29 September 2022

What hopes for levelling up with Liz?


Before I left these shores for two happy weeks of leave, I asked CapX readers whether or not Liz Truss would be able to hold together the winning coalition that Boris Johnson minted at the 2019 general election.

Whilst the extent to which the Red Wall was won by tacking left can be over-stated, there is no getting away from the fact that he did offer – or at least, gave every impression of offering – a sort of Toryism with a greater focus on the north and that was more comfortable with public spending.

If Truss can’t steady the ship, there is a real danger of the ‘fiscal event’ entering popular memory as the political version of that Simpsons clip where the Soviet Union comes back.

Key to selling the change of course to those areas which backed the Conservatives for the first time will be whether or not the new Government can deliver on ‘levelling up’. This is unfortunate, because not only can the Prime Minister not seem to bring herself to even say the words, it isn’t obvious that a genuinely market-led strategy is politically possible – or that even if it were, it could possibly pay dividends in time for an election in 2024.

The fate of the Investment Zones (IZs) proposed by Kwasi Kwarteng in the Growth Plan is a case in point. The strongest case for such a scheme – outlined previously on this site by Sam Ashworth-Hayes – hinges on planning reform. Yet already such elements are being watered down or stripped from the proposals altogether, in order to avoid spooking Conservative MPs.

Worse, Truss’s insistence on local buy-in (to avoid charges of ‘Stalinism’, no doubt) means that, at least so far, prosperous areas in the south are showing scant interest in becoming IZs. Yet it is precisely those areas, especially sites such as the Ox-Cam Arc, where the dividends of slashing structural barriers to growth would be highest and most swiftly delivered.

Then there’s the bigger question, which Johnson never really answered, about what levelling up actually is. 

To the extent that he put any meat on the bones of it, it was a gesture in the direction of more investment (or at least, more spending) in left-behind areas. That is, whatever his protestations to the contrary, nothing that previous governments haven’t been trying for decades.

Perhaps setting up a freeport archipelago of IZs across the Red Wall will be part of the answer. But a long-term solution, counter-intuitively, almost certainly involves taking the shackles off the south. 

Even if you don’t go the full Tim Leunig (who infamously argued that northern cities should be allowed to depopulate to a level better suited to their economies), Ant Breach of the Centre for Cities has made a persuasive case that one of the best things government could do for northern businesses would be helping potential customers in the south keep more of their money for discretionary spending.

But Truss can’t do this. Conservative MPs simply don’t want it to happen. Some of those tasked with making the case for the Government’s supply-side plan are active opponents of any move to increase supply on housing or infrastructure.

This country is choosing to make itself poor because the status quo suits a powerful section of the population who profit enormously from it, whilst being insulated from most of the downsides. Boris Johnson, with all his skills as a communicator and his own mandate, couldn’t pass planning reform. How could his successor possibly do it?

Yet without that, Truss’s odds of delivering strong and sustained growth are slim. Not even the fervent desire of her MPs to find any excuse to build houses somewhere else can just summon a strong northern economy into being ex nihilo.

In the absence of growth, the bridge to those voters who backed the Tories expecting them to pay more attention to left-behind areas would be spending and a lot of rhetorical love. 

Yet whilst there have been a few welcome commitments, such as Northern Powerhouse Rail, one doesn’t get the impression ministers are about to unveil a concerted spending programme – not least because the Chancellor is widely expected to deliver public spending cuts soon. And as mentioned above, when the Prime Minister seems either unwilling or unable to even say the words ‘levelling up’ it will be hard to persuade voters she cares much for it.

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Henry Hill is Deputy Editor of ConservativeHome.

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