The UK government faces a significant challenge in its ‘levelling up’ agenda, not least because the UK has some of the worst regional inequality among the OECD’s 38 advanced economies.
Productivity levels vary wildly – London is 32% above the UK average, Yorkshire and Humber 17% below. It’s a similar picture with employment, where the latest figures show the jobless rate in the east of England was 2.7%; in the north-east it was more than double that at 5.7%. Half of people living in London are graduates, while in the north-east the figure stands at a third.
In the Basque Country, a region of northern Spain, our population may be half the size of that of Yorkshire, but we faced a similar set of problems not too long ago. Like many towns and cities in northern England, the Basque region was once a centre of heavy industry. And, like those UK towns and cities, we suffered a huge shift in the 1970s and 80s as these industries declined. We were also hugely affected by the 2008 financial crash, which saw unemployment soar to among the highest in Spain, and productivity and wage rates fall to among the lowest. That in turn led to a brain drain, as those with higher qualifications left for pastures new – a similar story to that being told in English cities such as Wolverhampton.
Today, the turnaround couldn’t be starker. Thanks to policies introduced by the Biscay government, the Basque population now enjoys living standards regarded as some of the best in the developed world. Our region ranks alongside some of the most industrialised nations in terms of education levels, unemployment is way below the Spanish average, income equality higher than Denmark and the Netherlands, and a per capita GDP on the same level as Sweden. And our once dirty cities are now tourist attractions – ranging from the striking Guggenheim in Bilbao to the culinary experience of San Sebastian.
So how have we done it?
Regions need to be given true autonomy and freedom to lead. As a report last year by the Centre for Cities, the UK research and policy institute, concluded, the main reason why regional policy has been ineffective is that the regions have not had a level of government that could provide the necessary leadership for regional regeneration.
Granted, Michael Gove has said local authorities will be able to bid for powers closer to those held by the Mayor of London, but these are still well short of the kind of fiscal levers available to the Basque region. Our semi-autonomous status has allowed us to introduce our own generous tax incentives, which has been a trigger point in high-skilled labour from across Europe and major companies relocating to the region.
Along with tax-raising powers, regional regeneration needs substantial investment. Many have pointed out that there is no new money above existing resources in Gove’s White Paper, nor are there new commitments beyond the existing Spending Review. These limited spending pledges no doubt reflect the tight fiscal position, but this shouldn’t thwart ambition – especially if levelling up really is a flagship policy, as Boris Johnson says. It didn’t stop us – industrial recession hit Bilbao hard in the early 1980s, but then the Biscay government built a technology park, making the city a centre for research and development and hi-tech industry.
Investing in education is also key. When our heavy industry declined, we invested to upskill our regional workforce – also part of the wider strategic plan to attract hi-tech companies to the region. Some English cities will be starting from a low bar: for example, A-Level attainment in two of the three Wolverhampton constituencies is less than half the national average. The Basque Country on the other hand, now ranks alongside some of the most industrialised nations in terms of education levels, with 26% of residents holding advanced degrees in STEM subjects, double the proportion of both the European Union and the United States.
This has not only halted the brain drain, but skilled workers are now relocating from all over Europe to our region. More than 180,000 foreign nationals lived in the Basque Country in 2020, up from around 150,000 in 2018. Economic renewal has attracted major banks and global companies: the likes of Mercedes-Benz, Canon and PwC have operations in the region, which is now considered one of the top destinations for foreign direct investment in Europe.
And finally, don’t underestimate bold cultural investment as the cornerstone of success. It’s no use only committing to small-scale projects like local libraries and community arts centres, important though these are; sights should be set on establishing cultural icons. The Basque region fought hard to attract the world-renowned Guggenheim Museum to Bilbao. Eyebrows were raised at the time, but it now encapsulates the area’s turnaround, contributing €425 million euro to regional GDP and generating over 9,000 jobs, while boosting the city’s art scene and driving up tourism. It has been the centerpiece that has been the catalyst for a full-scale urban renewal programme, including a new metro system and business centre.
Of course, not every attempt at publicly funded cultural renewal has been a triumph (witness Sheffield’s National Centre for Popular Music which opened in 1999 and closed the next year) but there have certainly been success stories. Take the National Football Museum in Manchester, which has averaged 500,000 visitors a year since 2002; or the V&A Dundee, which saw over 830,000 visitors in 2018, its opening year, far exceeding estimates.
Here in the Basque Country, the Guggenheim recipe was successful for lots of reasons – an iconic design and renowned architect at the right time and in the right place; together with the backing of local, provincial and regional governments which paid for construction and running costs, while the Guggenheim Foundation lent its brand name and works from its collections, ensuring a strong art collection. These are all elements British cities could look to emulate.
So, although ours may be a small region, and the British government’s levelling up ambitions envisage on an altogether grander scale, there are certainly lessons that Gove and his colleagues can take from our success. If they really want to make regional regeneration work, perhaps the watchword should be Build Back Basque.
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