27 January 2022

For levelling up to work, London must be more competitive and equitable

By John Dickie

It is a truth universally acknowledged – at least by the British political commentariat – that an election-winning slogan must become a White Paper.  Since a promise to ‘Level Up’ helped the Conservatives sweep the Red Wall in 2019, there has been eager anticipation as to how such campaigning poetry will be turned into governing prose. And soon, Michael Gove, the recently-appointed Secretary of State at the renamed Ministry for Levelling Up, Housing and Communities, will tell us.

Much has been written about levelling up, with the general consensus that the outcome will be bad for London. But if levelling up is to work, we need a competitive and more equitable capital.

The start point for the slogan is that people are held back because of where they live: too few good jobs, inadequate education opportunities; poor infrastructure. And there is clearly truth in this. The UK has one large city where earnings are above the national average: London. Other comparable countries have several.

But the reality is more complicated. Averages often conceal more than they reveal. If you’re drinking in a bar and Bill Gates walks in, you’re now in a billionaire postcode. Similarly, while average income is higher in London than in the rest of the UK, average disposable income after housing costs isn’t.

The Prime Minister, when Mayor of London, noted how life expectancy declines, station by station, as the District Line weaves its way from prosperous west London through the East End to Barking. When a councillor in Camden, I canvassed double-fronted mansions and then minutes away knocked doors on estates where the indicators of multiple deprivation are amongst the highest in the country.

The first challenge of levelling up, then, must surely be that we look to real communities, not local government units or unwieldy regions.

This in turn points to the second challenge. Places are very different. There may be common issues, but the solutions will differ – central Blackpool’s needs aren’t the same those in the run-down parts of Hastings. Local people are better placed to work out how to level up their own communities, so real devolution of powers and resources must be at the centre of successful levelling up.

And this leads to the third challenge: it will cost. Here government has a choice. Does it stop investing in those parts of the country that are on average prosperous and which produce a tax surplus for the Exchequer – the East, South-East and London – to plough investment across the country? Or does it continue to invest in these areas so that it has the ongoing resources to invest in levelling up countrywide?

The history of post-war UK regional economic policy shows that it is very easy for the government to stop growth in one area (selective employment taxes, permits for new offices etc). It is also quite easy to direct new investment into target areas – as long as it’s heavily subsidised. The problem here is that when the government cheques stop, so too does the work.

By contrast, investment that flows into the UK via London does more for the wider UK than is often assumed. There are numerous examples of small headquarters going into central London underpinned by much larger operations elsewhere in the country. Analysis that we at London First undertook showed that roughly two thirds of the jobs and economic impact of investment into central London office development accrued elsewhere in the UK. Levelling up should go with the grain of the market and leverage our global strengths to support growth across the country.

Surely the aim must be to grow our economy and distribute the proceeds more equitably, rather than to try and divide a static – or even declining – cake differently? Surely this is what this government must mean by levelling up.

As ever, articulating the challenges is easier than tackling them. Materially shifting decades of over-centralisation is a herculean political task. Michael Gove has his work cut out for him. But if any minister can drive effective reform, his track record suggests he is the man.

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John Dickie is Chief Executive of London First

Columns are the author's own opinion and do not necessarily reflect the views of CapX.