Alexander Jan: Why Sunak’s Darlington move is good for London and bad for ‘levelling up’

Alexander Jan: Why Sunak’s Darlington move is good for London and bad for ‘levelling up’

In yesterday’s budget speech, the Chancellor, Rishi Sunak, did that usual Chancellor thing – making a number of big announcements about not raising fuel duty or taxes on wines and spirits. And among all the other announcements, “levelling up” – that increasingly hackneyed phrase to describe who-knows-what? featured big time.

There were announcements of nearly £20 million to “transform local cultural projects” in Hartlepool, Carlisle, Wakefield and Yeovil and the publication of a prospectus for a £4.8 billion UK-wide Levelling Up Fund (a consultant’s paradise). More money (£1 billion plus) was signalled for a further 45 towns in England – to be channelled through the controversial Towns Fund. (And as with the first round, it would be a surprise indeed if deprived parts of London were to get much of a look-in from this latest bout of Whitehall handouts.)

And there was more. An infrastructure bank is going to Leeds with a hefty sounding £12 billion in its kitty. (A recent report by the National Infrastructure Commission estimated that infrastructure needs about £179 billion by 2050 (see page 112). And in a policy reheat that could have come straight from the “play book” of the 1970s, the Chancellor announced that Darlington no less – with a population of around 100,000 – is to be the location for a new “economic campus”, taking perhaps 750 jobs with it from Whitehall. This represents a new step in the government’s Long March of Levelling up and plans to shift more than 20,000 civil service jobs out of London by the end of this decade.

In the past when such changes been made – think Office for National Statistics (ONS) to Newport or Channel 4 to Leeds – it would have been tempting for anyone who cares about London to perhaps consider them bad for the city. After all, such moves involve uprooting parts of the capital’s often marvelled at “ecosystem” of higher skilled, well paid jobs that form part of the rich mix of clusters of activity and sectors that economists (including me) get so excited about. This is levelling up at its worst some might say – damaging London and making it less productive.

But in the Alice in Wonderland political world we now live in, there are grounds for optimism about London in the Darlington declaration.

Firstly, even in the levelling-uppers’ wildest dreams, the move won’t exactly create a rival civil service hub to London’s. The numbers are (to say the least) modest. And as both the Centre of Cities and the Institute for Government have highlighted, creating clusters of government activities in, say, Manchester, Leeds or Birmingham would have been far more of a threat to London’s dominance in senior government decision-making.

Secondly, a smaller public sector in London means the city is even less dependent on the state. When the next rounds of public sector cuts take place, London will be not as exposed to the damage they will inflict, precisely because there will be fewer public servants to cut.

And thirdly, the evidence from (among others) Channel 4’s move to Leeds is that the vast majority of employees simply won’t move with it. That means the Darlington move could free up often highly skilled, talented labour for work in London’s (overwhelmingly) private sector economy, further boosting the capital city’s output and tax base.

Ironically, the news is less good from a “levelling up” perspective. As Centre for Cities has pointed out, areas at the receiving end of the relocation policy tend not to see much in the way of the benefits that are purported to flow. Local employers can often be “crowded out” by the arrival of a big government unit.

That was the case with the DVLA’s move to Swansea way back in 1965 and, to some extent, with the BBC’s move to Salford. The ONS move to South Wales has generated little benefit to the wider economy, partly thanks to its out-of-town campus location. As a result, these areas become increasingly dependent on central government for their economic fortunes and exposed to cuts and rationalisations. Conversely, the private sector finds it harder to grow and compete for local labour and talent.

Finally, it’s worth remembering that decentralisation of civil servants is not the same as devolution.  Don’t expect the leaders of Darlington borough council (or those in Leeds for that matter) to gain more powers to tax, spend or borrow any time soon.

Or will they? A sustained policy of scattering civil servants to the four corners of the union would ultimately weaken the civil service. Fewer mandarins at the seat of power in London would make the whole thing a bit less attractive to ambitious bright young things eager to dive in via the Fast Stream. So would many, many hours of trundling around on trains or indeed being stuck on Zoom calls. Big jobs in other civil government institutions such as City Hall, the boroughs or Transport for London would, at the margin, become more tempting, as indeed they would in major town halls across England.

A weaker Whitehall would be less well equipped to lord it over local government, hastening the day when real reform of decision-making arrives. Perhaps Mr Sunak is on to something after all – devolution through the back door. Now there’s an idea.

Alexander Jan is chair of the Midtown business improvement district and former chief economist at Arup. Follow Alex on Twitter.

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