Levelling Up: Another decade of not trying.
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Before you start, let me warn you. This blog post is very long. And not that well-written. If you want something shorter, clearer, and better, wait a few months.
A decade ago I published one of my first ever blog posts. The North-South divide: We’ve never even tried, I said. A lot of people read it. People still mention it.
Since then a lot has happened to me economically.
I collected the PhD in Computational Biology I’d passed the year before. Because the job I had trained for had moved from North England to Cambridge, I quit science. I started my own business, moved to Birmingham, had a few failures, and a few successes, worked with a business that got acquired by Google, helped set up The Open Data Institute Leeds (today, Open Innovations), moved to Manchester, built the first three versions of the Teacher Tapp app, and started The Data City, a company that today is worth over £10m and employs twenty people, and moved back to Leeds.
Not a bad innings.
Regional inequality
But my efforts have been completely inadequate to stop the UK’s regional inequality getting even worse.
Since 2013, London and the South East’s economy has pulled further away from North England and the Midlands. Regional inequality of economic output in the UK has increased by most measures.
At the same time it has come down in the EU and in many other countries. This shows that economic divergence was not inevitable.
Why has this happened? Did we try and fail? Or have we just spent another decade not trying?
Transport
In 2014 the Northern Powerhouse idea was announced in Manchester. This re-promised HS2, started the discussion about Northern Powerhouse Rail (NPR), connecting Liverpool to Hull via Manchester, Bradford, and Leeds with a new railway, and hinted at a new motorway between Sheffield and Manchester – the two largest nearby cities in Europe not connected by one.
Today, in Manchester again, the last but one surviving part of the final surviving project on that list will be cancelled.
None of the big three promised projects will be built. In a decade we have achieved very little.
Sheffield has no prospect of a motorway connection to Manchester. Its airport recently closed making that link even more crucial to its international connectivity. While the rest of the world electrifies its transport to make it greener and cheaper, trains from Sheffield to every city in Great Britain still run on diesel. There are no plans to change that.
From Leeds, only London is connected by electric trains. It is still the largest city in Western Europe and North America with no mass transit system. Its most recent attempt to build one was blocked for the third time by the UK government in 2016. Diesel trains still trundle, when they are not cancelled, to Sheffield, Birmingham, Manchester, Liverpool, Glasgow, Edinburgh, Hull, and Newcastle, from the city’s fume-stained station. Both HS2 and NPR were cancelled to Leeds years ago.
Manchester has fared slightly better. The world’s oldest passenger railway along the direct route to Liverpool was electrified. The line to Wigan and on to Scotland was too. The Metrolink tram system has been expanded. Buses have finally begun returning to the control of the city. A Metro Mayor, created on the insistence of George Osborne who made the 2014 Northern Powerhouse speech, is well-established. Andy Burnham consistently fights for the city and the wider North of England in a way that the British Parliament fails to.
But even in Manchester the failures outweigh the successes. Manchester remains the largest city in Europe without a metro system. Substantial investments in its railway have been wasted by the cancellation of two extra platforms at Piccadilly station, a pinch point on the national rail network that currently causes delays as far away as Edinburgh, Norwich, and Cardiff. The bottleneck keeps much of the North disconnected from the region’s most important airport in South Manchester. The resulting network is costly to run and slow, uncomfortable, and unreliable to use.
Investments in North England have been cancelled and curtailed. The argument is almost always that they are too expensive.
And yet investments with worse value for money have continued in South East England.
London’s Overground railway network has expanded rapidly. Its last remaining mainline diesel railway has been electrified. Huge investments in its tube network capacity have completed and are ongoing. One cross-city railway, Thameslink, has been hugely improved. Another, The Elizabeth Line, has been built from scratch. Both reach well beyond London. The operating profits from much of the national rail network feeding into them is retained by the city. HS2, now cancelled North of Birmingham, will be completed into central London, freeing up huge capacity on railways in the North of the region. East-West rail, England’s first new railway since HS1 connected London to the Channel Tunnel, will open its first stage in 2025.
None of these huge investments have been made because they offered better value for money than investments in North English cities that were cancelled. They were made because London is where the people who make and influence decisions in the UK live and work and those people are biased towards themselves. It is polite to dress up that accusation in euphemism. In the interest of clarity I have avoided that dishonesty.
The results of these decisions are apparent in the data. In total since 2010, less than £3000 per person has been invested in transport infrastructure in North England. The equivalent figure for the Greater South East is over £5000. In London it is over £8000.
Just looking at rail and local public transport, the investment that North England’s cities most desperately need to grow their economies, the difference is even more extreme.
In total since 2010, £1500 per person has been invested in North England. In the Greater South East, the figure is £3000 per person. In London it is £6000.
I do not necessarily argue that less should have been spent on transport in and around London. As a country we could and should have spent even more in North England than we did in the Greater South East.
We should have done it not because it was the right thing to do, or the fair thing to do, but because consistently our analysis showed it to be the better option for generating growth and prosperity for the whole of the UK.
But if we had a limited amount to spend, and we had to choose, we should not have chosen to spend so much in London and so little in North England. To label this as “levelling down London” or “talking down our Capital” as many do is moronic.
Closing our regional economic divides isn’t just about transport. In my piece a decade ago I also argued for a better allocation of R&D funding by the state, and the dispersal of both government and national institutions from London to other great cities of Britain. How have we done on that?
Research and development
In 2020, Richard Jones and I, with great help from Jen Rae, published The Missing £4bn. Our report showed that the UK’s assignment of R&D funding was hugely preferenced towards London with no good reason. Neither that city region’s scientific output nor its business investment in R&D merited the focus that the British state’s scientific spending put on it. And yet that spending continued and continues.
In 2016, for every £1 spent on R&D by the public sector in North West England the private sector spent £3. For every £1 spent on R&D by the public sector in London, the private sector spent 80p.
And it is likely that this observed public sector preference in R&D spending toward London will deepen once improved data on this is released by the ONS.
The general pattern of regional R&D spending is largely unchanged over the last twenty years.
Today the Greater South East of England (the three statistical regions, London, East, and South East) contains 45% of England’s population.
In 2001, 43% of England’s business sector R&D was performed in the Greater South East, while 56% of public sector R&D was.
In 2019, the latest data we have, 44% of England’s business sector R&D was performed in the Greater South East, while 57% of public sector R&D was. 61% of charity spending on R&D occurred in the Greater South East in this period.
The regional misallocation of our national R&D effort has, if anything, worsened over the past decade just as it did in the decade before. And there are no signs of the direction of travel changing in the coming decade despite frequent loud announcements by the government and national institutions to the contrary.
Government and institutions
The third area of policy that I argued would be key to closing our regional inequalities a decade ago was the location of our national government and its institutions.
On this, as everywhere, we can point to some successes. The BBC moved a small part of its operation to Salford Quays in Greater Manchester in 2006. Channel 4 moved its headquarter to Leeds in 2021. In the same year The Treasury picked Darlington as the destination for some of its staff being moved out of London.
But this reallocation out of London has been dwarfed by less loudly celebrated but much larger moves towards London. Since 2010 the Civil Service has grown enormously in London and shrunk in every region of England. This was during a time of constant UK government announcements that it was moving out of the capital.
Relocations are painful for the people involved. They often interrupt careers and disrupt families. They are best avoided. The best time to locate national functions of (or allied to) the state outside of South East England is on their creation.
It is a shame then that new national institutes have been created constantly in London and South East England over the past 15 years. The Crick Institute, The Centre for Data Ethics and Innovation (CDEI), Tech City, Tech Nation, The Open Data Institute, The Advanced Research and Invention Agency, The Alan Turing Institute, and The Ada Lovelace Institute are just a few such institutions in the fields where I work. Other people working in other fields can give their own lists.
Often these institutions claim to want to serve a national purpose and do so by establishing outposts in “the regions”. Some, like The British Library, promise such outposts but never really get round to building them.
When the hubs do get built, our record of keeping them in existence is awful. Tech Nation killed and reabsorbed Tech North when it started to be seen as outperforming it. I helped run the last surviving node of The Open Data Institute, in Leeds, with no central government funding, before that organisation retrenched to the safety of central funding in central London for similar reasons.
And there is rarely any good reason why London is picked as the location for new bodies. The CDEI’s location defaulted to London, despite challenges by people like me. We don’t know why ARIA picked London as its location, but it is a missed opportunity to address the extreme misallocation of R&D funding within the UK.
Of course the North could have created its own institutions. If it had money. Which after a decade of cuts to local government, centralisation of government within England, and restrictions on local government fundraising powers it doesn’t.
Even the minimal tax raising that city regions have been able to secure in North England have been subject to conditions which London never had to meet and in the case of Leeds, to unilateral withdrawal by the UK government.
Follow the money
The pattern is clear. For nearly 15 years the UK government has talked about reducing regional inequality in the UK. And in that period it has continued to spend much more in London and South East England on the major areas of spending that can affect economic growth rates.
We could only have reasonably expected significant convergence in the UK’s regional economies if more money had been invested in growth in the regions with weaker economies. Instead we did precisely the opposite and invested the most in the places with the strongest economies. Since this investment was poor value for money by our best objective measures this not only deepened our regional inequality but also made us poorer overall than we would have been had we invested for best value. Our current economic situation and our widening regional inequalities are exactly the result we should expect from our actions.
Cancelling HS2 is just the latest action as part of this pattern. There is absolutely no sign that the UK government will change course. Given past performance, a repeat of previous promises should be discounted. While talking about levelling up this government is actively investing in deepening Britain’s economic inequality.
The cost of failure
The outcome of deepening regional economic inequality is exactly what we would expect too. The most obvious outcome of the UK’s low investment in North England is the poor economic performance of its cities, places that more heavily rely on public investment to function.
North English cities have the lowest productivity and among the weakest economies in the OECD countries of North America and Europe. The Netherlands and The North Rhine Westphalia region of Germany which have similar populations and densities to North England have economies that are 60% and 40% stronger respectively.
As our economy stagnates, North England has become ever more reliant on fiscal transfer from the Greater South East to fund basic public services. Two decades ago our economy needed support. Today it is more dependent on that support than ever before.
This is in stark contrast to other countries in Europe where weaker regions have been supported to invest in growth. While the examples of Sweden, Austria, and the Netherlands may be more applicable to the UK, we have better data for Germany.
So let’s look at Germany.
In 1990, upon reunification, the fiscal transfers from West to East in Germany were enormous. After twenty years of huge investment in the East, they had come down to the same level as in the UK. Today after further convergence of regional economies in Germany and with the economy of East Germany stronger than the economy of North England we can be reasonably confident that regional fiscal transfers are lower in Germany than in the UK.
This means that people in the West of Germany get to keep more of their money. They can spend it on better public services, lower taxes, or higher investment.
This will not now happen in the UK. North England will become ever more dependent on fiscal transfers from London and South East England to fund its basic services. London will have less money to fund the public services that its population desperately need to be better. London will experience even more pressure on its housing market, and the resulting high levels of after housing cost poverty, as people in the UK have fewer alternative places to start and run successful businesses. The UK as a whole will be poorer than it otherwise would have been.
And some people will still say that “regional inequalities in the UK have been large for a long time, we’ve tried really hard to reduce them and it’s extremely difficult so we haven’t made much progress”.
Those people are wrong. Regional inequalities were once unusually low in the UK. We have every reason in such a densely populated country to expect them to be low again.
We continue to invest in deepening those regional inequalities instead of closing them. We invest in London and the Greater South East of England with preference to North England and the Midlands because our national elites live and work in London and the Greater South East and are biased towards themselves and the places that they understand. This poor governance, our low quality and inward-looking institutions, and our biased national elite means we take poor decisions that make our country poorer.
We have not tried our best and failed. We have taken decisions that actively worsened our regional inequality. We are lying to ourselves if we claim otherwise.