Ex-Bank of England chief economist calls for ‘fundamental’ devolution rethink to strengthen communities

Ex-Bank of England chief economist calls for ‘fundamental’ devolution rethink to strengthen communities

The Bank of England’s former chief economist has called on the government for a “fundamental rethink of devolution practices” in the United Kingdom, an end to short-term, “centrally-allocated” funding concentrated on small local infrastructure projects and a commitment to increasing the capacity of the country’s “left behind” places to improve local peoples’ lives.

In a lecture for Local Trust about community power delivered last night at the John Adam Street headquarters of the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA), Andy Haldane, characterised the UK as “one of the most centralised states in the western world”, meaning it is “no coincidence” that it is “also one of the most spatially unequal economies in the western world, regionally and sub-regionally”.

Haldane, who left the Bank of England of England at the end of last month and will take up the role of RSA chief executive in September, said that although “some greater degree of regional autonomy if gradually being distributed” by way of metro mayors, “we are still miles away from the levels of devolution present in other, less spatially unequal countries”.

Haldane said that “almost £2 billion was set aside for levelling up” in this year’s budget, but that most of that was for mostly national-level “physical infrastructures” while “spending on social infrastructures looks pretty modest”, certainly “relative to the scale of the challenge facing many left behind communities”.

He went on to warn that the mechanisms by which this public money is distributed, with sums awarded according to the outcomes of competitive bidding processes, “tend to lock in the advantages of those who already have the resources. In other words, it’s the opposite of levelling up”.

In a core theme of his lecture, Haldane argued that the community layer of decision-making has been neglected compared with those of the state and and individual, and that correcting this would entail strengthening a “second invisible hand” – a counterpart to moral philosopher Adam Smith’s economic concept concerning the relationship between social benefits and the pursuit of self-interest – to build new institutions of “locally-centred decision-making” in place of the current “exceptionally patchy” capacity picture, which Haldane called “the legacy of decade on decades of chopping, changing and in some cases defunding”.

He praised the scale and ambition of Local Trust’s proposal for the creation of a community wealth fund and ideas put forward by Conservative MP Danny Kruger, adding that US President Joe Biden’s recently-announced Community Revitalisation Fund “has many of the same ingredients”.

The government says it will publish a Levelling Up White Paper later this year to articulate “how bold new policy interventions will improve opportunity and boost livelihoods across the country as we recover from the pandemic.” Previous “levelling up” initiatives the Towns Fund and Levelling-Up Fund have been criticised for being skewed to benefit Tory parliamentary constituencies and largely excluding London, which has the highest overall poverty rate in the country.

Invited by On London to respond to the view that “levelling up” is essentially a political project for pleasing voters in newly-Tory parliamentary seats, in part by ostentatiously depriving and deriding London, Haldane said “time will tell on that” but that he is “personally optimistic that progress will be made” because he detects a rare alignment “between that which is politically expedient, that which is socially just and that which is economically sensible”. However, he observed that “ultimately we need plans” to put change into effect.

Last October, in a presentation for think tank Centre for Cities, Haldane stressed that geographical inequalities within regions are greater than those between them. In March, the annual report of the Industrial Strategy Council, which evaluates government progress and which Haldane chairs, said the “levelling up” agenda as it stood was “unlikely to be a recipe for success” because “sustained local growth needs to be rooted in local strategies, covering not only infrastructure but skills, sectors, education and culture” and “locally designed”.

Read Andy Haldane’s lecture in full here and watch it via here.

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