16 November 2022

Unlocking the change this country needs

By The Rt Hon Michael Gove

The following is an edited transcript of Michael Gove’s keynote speech at the Centre for Policy Studies’ Margaret Thatcher Conference on growth

It’s a pleasure to be here today, and I’m tempted to say that the answer to almost every question that we’ll be asking ourselves this afternoon is contained in a Centre for Policy Studies pamphlet, because almost every one of the issues – whether that’s regional inequality, reviving the High Street or getting the housing market going – has been addressed brilliantly, originally and forthrightly by one of the team of authors, the Robert Colvile has brought together under the umbrella of the Centre for Policy Studies.

So if there is one thing I want you to take away from today, it is these CPS pamphlets, which are often the keys to unlocking the change that this country needs.

And I want to thank in particular, not just Robert, but also Lord Spencer, for the leadership that he has shown and making sure that CPS can be true to its founding mission, and go from strength to strength in generating the policy solutions to the dilemmas that we face.

And I’m also grateful to Chris Hayward (Chair of the Policy & Resources Committee at the City of London Corporation) and to Ian Stuart (CEO of HSBC) for their comments. Introducing today’s conference, Chris has reminded us that the strength of financial services is a critical part of the United Kingdom’s competitive advantage. And it is important for us all, even in challenging times, to remember those areas in the UK economy that are doing well, that are innovating, that are driving growth. Not just financial services, but life sciences, retail tech, our creative sector, our higher education sector.

And of course, there is one major new growth area in which Britain has been powering ahead. In the last few months, we have dramatically increased the number of ex-prime ministers contributing to our economy in the UK.

One of the other points, of course, that that Ian made was the vital importance of one front door when it comes to investment. And one of the things I would say is that the Department for International Trade is that front door. It has been the case hitherto that an awful lot of emphasis being placed on DIT’s role in both rolling over free trade agreements with those countries with which we had relationships when we were in the EU, and forging new free free trade deals. Both enhancing our trading relationship with Japan, and forging new trade deals with Australia and New Zealand and, soon to come, our membership of the CPTPP. Those free trade deals are important – but even more important, under Kemi Badenoch, is the role that DIT it will play in making sure that it can be that front door, that friend and guide for international investment, and for making sure that the world recognises that there are investable propositions within the UK. And I know that Kemi will be speaking to the CPS again in the future about the role that DIT will play.

One other thing, of course, that that Ian mentioned is the importance of green growth. It is sometimes the case, in some of the more simplistic commentary that you see about politics – and by simplistic commentary, I do not mean in the pages of The Daily Telegraph – that you see a tension being held up between a move towards net zero, and environmental enhancement and economic growth overall. The truth is that the United Kingdom is leading the green Industrial Revolution, as it led the original industrial revolution. That decarbonisation, at whatever pace and in whatever way, is the path that the world’s economies are accelerating down. We need to ensure that the advantage that we have – both in research and development, and in manufacturing and renewables and in other areas – is not an advantage that we retreat from.

It will increasingly be the case that the technologies that we develop here will be adopted elsewhere in the world. The political and economic leadership that has been shown in this area is something that we should double down on, not retreat from. And of course, the Government is committed to being the greenest ever. Our government’s commitment to recycling has been shown, by the way in which the Secretary of State for Justice and the Secretary of State for DHLUC have been recycled effectively after only a few weeks on the waste pile.

The moral necessity of levelling up

The other thing that I want to emphasise is the importance of the two areas for which I’m directly responsible: levelling up and housing. The Centre for Policy Studies has been brilliant in making the case for the reforms that we need, not just to planning but to the housing market.

When it comes to levelling up, the simple moral case is easily stated. It can’t be justifiable, it can’t be defensible, that a country with the resources of the United Kingdom should be so fundamentally unequal and fundamentally geographically unequal.

The difference between the productivity level, the growth rates, the number of new and successful firms being established, in the East of England, the southeast and London, compared to the rest of the United Kingdom is a chasm. It’s a gulf. And that means that the opportunities for individuals in this country are blighted based on where they are born. And no government can be indifferent to the fact that that inequality has a scarring effect, morally and socially. But even if you were indifferent to the moral imperative of levelling up, you would be foolish to ignore the economic damage that is being done by having such a lopsided model within the United Kingdom.

If every part of the United Kingdom were as productive as the three most productive regions, then we would be the largest economy in Europe.

The failure to ensure economic growth in those areas that have been overlooked and undervalued has held us back. It’s not just the case that transfer payments from the wealthier areas have to go to those poor areas, it is also the case that there is an untapped potential that we need to do more to ensure that we can benefit from.

But there is no single simple answer to the question of levelling up. We can’t do it just through deregulation. We can’t do it just through education and the enhancement of human capital. We need to bring a variety of different forces to play. And that is why in the levelling up white paper, we outlined a series of missions, all of which are designed to address the complex interplay of factors that have held particular areas back. So some parts of our country have suffered economically from the longterm scarring effects of deindustrialisation. But they’ve also been held back by other factors.

Firstly, and most importantly, it is human capital and education. That is why I’m so pleased that Mark Lehaine, one of the leading education reformers in the UK, is now working with the CPS in order to make sure that energy is put back into education reform. We’re unique in this country, in the gulf between what happens in our very best state schools and in our weakest. We’re also unique in the fact that London is the only capital city in the developed world where the schools in the capital are better than the rest of the country.

So we have a huge gap to overcome. That can only happen if we go back to the dynamism in education reform. That means expanding free schools and academy chains, rigour in the classroom, whole class teaching with an emphasis on traditional pedagogy. And at the same time a transformation of what’s happening in technical and vocational education, where the current incentives for further education colleges are far too often to offer people low value courses, so that the FE principals can earn their fees, rather than providing the sorts of qualifications that our economy needs and the individuals will benefit from.

And as it goes in FE, so it goes in HE, where far too many courses have been designed for university Vice Chancellors to fill their boots, rather than to provide students with means of contributing successfully to the economy and to their own advancement. So we need change there.

But we also need change in other areas. We need improved infrastructure, not just the major infrastructure projects like HS2 or the spread of superfast broadband, but also infrastructure within our towns and cities that ensures improved connectivity. It is just as important that we improve bus services in Bradford as it is that we make sure that our major rail links are out there – because in communities and cities like Bradford, the people who are locked out of economic opportunity are the people who often lack the basic ability to get from areas of low growth and low employment to areas of potentially higher growth and more rewarding employment, even within their own urban area. That’s a critical factor as well.

But our cities overall, as the CPS have pointed out, are less dense in terms of population than comparable cities in Europe. The agglomeration effects that those other cities enjoy are less apparent here. It has been the case in the last two decades that we’ve seen a resurgence in population in the hearts of our cities, often driven by higher education students and changes to the property market, but we need to double down on that.

And again, there are more changes that we need to make not just in housing and planning, but also in the quality of local leadership. If we do want to see levelling up, then we need to make sure that it doesn’t just happen from Westminster and Whitehall, but that it is powered by strong local leaders like Ben Houchen and like Andy Street. But we need to make sure that devolution of responsibility is accompanied by devolution of fiscal and revenue raising powers – because we want to see a greater level of direct accountability for those who are local leaders.

There’s so much more that I can say about levelling up – the importance, for example, of making sure that those areas that we want to become attractive destinations for investment are the sorts of places that people can feel proud of, or have their pride given concrete (or preferably, in my view, bricks and mortar) expression. And that is why I’m so interested in the debate at the moment about culture.

Some of you will be aware that there’s a vivid and high level debate about the future of English National Opera. Should it move from London to Manchester? ENO is an outstanding cultural institution. But I do think that it is important that we recognise that if we were a country like Germany, or Italy, the idea of having an outstanding Opera House and an outstanding opera company in every major provincial city would be a no-brainer. So to my mind, while I won’t get into the detail of that debate, I do think that the spirit behind it – that we should be planting those successful cultural institutions, that we should be improving education, improving infrastructure, improving local leadership – all of that is critical. And why? Because we want to irrigate the soil. We want to make sure that those places that have suffered from low growth and low productivity become increasingly attractive for the private sector to invest in.

Some of what we’ve said about levelling up, because it involves government action and leadership, has been characterised by some as a return to the 1950s and the 1960s, and the state direction of capital and labour. Nothing could be further from the truth. We’re not going back to the ages of Macmillan and Butskellism. We’re not telling companies where they should or must go. What we are doing is saying that, if the private sector is going to invest in those areas, it needs to make sure that the supply side constraints are removed. And what are the big supply side constraints? Labour market: lack of skilled employees. Transport: lack of ability to get goods and services to where they are needed. Local leadership: the responsiveness that you need, when you’re thinking about whether or not to invest in Teesside, the West Midlands, or elsewhere. And of course, as I mentioned, the other supply side concern is the quality of life ingredients that make countries or other parts of countries investable.

Five things holding back new houses

But of course, the biggest supply side reforms for which I’m responsible is planning reform. Now, again, the argument that you sometimes see is that, following on from my colleague Robert Jenrick’s attempts with a planning white paper to look at how the system should change, that any remodelling of those proposals is somehow a retreat, and that the government has given up on looking at our dysfunctional planning system and improving it. Not at all.

But if you’re going to change something as complex and as dysfunctional as our current planning system, then it is vital to understand why previous attempts at reform have foundered, and understand why there is resistance to the development that this country needs. I think if you attempt simply to – please excuse the metaphor – bulldoze your way through opposition, rather than taking people with you, you will create a backlash, which will mean that you will not see the development that you want.

I think there are five basic factors that we need to recognise are entirely rational reasons for opposition to new development. The first is the quality of so much that is built, particularly the quality of new homes built by our volume house builders. The experience of many first-time buyers is that the homes that they buy, incredibly expensive homes simply, aren’t fitted out to the standard that they should be.

But more than that, the fact that so many of our volume house builders use a restricted pattern book with poor quality materials and the aesthetic quality of what they produce is both disappointing and also not in keeping with the high aesthetic standards that may already exist – that is a reason why a community will say no. They do not want ugliness to be imposed on them. So one of the things that we will be unveiling are a series of policies in order to ensure that we improve the quality, and in particular the aesthetic quality, of new development. Beauty.

The second reason why there is a opposition to new development is the lack of infrastructure that accompanies it. People are naturally worried that there’ll be more pressure on schools, hospitals and roads. And also, they worry that it will be the landowner who will get the cash benefit from the uplift in land value, not them. That’s why we’re introducing a new infrastructure levy to build on Section 106. And the community infrastructure levy so that more of the value in land value uplift can go to the community. So we can have the GP surgeries, the schools and the road improvements that are needed. So I: infrastructure.

The third reason why there is resistance to development is that democracy is seemed to be overturned. Local communities adopt plans, those plans have space for new homes. But it is often the case that some of the big developers manipulate the way in which plans operate, manipulate the presumption in favour of sustainable development. So the community that has taken the risk of saying that it wants a set number of new homes has that democratically adopted plan overwritten by the way in which the planning Inspectorate and current legislation works. So we need to put democracy back, so that people feel that they have control over the way in which they accept new homes. D for democracy.

Next, the environment. One of the perfectly rational reasons why people object to new development is the loss of green space, the loss of wildlife, and indeed, the impact on the climate and on nature of new development. Sometimes, of course, there’s going to be a convenient new passion. It is surprising how many communities that had not hitherto shown a fondness for newts and bats can suddenly discover a love of reptiles and of flying mammals. But nevertheless, these environmental concerns are real. And they need to be addressed through environmental enhancement, biodiversity net gain and other tools.

And the final thing is the sense of neighbourhood. One of the problems that we have with much new housing development is that you have those new homes without a sense of community behind them. So it’s not just the infrastructure that is there in the public realm, the hospitals and GP surgeries and schools. It is also the case that you have a sense that a new community is being built.

There is an example of a new neighbourhood and a new community is in front of our eyes in Poundbury, in Dorchester, and there are many, many other examples. The reason I mentioned it is that it’s controversial. Its controversial because people say it’s pastiche, it’s the former Prince of Wales’ architectural vision, it’s misty eyed and old fashioned. That’s all rubbish. The thing about Poundbury is these are beautiful homes. You cannot tell the differences as you go round that community between homes for rent and homes which are owned. But also these beautiful new homes are built around the sorts of facilities – pubs, shops, village halls, green spaces – that make it feel like a proper community. And as a result, homes in Poundbury are now worth more than homes in Dorchester, the existing community. It is very rare that you have a new development attached to an historic settlement where the new homes are actually worth more in the market. And that’s because it’s a neighbourhood.

So B, I, D, E, N: beauty, infrastructure democracy environment neighbourhood. That spells ‘Biden’.

Now, a week ago, when I was accepting Rob’s kind invitation to come here, I wondered if I should really endorse Biden in front of this audience? And one of my officials said those initials also spelled ‘in bed’. And I thought however embarrassing it might be to endorse Biden, asking people to believe that they should be in bed with Michael Gove was probably even worse.

But without reflecting on what happened in America last week, all I would say is, whatever the initials, whatever the order, if we do make sure that in the planning reforms we’re bringing forward, people understand that new homes will be beautiful, they’ll be accompanied by infrastructure, there will be democratic input in decision making, there’ll be environmental enhancement, and that we’re creating new neighbourhoods – then we can build the new homes and the additional infrastructure that this country needs in order to power the growth to which all of us are committed.

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The Rt Hon Michael Gove is Secretary of State for Levelling Up, Housing and Communities