This blog was first published in The Herald newspaper on 24 August 2021.
By Graeme Roy, Professor of Economics at the Adam Smith Business School, University of Glasgow
Spurred by changes in electoral geography at the 2019 General Election, ‘levelling-up’ has become a key policy priority of the Westminster Government.
Across a range of indicators, UK regional economic inequality is amongst the highest of any high-income economy. It’s an important issue in Scotland too. GDP per head (a measure of relative economic prosperity) was around £23,500 in the South of Scotland in 2019. In Aberdeen and Aberdeenshire, it was over £38,000. Across the UK in recent years, these regional inequality gaps have widened rather than narrowed.
But beyond good intentions, there remains little in the way of concrete policy ideas to define what the ‘levelling-up’ agenda means in practice. Policy announcements have either contained vague promises to empower local communities or to invest in new infrastructure. Debates have also tended to disappear down rabbit holes such as modelling the minutiae of statistical rules which govern what regions should get what from relatively small pots of money.
The economic geography of the UK today reflects a complex array of factors that can’t be changed overnight. Tackling our regional inequalities requires both huge investment and difficult decisions on priorities – both fiscally and economically – that past governments have shied away from. If we’re to make much headway into ‘levelling-up’ then there are three crucial questions we must resolve at the outset.
First, are we clear about what we mean by ‘levelling-up’? The agenda is frequently presented as an economic question to be answered. But growth does not buy happiness. Many of the ‘richest’ parts of the country have lower levels of personal wellbeing than our (supposedly ‘economically poorer’) rural communities. But many of the happiest parts of the country struggle with poor social and economic outcomes that impact their resilience. The challenges are complex, and so too must be the policy approach.
Second, having decided what we’re wanting to ‘level-up’ to, what are best policy tools to achieve that ambition? Often we look for simple solutions. In the case of ‘levelling-up, the answer is typically ‘more infrastructure’. Whilst infrastructure undoubtedly has a part to play, it is one solution in a complex set of responses required. Some of the most successful EU Structural Funds initiatives have come from the Social Fund designed, amongst other things, to boost the employability prospects of young people. It’s wishful thinking hoping that building a bridge to Northern Ireland will see the South of Scotland shoot up the GVA league table. Investment in local business growth, skills and the genuine infrastructure priorities of that community will achieve much more.
Third, what is the economic geography we are targeting? Inequalities within regions are often much greater than between regions. Look across Glasgow and within this one ‘region’ there are huge variations in economic, health and social outcomes. Allocating funds based on artificial regional boundaries could see priority areas miss out and may even end up reinforcing inequalities.
Beyond these questions, we will – in time – need to agree who is best placed to deliver such policies. Recent political controversies over the new Shared Prosperity Fund, the Internal Market Act and devolved powers do not bode well. Ultimately, we should care little about who leads on what, as long as the best outcome is achieved. But this will require close collaboration between Westminster, Holyrood and local authorities. The last thing we need are political disagreements holding us back.
Most importantly, we need to recognise that having ‘levelled-down’ for the best part of 40 years, our economic policy needs to transcend the political cycle and focus on a long-term plan to address the deep-rooted causes of regional inequalities. Failure to do this, will see the ‘levelling-up’ agenda join other well-intentioned initiatives on the policy scrapheap.