Why ‘levelling up’ in the UK has so far failed – and what a Labour government might do about it

Jack Newman, Simon Collinson, Nigel Driffield, Nigel Gilbert and Charlotte Hoole argue that the real solutions to the failings of the Conservative government’s levelling-up agenda in the UK lie in governance and not just investment. This is a lesson the Labour Party, as likely winner of the next election, should learn

Labour in power?

In the year since the disastrous premiership of Liz Truss, opinion polls in the UK have shown a fairly consistent 15–20 point lead for the Labour Party ahead of the expected 2024 general election. Of course, politics is notoriously unpredictable. However, there is a growing sense in the UK that the Conservative Party is now the opposition in waiting.

Speculation is therefore rife about what Labour would do in power. There is increasing scrutiny of its five missions and spending plans. One of these is securing the ‘highest sustained growth’ in the G7, a mission that depends on rejuvenating vast swathes of post-industrial towns and cities suffering from decades of neglect. Yet, Labour seem to have been remarkably quiet on what has been an apparent cornerstone of the Conservative government agenda since the General Election in 2019: so-called ‘levelling up’. While the levelling-up agenda has been characterised by ambiguity, in broad terms it is an attempt to tackle the UK’s stark geographic inequalities.

One crucial reason the Tories have failed to tackle inequality in the UK is the significant problems with England's governance system

Despite some sizable rhetoric, the Conservative government has failed to tackle the UK’s geographic inequality and failed to revitalise ‘left-behind places’. One crucial reason, as our research shows, is significant problems with England’s governance system.

Clearly, the current economic situation limits the possibility of significant investment. Labour will therefore need to fine-tune its governance system to deliver positive economic outcomes for local places.

Learning from levelling up

Over the course of the Conservatives’ 13 years in power, there has been a staggering lack of consistency on local economic development. But will an incoming government actually learn lessons from this failing?

An emerging consensus among the policy community points to the importance of place-based economic development, particularly in the big cities. This requires leadership from high-quality local institutions, which need flexible budgets over a long period of time and enhanced policy powers over clear geographic areas.

The Conservatives have shown staggering inconsistency on local economic development. But will an incoming government learn from these Tory failures?

So, aside from the issue of under-investment, why has levelling up not worked until now? And what are the solutions in relation to the governance system that delivers local economic development (a network including Westminster and Whitehall, public agencies, combined authorities, local authorities, and various other local institutions)?

There are currently four major failings in the way in which these institutions link together.

Governance principles

First, there are problems with the two main principles that underpin the governance system: the anarchy of the market and the hierarchy of the state. The former is manifested in competitive bidding, deal-making, and business-style management. The latter is apparent through the centralised control of funding and the command-and-control approach to local government. This wastes significant time and money, and heavily constricts local decision making. As a result, local institutions are unable to develop the long-term cross-sector strategies needed for regeneration in less prosperous places.

System design

Second, a history of constant change has rendered the governance system inherently unstable. One obvious consequence is weak institutions that have lacked the stability and resources to improve over time. Rather than steadily building teams of experts that suit local needs, these institutions are often overstretched and ineffective. As a result, they do not attract enough talented people. Over time, the instability and underfunding of the system has eroded trust and undermined the relationship between central and local policymakers.

Rhetorical framing

Third, the rhetorical framing of the governance system is dominated by central government. Local institutions are in constant negotiation and competition for powers and funding. As a result, they get drawn into the short-term political cycle of national politics. Local strategies are developed based on the funding pots to be won, rather than on local needs. Through this process, local partnerships are built only to be abruptly ended, as a funding stream or policy initiative disappears. And the public gets tired of seeing blueprints and artistic impressions that are never realised.

The UK's governance system is unstable, unstructured and overcentralised, allowing a small number of politicians and officials to interfere in local policymaking through informal channels

Overactive management

Fourth, problems arise from central government’s overactive management of the governance system. The system is unstable, unstructured, and overcentralised. A small number of politicians and officials at the centre are therefore able to interfere in local policymaking through various informal channels. This has numerous consequences: tussles between central and local government when attracting foreign investment; unfair advantages for some areas thanks to their party-political connections; and disputes over the organisation of local geography. All this undermines the relationships that are the lifeblood of the governance system.

Rebuilding the governance system

Solutions to these problems will require much more ambitious reform to various aspects of England’s governance system.

  • Funding: a stable, long-term formula to ensure that different places receive single, flexible budgets based on need rather than negotiation.
  • Accountability: local institutions need to be accountable to local people, not to central government. This shift is necessary to rebuild trust across the political tiers.
  • Capabilities: local institutions need long-term stable investment to build their expertise and policymaking capacity over a longer timeframe.
  • Geography: the borders of different public sector and governance institutions need to align, so that local and regional strategies can develop in defined borders.

Labour has 'plans to spread power and authority across the country'. To deliver on its pledges for economic growth, the party will need detailed approaches to each of these four points. This, in turn, will require a careful consideration of the successes and failures of the levelling-up agenda thus far. Otherwise, Labour risks starting from scratch and perpetuating an unstable and unsuitable governance system.

This article presents the views of the author(s) and not necessarily those of the ECPR or the Editors of The Loop.

Contributing Authors

photograph of Jack Newman Jack Newman Research Associate, The Productivity Institute, Department of Politics, University of Manchester More by this author
photograph of Simon Collinson Simon Collinson Deputy Pro-Vice Chancellor and Professor of International Business and Innovation, University of Birmingham More by this author
photograph of Nigel Driffield Nigel Driffield Professor of international business, Warwick Business School, University of Warwick More by this author
photograph of Nigel Gilbert Nigel Gilbert Professor of Sociology, University of Surrey More by this author
photograph of Charlotte Hoole Charlotte Hoole Research Fellow II, City Region Economic and Development Institute (City-REDI), University of Birmingham More by this author

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