Lack of government strategy is real blockage to ‘levelling up’ regions, says new report

Lack of government strategy is real blockage to ‘levelling up’ regions, says new report

A lack of national government strategy and an inability at local level to make strong arguments for public investment are the main impediments to closing economic inequalities between Britain’s nations and regions, rather than Treasury bias towards London, according to a new report.

The analysis from Centre for Cities, a think tank which seeks to improve the economies of the UK’s largest cities and towns, contests the often-made case that the Treasury’s Green Book guidance for evaluating funding bids for transport and other infrastructure programmes skews decisions in favour of the capital and wider south east of England, putting other places at an unfair disadvantage.

Chancellor Rishi Sunak, who has outlined plans to review the Green Book, has been urged on by politicians and others in the north of England to re-write the Green Book spending rules in their favour.

However, the new report’s authors, Anthony Breach and Simon Jeffrey, conclude that the Green Book’s method for calculating a project’s benefit cost ratios (BCRs) – its overall value for money – are “not biased towards the Greater South East” as is commonly claimed, and that the true problems begin before BCR formulas are applied, with business cases for investment in other parts of the country being “often of poor quality” making them more likely to “subsequently fail”.

Though recommending reform of the Green Book to assist local government bodies with making better quality bids, the report, entitled Re-writing the Green Book for Levelling Up, says the government more importantly needs to define what it means by “levelling up” and set a “strategic objective” for policies to bring it about. “The current government has been clear that it wants to level up the UK,” Breach and Jeffrey write: “But it is not clear yet what this actually means in practice.”

The report also advocates “a strengthening of local government and greater devolution” in order to create a better system for regional and local authorities, supported by additional funding. This would “build local state and analytical capacity” and should be accompanied by reforms to local taxation, enabling areas to take greater control over their own funding streams and “use local growth to fund local services”.

Ahead of the government’s much-anticipated comprehensive spending review, the report argues that local government austerity should end and local councils should be given control over Council Tax and Business Rates. To achieve “levelling up ambitions” the government will also need to spend an additional £100 billion of ten years, Centre for Cities says.

A third top line conclusion is that, “In most local areas, the first priority [for investment] should not be transport, but skills, housing, or city centre commercial space.” This may be less so in the biggest cities, such as Birmingham or Greater Manchester – whose regional combined authority is held up as an example of good practice – but, says the report, “many places will need a wider mix of interventions than just transport”.

The report argues that, contrary to other analyses, “if anything the Green Book’s current guidance is biased towards public transport investment outside the Greater South East,” rather than the other way round, in part due its failure to take fully factor in the effect of local wage levels on BCR equations. It is also stressed that BCRs, which receive much critical attention, are but one criteria for informing decisions that are ultimately made by politicians.

In a section on Crossrail, which is characterised as “a totemic example of supposed Green Book bias towards London”, the authors record that the project “responds to clear capacity constraints and fits into London’s strategic vision for a strong city centre economy” and also serves areas outside the capital. It states that Crossrail’s time and budget overruns have “tarnished” Transport for London’s record for delivering large projects, but that its previous record had “built trust in Whitehall that it could handle complex and expensive investments”.

The report challenges the frequently-made claim that potentially transformative transport projects in other parts of the country are blocked due to pro-London Treasury bias, saying that although London has been receiving the highest transport spending “per person” it also has “the country’s longest commutes” and that “the pressure on London’s transport infrastructure is greater than anywhere else”. This creates a “local priority” for London, which public money addresses.

Centre for Cities chief executive Andrew Carter said, “our struggling cities and towns will not be levelled up by directives from Whitehall. This can only be done by democratically accountable local politicians with the knowledge to select the right projects for their area – not by Treasury officials choosing between different parts of the country.”

Calling for more clarity from the government about “what they want levelling up to achieve”, Carter underlined that “it will take a very significant sums of money” to close the country’s deep geographical economic divides. Speaking separately to On London, Carter warned against defining the “levelling up” project in terms of “a see-saw model, in which the solution is seen as simply taking away from London and giving it to somewhere else”.

Download the Centre for Cities report in full via here.

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