Leveling Up: What Went Wrong and How to Fix It

What is Leveling Up?

The UK is home to many of the world’s leading innovators and businesses, but economic growth and the higher productivity that underpins it has been disproportionately concentrated in London and the south-east of England. This concentration creates stark geographic inequalities, negatively impacting opportunities and quality of life across the country in significant ways.

A striking example of this inequality is the 15-year difference in life expectancy between the best and worst local authorities. This disparity highlights the urgent need for Level Up, a program aimed at reducing these regional disparities and promoting equal opportunities.

It is important to approach this challenge without restricting or undermining wealthy areas. Policies that impose heavy burdens on prosperous regions can inadvertently increase regional inequality. Not everyone in London or the South East is wealthy, and any strategy must take into account the nuances within regions to avoid exacerbating existing inequalities.

How has the Levelling Up initiative developed since the last election?

Leveling Up is about reducing regional inequalities, which are reflected in differences in wages, productivity, living standards and well-being. Underpinning the 12 Leveling Up missions set out in the 2022 White Paper is the important goal of reducing the economic and social gaps between the UK’s regions by 2030, in particular between the best and worst performing areas, both between and within regions. within. .

Given the scale of the task and the impact of shocks in recent years such as Covid-19 and the cost of living crisis, progress in reducing regional disparities has been understandably slow. Some regions, such as the North West, have seen increases in wages, the share of people employed in skilled jobs and public investment. Unfortunately, these successes are the exception rather than the norm.

Overall, Levelling Up has not happened. The gap in living standards and productivity has remained unchanged or widened. The gap in living standards between London and the South East and North East has increased from around £4,600 per year and household on average to around £7,300 per year and household on average. Meanwhile, productivity, measured in gross value added per hour worked, has also increased between London and the South East and West Midlands, with London set to rise from 68 to 72, while the West Midlands will see its productivity fall from 32 to 30. Our projections for living standards and productivity suggest that, absent some fundamental change, there will be little progress by 2030.

Why is progress so slow and limited?

Despite the lack of available data, a combination of inadequate central government resources and slow spending of relatively small pots of money means that Levelling Up has been a policy failure. Up to £10.47 billion is expected to be allocated across three Levelling Up funds between 2020/21 and 2025/26. The latest figures show that the Department for Levelling Up, Housing and Communities has awarded £3.7 billion to local authorities.

However, according to the Public Accounts Committee, local authorities were only able to spend around £1.25 billion, less than 10 per cent of the total of £10.47 billion. Furthermore, our work showed that the allocation of funds varied by allocation round and fund. Round 1 of the Levelling Up funds had larger shares for the North West and Scotland, but was otherwise more evenly spread across the country. In Round 2, the greatest concentration was in the North West. Round 3 went mainly to Scotland, Wales and Yorkshire and the Humber.

There are three main problems with the disbursement of Leveling Up’s three different funding streams. Firstly, there is the sheer cost of applying for funding, which places a significant burden on local authorities’ already strained finances. Secondly, the centralized nature of allocation, which is part of the “begging bowl culture” (in the words of Andy Street, former Mayor of the West Midlands). Third, doubts over whether economic and social criteria were applied consistently: local authorities in some of the most deprived areas lost out, while affluent areas in the south-east gained funding.

What policies would you recommend to the next government?

The Levelling Up Fund needs restructuring. As it stands, local authorities spend a lot of money on competitive tenders for relatively small amounts of money. The process of selecting winning bids for the Levelling Up Fund needs to be transparent and consistent in each funding round.

In addition, the Levelling Up Fund themes should align with the Levelling Up White Paper. To fully leverage the Levelling Up Framework, they must align with missions or objectives. This will enable support to be offered to policy areas that the worst performing areas should focus on the most. It will also help inform the disbursement process, as using existing metrics alongside other assessment metrics will facilitate the allocation of funds.

Above all, the Leveling Up Fund needs to be more resourced and focus more on local authorities working together to bid for higher value offers to overcome pre-existing regional disparities. Eliminating deep-seated regional disparities should remain one of the main priorities of the new government. However, this issue should be seen as a long-term investment rather than a problem that will be solved by 2030.

To deliver meaningful change, the government must address the significant gaps in public investment by raising public investment to 5 per cent of GDP per year and designing and delivering public investment projects that unlock business investment, such as transport connectivity, skills and housing.