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Bringing growth back home – the moral purpose of levelling up
I want to begin my remarks by quoting from a prominent Manchester industrialist of the 19th century, Friedrich Engels.
A spectre is haunting Europe. In our case it is the spectre of low growth.
And it’s not just Europe.
Since the financial crash of 2008 much of the developed world has been enduring the pain of stunted economic development.
This pain has been visited on developed nations by a variety of factors.
Now not every economy has been affected by all of these factors, but collectively they have held back growth across the West. And we have seen in different countries the over-financialisation of their economies.
We’ve seen a naive trust in the ability of authoritarian regimes to be reliable partners.
Corporate structures that have sometimes put executive reward ahead of capital investment.
And of course bureaucratic reporting requirements that have sometimes elevated abstract goals that please pressure groups ahead of concrete gains that deliver for the poorest.
We have also seen supply chains that lack resilience and in some countries education systems that lack rigor.
And linking them all of these phenomena has been a preference among some policy-makers for models that appeal to theorists and think tanks rather than action rooted in real people and real places.
Popular resistance to this model – unhappiness with the way it shifted influence to well-connected and often unproductive elites and moved resources and economic power abroad – lay behind big political shifts in the last ten years – not least Britain’s decision to leave the European Union.
It was notable, though of course no surprise, that the strongest support for Brexit came from communities in this country that had suffered most over the years as a result of a failure to get real.
The weaknesses in the model that those voters rejected have been more cruelly laid bare than ever in recent years.
The Covid pandemic underlined just how exposed we have become to risk as a consequence of our economic reliance on regimes such as China for essential finished goods.
The war in Ukraine has reinforced the significant additional risk to all of us of being reliant on authoritarian regimes for energy.
Nations and political systems which I admire – such as Germany – have found their dependence on Russian energy to fuel manufacturing and Chinese markets to sell their goods have left them in severe difficulties.
But there is no room for schadenfreude here.
Quite the opposite.
Because lying behind the 2016 vote was an awareness that our own economic model in the UK lacked – in every sense – real resilience.
We’ve seen manufacturing declining over decades.
Government, corporate and personal debt is too high.
Energy supplies insecure.
Transport networks have been deprived of investment.
A workforce with huge talents and potential but without the right skills and qualifications.
These weaknesses have been, across the UK, in the fullest sense, supply-side problems.
We have had a problem with human capital because our labour market has been constrained by a lack of supply of suitably qualified workers trained in the UK, particularly those with scientific, mathematical and technical skills.
The supply of finance capital – direct investment in productive industries – has also been limited by the structure and regulation of financial services.
The supply of high value manufactured goods we produce domestically has been held back by both of the above factors – and that in turn has exacerbated our current account deficit, reduced the number of high-paying jobs for all communities and unbalanced the economy.
Historically poor connectivity – both physical transport links and digital infrastructure – have added to our shared economic challenges.
And past decisions on energy investment – perhaps most conspicuously with respect to nuclear power – have left us dependent on unreliable foreign partners not just for supplies but for engineering expertise and finance.
These problems have been long-lasting and are deep-rooted.
As has one of the most profound weaknesses in the United Kingdom’s political economy.
The North-South Divide.
The UK, as the IPPR reminds us today, has suffered more than any of our neighbours, friends and rivals from an enduring and entrenched geographical and social imbalance.
Wealth, influence, innovation, high productivity firms, high wage jobs and high quality schools have been disproportionately concentrated in the south-east quarter of the country.
None of that is intended to play down the vital importance to our economy of our capital city – probably the world’s single most attractive destination for investment. Quite the opposite. London is a priceless asset for all of us. And, as I shall go on to argue, it’s been a model in certain very specific ways.
But we all know we cannot prosper fully as a state if we rely so much on one region – and within that region on one city.
The UK economy has been like a football team with a star striker but a midfield that consistently struggles to get the ball upfield and a defence full of holes – and no forward – not even Lionel Messi – can do it on his own.
Success depends on strength in depth.
And that is what the UK economy has lacked for too long.
We have been insufficiently resilient, inherently constrained by supply-side weaknesses and unequal in access to power, capital and investment.
But while these problems have been holding Britain back for decades this Government is committed to tackling them head on.
The Prime Minister has made clear the moral imperative of reducing inflation is heart of everything we do, because inflation reduces investment and he’s also made clear that he’s committed to generating sustainable growth across the country through innovation and enterprise.
The Chancellor has outlined reforms to financial services to better support industry and manufacturing, and of course we have tax cuts like the super deduction which further incentivise investment in productive capital.
The Foreign and Trade Secretaries are working to secure investment from abroad in those areas in the UK which have been overlooked and undervalued in the past.
The Work and Pensions Secretary is addressing economic inactivity, focussing particularly on our most disadvantaged regions.
The Education Secretary is tackling deprivation at root – shifting resource to where it is needed both geographically and in children’s life-cycles to extend opportunity.
The Transport Secretary is investing in improved links between and within communities that have been neglected in the past.
And the Business Secretary is directing record research and development money to historically under-funded regions to ensure the spark of innovation is nurtured across the whole country.
I will say more about all of these initiatives in a moment.
But two truths that are important to underline now.
Growth relies on using all of these tools – not just the fiscal and regulatory weapons which are at Government’s disposal.
And all these initiatives work best, most fruitfully and sustainably, when we are working in partnership with empowered, strengthened, economically ambitious local leaders who are our equal partners in our shared national endeavour.
Our Levelling-Up White Paper, published last year – outlined how this Government can bring all these factors and forces together. And in light of the events of the last twelve months, it is more important than ever as a guide to Government action. Recent economic challenges only underline how powerful is the analysis of the White Paper and how important are all of its actions.
The White Paper lays out the steps necessary to improve our country’s economic performance – durably, resiliently and equitably.
It complements the Prime Minister’s Mais Lecture and underpins the priorities that he set out in his speech on the Government’s agenda earlier this month.
Read together, and reviewed alongside the policies that we are implementing and delivering on levelling up, they constitute a plan of economic action which is both radical and evidence-led – it is a Growth Strategy rooted in real people and real places.
Other jurisdictions are also grappling with the challenge of years – indeed decades – of low growth. The US Government’s Inflation Reduction Act and the EU’s evolving response have provoked understandable curiosity and debate.
But the Levelling Up White Paper preceded both of them – and in both diagnosis and detail it is just as ambitious.
The White Paper outlines that sustainable economic growth relies on multiple interventions to create the environment in which private enterprise can flourish, innovation can take flight and new jobs can be created.
Unless there are good schools with high standards, further and higher education institutions providing students with qualifications that employers value, unless there are effective transport links within and between towns and cities, unless there is fast and cost-effective digital connectivity and better access to finance capital for local firms in every part of the UK then growth cannot be maximised across all communities.
And if course for those communities to be genuinely resilient, to attract and to retain the talent necessary to flourish, and to maintain economic competitiveness and generate further innovation, there need to be safe streets and ordered public spaces, an attractive natural environment and a beautiful built environment, cultural richness and respect for heritage – the civic infrastructure that reflects the pride people have in the place they call home.
And the best way to ensure all these public goods are aligned is to have strong, accountable local civic leadership incentivised to work with every actor who can reinforce virtuous cycles.
Our White Paper identifies the need for those changes and it sets out twelve national missions to ensure we take the steps necessary to embed growth in every community.
And these missions include clear and stretching goals to eliminate illiteracy and innumeracy, to improve skills uptake, reduce health inequalities, upgrade transport networks, connect communities digitally, allocate R and D funding more strategically, tackle poor quality housing, improve wages and productivity, enhance pride in place and extend the programme of devolution we have been delivering and to which I am so committed.
These missions all complement each other – by making it the central domestic task of Government to shift power, wealth and opportunity more evenly, more equitably across the country – and in so doing provide the foundations for durable economic growth.
Now some have argued, in response to the White Paper, that it is not the role of Government to promote growth by acting in this way but by absenting itself.
Well I am certainly no supporter of the State’s undesirable and inevitable and continuing expansion. But I am against ever lengthening welfare rolls, lives spent in dependency, children brought up without the exam passes that translate into jobs, health inequalities that will place growing future demands on the NHS, family breakdown, lawless public spaces, slum housing which makes its inhabitants ill and civic institutions in decay. All of these place greater pressure, sooner or later, on the public purse and they are affronts to the conscience that no Government can ignore. Which is why there is both a moral – and economic – imperative to levelling-up.
And the experience of successful economic transformation demonstrates that growth is not secured by absent Government but by active Government.
A Government that plays a strategic role, irrigating the soil for growth. As Mrs Thatcher did. Specifically in the Docklands.
When the Thatcher Government took office in 1979 London’s Docklands were a derelict economic desert. Their economic rationale had gone as containerisation had taken shipping away from the historic wharves of Bermondsey and Poplar to new purpose built ports. Jobs had disappeared, housing was slum-level, schools were places of narrow horizons and fading hopes.
The original vision for regeneration of the area – from the Treasury of the time – was simple. Just cut taxes and de-regulate and a thousand flowers would bloom in the dusty and contaminated soil of the Docklands. But while lower taxes and smarter regulation are certainly powerful ingredients in any growth package they just weren’t enough.
Margaret Thatcher, and her then Industry Secretary Keith Joseph tasked the then Environment Secretary Michael Heseltine with bringing together a wider range of interventions through the London Docklands Development Corporation – land was assembled and remediated through Government agencies, new transport links were built, including the DLR and what was to become London City Airport, new housing was commissioned and in due course cultural, sporting and educational investment followed. The area thus irrigated became fertile ground for massive commercial investment. Government created the environment, the private sector created the jobs. London Docklands today is an economic success story – one of the most signal success stories we owe to Mrs Thatcher’s Government.
And it is that spirit that animates our levelling-up policies, active government. And that spirit is there most vividly our plans for new Investment Zones. This country has no shortage of growth industries, whether in advanced manufacturing, renewable industries or life sciences. And we have no shortage of world-class universities, including here in Manchester.
But where we have underperformed is leveraging the success of these industries and research to support growth across the whole country and particularly in communities in need of regeneration. That is my guiding mission for Investment Zones and we will shortly begin a process to identify Investment Zones in areas that need levelling-up.
Our approach will be guided by three principles. First, that government cannot create clusters, but it can and has create the conditions for them to succeed. Second, success requires fiscal support, but also that wider range of interventions that we saw in Docklands, whether that’s land assembly, housing investment, transport infrastructure, or skills investment, in order to ensure we tackle the specific barriers in each cluster that hold back growth. And of course third, Investment Zones can only happen in partnership with strong local leadership.
Our new Investment Zones are intended to deliver long-term change in the areas where they are established. And we recognise that the scale of our levelling-up ambitions means that we can’t accomplish all the economic strengthening and re-balancing that our nation needs overnight.
That is why our missions in the White Paper are deliberately designed to extend beyond the life time of this parliament. They are not exercises in temporary amelioration or fiscal elastoplasts. This is a deliberately long-term economic plan.
And nowhere is that more vividly demonstrated than in the scale of change, and the level of investment, that we have brought to devolution. We are reforming the shape and nature of Government itself – re-distributing power and influence within England to strengthen cities and communities outside London – with the North benefitting most of all.
Government itself has been re-shaped.
In the past, a disproportionate number of the key decision-making roles within the UK Government and the Civil Service were located not just in the capital but in one postcode. That has changed on our watch. The Treasury has established a new campus in Darlington, staffed by senior officials and recruiting locally. The economic strategists of the nation now increasingly have those in manufacturing and the renewables sector as their neighbours not hedge funders and pressure groups.
We have also established second headquarters for my own department in Wolverhampton, for the Cabinet Office in Glasgow and for the NHS in Leeds alongside establishing a Home Office centre of excellence in Stoke and a new cyber defence establishment in Samlesbury near Preston. So far 20,000 senior posts have been relocated in the Places for Growth programme with more to follow.
While relocating central government decision-making is important, even more critical is empowering local decision-making through meaningful, durable, devolution.
I hope I do not need to rehearse in front of this audience the benefits strong mayoral leadership has brought, most notably to Greater Manchester, the West Midlands and the Tees Valley. Before 2010 the only significant devolution in England had been in London. Now strong mayors in our major cities are acting as agents of economic growth.
The impact of Ben Houchen’s leadership in the Tees Valley has been transformational. An airport revived and now a busy freight and passenger terminal, a new freeport regenerating thousands of acres and bringing tens of thousands of new jobs, further education colleges working more closely than ever with employers, a world-leading destination for investment in offshore wind and home to a new free school backed by the leading educationalists in the country, Tees-side is proof that putting economic development in the hands of an empowered and energised local leader works.
Which is why today I’m delighted to back Ben with new powers, with the establishment of two new mayoral development corporations in Tees Valley to drive the regeneration of the town centres in Hartlepool and Middlesbrough, making a major contribution to levelling up and attract businesses and people back to these centres making them vibrant, safe, and pleasant places in which to live and work.
Ben’s success deserves to be reinforced. As does that of the mayors in Greater Manchester and the West Midlands. While I will not always agree with Andy Burnham, indeed it would be fatal for his political career if I did. I must acknowledge that both Andy Burnham and Andy Street have used the mayoral model powerfully and effectively. Both recognise the mayor’s central role is economic development – driving growth. And the regeneration projects they’re delivering are turning derelict brown fields into nurseries of investment. The Greater Manchester Housing Investment Fund, for example, has seen £420 million worth of spending unlock an additional 5,150 homes across 40 sites in the city region.
We are currently in talks with both Greater Manchester and The West Midlands to strengthen the hands of both mayors. We want to devolve even more housing funding, including exploring giving more control of the Affordable Homes Programme to West Midlands and Greater Manchester. At the moment London is the only mayoral authority controlling this budget and if we want more of the homes we need in the places where they are needed, regenerating those brownfield sites and driving growth, this devolution is vital and necessary.
And as well as working with mayoral combined authorities to improve supply – to increase the quantity of new homes – I want to collaborate on improving the quality of existing homes.
One of our key Levelling Up missions is driving up the standard of housing across the country – and making sure all homes are warm, safe and decent. Because we know poor housing kills.
The tragic death of Awaab Ishak in Rochdale rightly reinforced the need for action. And improving quality of the homes in which every citizen lives is not only a Levelling Up mission but a personal mission for me. I have been inspired by the work of people like Dan Hewitt and Kwajo Tweneboa who have campaigned for tenants whose lives have been blighted by terrible housing conditions. So today we are going further in our drive to make every home a decent home and allocating £30m for Greater Manchester and the West Midlands to start making improvements in the quality of social housing.
But while improving housing quality is a passion, it is, of course, one of multiple missions.
Missions that extend across Government. The LU White Paper outlined powers we also plan to devolve which extend far beyond those directly within the control of my department.
Which is why we are also looking to devolve more control over further and technical education, transport, trade, culture and employment support.
And because accountability is key to effective delivery we will also improve the knowledge all voters have about the performance of all local leaders. Our new office for Local Government, OfLog, will produce detailed and precise comparison of delivery across local authorities and mayoral combined authorities. Value for money and effectiveness of service will be measured more effectively than ever before, monitored and analysed so we can learn from the best and support others to improve.
I am delighted that Amyas Morse, Lord Morse, the former head of the National Audit Office has agreed to chair this new body – and my Department will launch a competition to find a Chief Executive to lead the organisation in the days ahead.
And I am confident it will be another step in enhancing the role local leaders play in our political lives and in delivering economic growth. The greater scrutiny will not only further sharpen efficiency and spread learning it will, I know, show how successful devolution is, can and will be in the future.
As well as deepening devolution we must also broaden it. We have already made huge progress in extending devolution across the North – with a new MCA bringing a mayor to North Yorkshire for the first time, and an extended deal coming this month for the North East worth 1.4bn. I’ve been clear that my ambition is to finish the job and to give all parts of England that want one, a devolution deal by 2030. Soon 75% of the North will have a deal, with positive discussions in the remaining areas which I look forward to developing later this year.
In the White Paper, we made clear we will return to that conversation in Cumbria – once we are through the important process of local government reform. And I also want to see devolution not only in Cumbria, but in Lancashire, in Cheshire & Warrington, and in Hull & East Yorkshire and look forward to picking up those conversations later this year with the leaders with the fantastic Levelling Up Minister Dehenna Davison, who has been so intimately involved in getting these deals over the line. Dehenna apologies for not being able to join you today, business in Westminster has kept her from being here – I know that for Dehenna as for me being kept in London is punishment not liberation.
I am very conscious that the mayoral model has its critics and sceptics. I am particularly conscious that communities on the periphery of mayoral geographies sometimes worry that their needs can be overlooked. But I do not think there is a tension between Manchester’s success and Bury’s, or Sunderland’s growth and Spennymoor’s, or indeed Newcastle’s prosperity and Blyth’s regeneration. Attracting investment to magnet cities is a necessary part of reviving the economic fortunes of satellite towns.
And indeed if we unlock the potential of our major cities then the whole country benefits. Improving the productivity of the nine UK second cities will add billions to the UK economy.
But if every community within MCAs is to benefit to the full that means even more effective transport links within those communities. That is why mayoral deals involve specific funding for city region sustainable transport improvements, why we are backing MCAs in their bids to improve bus services and the White Paper commits us to helping other cities emulate Greater Manchester’s Bee Network and establish London-style integrated transport systems across their geographies.
But there are communities geographically beyond the boundaries of mayoral combined authorities, and relatively distant from the faster growing cities, which also require specific, bespoke, attention. Coastal communities in particular, where economic change has meant the employment opportunities of the past have faded.
Which is why in DLUHC we have developed partnerships with communities such as Blackpool and Grimsby to determine what direct action is required to drive growth. In these communities the quality of housing, the attractiveness of the town centre, poor educational standards and expectations and a feeling of local disempowerment have held back economic development. Which is why we are investing directly in improving housing quality, regenerating the urban heart of towns, unblocking transport bottlenecks, improving technical and further education and strengthening civil society.
In Blackpool we have recently invested £30 million to help the council acquire public land necessary for the effective re-modelling of the town centre and, just last week, £40 million from the Levelling-Up Fund was deployed to help create a new higher education campus – the multiversity – which will provide more high quality courses designed in collaboration with local employers.
The allocation of Levelling-Up Fund investment last week attracted lively comment across the country. And the more people discuss levelling-up, the happier I am. But it is important to bear in mind that the £2.1 billion allocated last week was just a small fraction of our overall spend on levelling-up. And the Fund is specifically designed to complement the many other policies, and the significant additional spending, outlined in the White Paper. I don’t apologise for a moment for using vehicles like the Levelling Up Fund to invest additional Government money in communities outside MCAs, such as in Blackpool, Accrington, Workington, Cleethorpes, and Ashfield. We are active, engaged, committed across the country.
The LUF of course adds to the significant increase in local government spending announced in the spending review, and, of course, of our £2.6bn UKSPF over £625m is going directly to local authorities in the North.
And it further complements the further additional funding mayoral combined authorities have secured through their devolved investment funds totalling some £8bn so far – growing to £12bn in spending power through all the new devolution deals concluded last year – and indeed builds on the billions already allocated through Towns and High Street funds and indeed the first round of LUF spending last year.
And I can confirm that there will be a further round of investment from the Levelling-Up fund after the March budget, alongside more capital funding for MCAs and further support for local government.
I am always open to discussion about how we can further refine how we deliver funding for levelling-up, and give local communities more control. And while I believe a competitive process in allocating funding can help drive innovation and ensure rigour in delivery I do recognise that there is a need to reduce the bureaucracy involved in the many repetitive bidding processes which have grown up over time. Which is why I am working with the Chancellor to simplify funding allocations and extend local government autonomy. Again, more detail will follow the March Budget.
The budgets my department allocates to local authorities have levelling-up at their core. But it is not just DLUHC that is a levelling-up department. Every Government department is committed to our mission. We are committed to using every tool at our disposal to drive economic development.
It’s why we’re increasing public investment in Research and Development to £20 billion a year, with Grant Shapps ensuring that more of this funding is spent outside the South East. This includes significant investments in the North already – £222m for a prototype fusion power plant in Nottinghamshire and £22m for fusion technology in Rotherham, helping both become growing hubs for Net Zero; and £15m for innovation pilots in Tees Valley and Liverpool.
Our future depends on catalysing industrial investment. Whether it’s battery technology, improved power transmission networks, more efficient renewables infrastructure, carbon capture and storage, hydrogen, AI and robotics, the synthetics revolution, gene-editing, modern methods of construction, metallurgical and materials technology, zero-carbon aviation, quantum computing, drone development or a plethora of other new and evolving technologies, the future will be shaped by high-value manufacturing and of course the North is at the crucible of the growth of high-value manufacturing.
Our national resilience and strength depends on our embrace of these opportunities. And as Gavin Rice of the Centre for Social Justice has reminded us in a brilliant new study earlier this month – high value manufacturing is the route to higher employment, higher wages and higher national productivity.
But one factor which has held back the investment we all want to see has been sclerosis in the planning system for the major projects which drive significant growth. That is why we will shortly deliver the next stage of our drive to accelerate the process of securing planning consent by making sure that we publish an action plan which will set out reforms to the Nationally Significant Infrastructure Projects regime. This will streamline and speed up the consenting process, it will boost investor confidence in major infrastructure and it will help the Government to improve energy security, achieve Net Zero and deliver better transport connectivity.
This reform to the planning process stands alongside the reforms to financial services outlined by the Chancellor in Edinburgh last year which will make finance work better for industry and bring growth back home.
And to make the most of these opportunities we need a workforce equipped with the technical skills new industries require. One of the unheralded successes of the last twelve years has been the growth in the number of students leaving schools with exactly the skills required – especially high quality science and maths qualifications.
But I am very aware that the benefits of educational reform have – so far – accrued disproportionately to students in the South, and especially in London. That is why we are supporting the best MATs to grow and extend their opportunities across the North. Star Academies Trust have already shown the way with new academically ambitious free schools being established in Preston; Blackburn; and Bradford.
Good schools, indeed great schools, act not just as springboards for existing students – they also contribute to improving the attractiveness of communities for inward investment and incoming talent.
And that is because the quality of life within communities is as important as any other factor in the alchemy of success. And that’s why we’re increasing funding through the Arts Council in culture outside London and it’s also why we are strengthening our new Community Ownership Fund which enables local people to take back control of assets that have been degraded by others in a way which that community has been left disempowered by. And our Community Ownership Fund, working with Andy, was able to give supporters of Bury the chance to take back control of Gigg Lane and there are other initiatives that the Community Ownership Fund will be supporting in the future.
But as well as reinforcing success we also need to be even more energetic in tackling those factors which mar the quality of life for too many communities.
That means focussed action on high street dereliction and greater zeal in countering anti-social behaviour.
Vandalism and grafitti, drug-taking and dealing, vehicle crime and the intimidation of women and girls – all are more likely to flourish in the hollowed-out heart of communities where neglect has slowly taken hold. The Broken Windows phenomenon is a cliche in the discussion of crime and anti-social behaviour. But it is a cliche because it is true. The unoccupied and unloved become the disused and derelict and where care in every sense is absent chaos finds an opportunity.
This is why we will shortly publish an action plan on anti-social behaviour. Our determination and ambition is high. We will have stronger, tougher enforcement, swifter delivery of immediate justice with those who damage local assets deployed to repair them, and investing in young people and the activities available to them.
Alongside those tools we will tackle public drug-taking, including the use of nitrous oxide, and support enhanced community policing with better use of data and faster responses to complaints.
Driving faster, and fairer, economic growth go together. A nation only succeeds when it mobilises every citizen’s talent and potential. But that can only happen through local and central government, civil society and the private sector all playing their part.
And it will always and everywhere be the private sector that creates the new jobs on which economic growth, and individual fulfilment depend.
But for the private sector to grow, for the Promethean spirit of entrepreneurs to take wing, we do need to ensure that our society, its institutions and all our communities are included in a common national enterprise.
That is what our levelling up strategy does. It places the innate value of every single citizen at the heart of economic decision-making. It refuses to accept that any life, community or region cannot be made to flourish and to contribute to a greater national renewal. It places greater national resilience, and economic autonomy, within a framework of strengthened civic institutions and stronger local pride. It sees in rigorous education, the route to leading in the high value manufacturing industries of the future. It attacks economic inactivity and upholds local loyalties. It cherishes earning and belonging.
National in scope, local in delivery, economically ambitious, socially just, politically central and morally urgent – that is what our levelling up strategy means for this Government.
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