in 2019.
Despite the levelling up plan, the Learning and Work Institute estimates that skills investment will still be £750m lower in 2025 than in 2010. Stephen Evans, the thinktank’s chief executive, said: “To truly ‘level up’ demands better investment, greater local control and long-term commitment. Unfortunately, the education and skills plans fall short.”
Health
The plan includes a mission to narrow gaps in healthy life expectancy between local areas and increase it nationally by five years by 2035 replicates a target set by Theresa May in 2018 under her industrial strategy.
Over the past decade, however, the gap in the number of years a person can expect to live a healthy life has widened to become as large as that between the UK and Sudan, according to the Centre for Progressive Policy. Reflecting rising inequality between rich and poor areas, people in Blaenau Gwent in south Wales can expect up to 16.4 fewer years of good health than those in Wokingham in Berkshire.
Jo Bibby, director of health at the Health Foundation, said the ambition of the government plan was welcome, but that several of the worst places in the UK for healthy life expectancy would be outside expanded mayoral authorities. Before Covid-19, the health policy thinktank calculated it would take 75 years on current trends to improve UK healthy life expectancy by five years.
“It appears the government has failed to grasp the enormity of the challenge,” Bibby said. “The regeneration schemes are too narrowly focused to address the entrenched inequalities in left behind areas.”
