Inequalities of Region and Place

With support from the regional development fund of blessed memory, Lancaster also invested in a health innovation campus, where we can, for instance, work with health authorities in Blackpool—which has some of the worst health outcomes in Britain—using the university’s expertise in digital analysis of NHS patient records to improve patient and public health outcomes. That is not an investment in a new hospital; it is an investment in ways to keep people out of hospital.

University research generates innovations at the frontier of knowledge that stimulate new enterprise in the ecosystems that form around them. But the stranglehold of R&D funding of the south-east golden triangle must be broken. I congratulate the Government on locating the headquarters of their new National Cyber Force in Lancashire, which will enable it to draw on Lancaster’s excellence in cybersecurity. But the money has to come north from Oxbridge, and that will happen only if the Government deliver on their commitment to expand R&D spending from 1.8% to 2.4% of GDP—I hope they will.

When it comes to education in schools, the north and SNP Scotland have badly slipped behind London’s soaring standards. London now gets something like 60% of kids at 18 into university; in many northern towns, the figure struggles to get over 30%. We badly need a regionally tailored version of the Blair Government’s London Challenge, in which my noble friend Lord Adonis played such a transformative part.

In transforming young people’s expectations and opportunities, good-quality apprenticeships are as crucial as A-level grades. There is a national crisis in the declining availability of good apprenticeships, so why not create a 30% target for level 3 apprenticeships to stand alongside the 50% target for university entry? The levelling-up plan should ensure that every significant town in deprived regions has a further education college that is not a poor relation but an anchor institution that commands respect, has organic links to local business and offers clearly marked steps up a visible ladder of opportunity to foundation degrees and beyond.

The decline of the north has been with us for a century or more, following the horrors of the great depression of the 1930s. There was some success after the war, with the policies that Hugh Dalton introduced in wartime. But, since the 1980s, the regions—which now include large parts of the Midlands as well as the north—have had their economic heart torn out. In part, they were victims of inevitable technological change and the shift to a knowledge and service economy that goes right across Europe. The Germans managed to upskill their manufacturing, rather than destroy it as we did.

The social consequences of this have been profound. Take Barrow in Cumbria, for instance: it lost thousands of jobs in the shipyard in the 1980s, but the shipyard now enjoys a brilliant high-tech recovery, with many fewer jobs but much higher levels of skill. Yet too many families who suffered job losses in the 1980s have got stuck in the cycle of generational deprivation and worklessness, where a culture of low expectations makes a mockery of educational opportunity and where health and life expectancy are shockingly poor.

After 10 years of austerity, our public services are badly stretched in addressing these problems. They are too thin on the ground, too siloed, too focused on crisis, sticking too much to the rule book, too defensive and too resistant to change. To speak the language of new Labour: we need investment and reform at one and the same time.

In the 1980s, Margaret Thatcher argued that there was no alternative. Deindustrialisation was accompanied by radical change in UK labour markets, a shift to flexibility and a loss of trade union power, and this went along with a reassertion of short-termist shareholder capitalism, which discouraged long-term investment in technology and skills. Now the Prime Minister asserted, again, in his speech that

“no government has had the guts to tackle … the long-term structural weaknesses in the … economy”.

He has to recognise, however, that these weaknesses have been apparent since the 1980s, well before—in the Prime Minister’s rewriting of history—uncontrolled immigration became the sole structural problem. The truth is that immigration is not the cause of our structural weaknesses, and controlling immigration—whatever its merits—will not provide any kind of permanent solution to them

Mrs Thatcher did have a plan for the regions; it was called Europe’s single market, and it was very good at attracting inward investment—for instance, in the north-east, to get Nissan to come to Sunderland, which was crucial in the future. It also strengthened our position in financial services, and lots of jobs across Britain in places such as Leeds benefited from that. For the future, however, we shall have to address these structural problems with Brexit, as it were, tying one hand behind our back. That makes the need for a plan more urgent, not less.

The Labour Governments of 1997 to 2010 had many proud achievements to their credit and I am overjoyed that, at long last, my party is prepared to acknowledge them. Huge fiscal transfers were made to the regions, improving public services and raising children and pensioners out of poverty, but this did not prove a lasting change. After 2010, it was put into reverse by an austerity that bore more harshly on the poorest parts of the country. The fact is that the £20 cut in universal credit takes more spending power out of the regions than the levelling-up agenda is putting in.

Labour could have done better, however. We revived the northern cities through the regional development agencies—excellent—but there was weakness in the towns. It is not easy to put this right. The revival of a dynamic private sector when the heart of its local economy has been ripped out is a huge challenge. It requires powerful incentives for business relocation from the overcrowded south-east and possibly even stricter planning controls, as well as sustained support for indigenous new enterprise. It also requires an active national industrial policy, which I was privileged to help my noble friend Lord Mandelson with in 2008. At its heart today should be a green new deal that prioritises the transformation of our old industrial towns into exemplars of zero-carbon living, with the state offering the incentives and regulating the market, but the private sector doing the work and creating the skilled jobs.

But where now is the Government’s plan? We have lots of funds: the high streets fund, the towns fund, the levelling-up fund, the shared prosperity fund, the environment fund and even a bus improvement fund—the list goes on—for all of which local authorities have to make bids to Whitehall departments. It is London-based civil servants who recommend what should happen. Ministers consult their MPs—especially red wall Conservative MPs—about which splashes of new paint are likely to buy them the most votes. This puts the regions in the position of Oliver Twist, standing in the workhouse queue begging for whatever doles our London masters are prepared to spare us.

This top-down but fragmented approach is not a coherent regional policy. We need a coherent plan that, place by place, builds on existing economic strengths. We need a fresh start and I hope that Michael Gove, a man who prides himself on his radical thinking and intellectual strengths, will give us this. Key to that is, first, stronger local government structures, based on credible unitary authorities with elected mayors to offer accountable metropolitan and sub-regional leadership.

The second thing is a fair funding settlement for local authorities, based on transparent, independent assessment of needs, not the good fortune of a strong revenue base. The third is that local government and mayors must be trusted to draw up their own rolling plans for economic development and put in a single capital bid to central government to determine priorities.

Finally, we now have a unique opportunity to build a national consensus on levelling up—Boris Johnson has given us that. But high aspiration and lofty rhetoric are not good enough: we need a plan, and we need it now.

“Boris Johnson put levelling up at the heart of his conference speech ... But what is it? The objectives of levelling up are clear. To empower local leaders and communities.”

That objective was reinforced by Bridget Rosewell, a member of the National Infrastructure Commission, who commented on a report that it issued last month. She said:

“Levelling up cannot be done from Whitehall. Every English town faces a different set of challenges and opportunities, and local leaders are best placed to develop strategies to address these.”

But we live in a highly centralised country. In a recent report on tax and devolution, the IfG said:

“The UK is an outlier by international standards. In 2014, every other G7 nation collected more taxes at either a local or regional level according to estimates by the Organisation for Economic Co-operation and Development.”

Our figure is about 5%, roughly half that of most other countries.

So, while other countries have national and local government, we have national government and local administration, and it is not working. The helpful Library brief for this debate shows that the UK has the highest regional inequalities of the 27 nations measured. I believe that part of the answer to the question posed by the noble Lord, Lord Liddle, in this debate about regional inequalities is to set regions free from central control and allow them to take greater responsibility for key decisions. Others will talk about devolution of power; I shall talk about devolution of money because, without freedom to raise and spend, and being accountable for those decisions, devolution of power is meaningless.

Let me give two examples of how the system is weighted against raising money locally. The Government have just increased national insurance contributions from 12% to 13.25%—an increase of more than 10%. Local government would not have been able to do that without holding a referendum first. There has been no such inhibition on the Government. Then take national taxation. Government income is buoyant. Without touching tax rates, economic growth and inflation swell the Government’s coffers year by year. Income tax, national insurance, inheritance tax and capital gains tax all rise without the Chancellor lifting a finger or incurring a single hostile headline. The OBR estimates that just freezing personal allowances—so-called “fiscal drag”—will be worth £8 billion a year to the Government by 2025-26.

Local government has no such advantage. The council tax base is fixed at 1990 levels, and if local government wants to raise more money, even to stay still in real terms, it has to raise tax rates, with all the aggravation that that entails. And, unlike income tax, council tax is regressive and the tax base is 30 years out of date. Would the Government raise income tax on the incomes of 1990?

I will irritate my noble friend the Minister once more by suggesting that tax bands should be revalued and that there should be two additional bands. However, my final suggestion is that, when we move from taxing fuel to road pricing, the revenue from road pricing—a buoyant source of revenue—should go to local, not central, government, which would give councils the independence and financial help that they need to deliver the autonomy that we all want to see.

The compound impact of the two-child limit in universal credit, the cuts to the £20 uplift, the impending national insurance levy, and food and fuel inflation create an increasing threat of a growth in child poverty. So, along with groups such as the North East Child Poverty Commission, the Child Poverty Action Group, the Work and Pensions Committee and many more, I urge that a strategy is developed rapidly. I hope that we will hear soon that HMG will publish a proper child poverty reduction strategy.

Then there are health inequalities. Here I note the findings of the recent report from the Northern Health Science Alliance, A Year of Covid in the North. This research found that Covid mortality rates between March 2020 and 2021 were 17% higher in the north than in the rest of the country. The estimate is that this has cost the national economy £7.3 billion in lost productivity. Minor psychiatric disorders were also 10% higher in the north.

In considering levelling up, what are Her Majesty’s Government doing about the disparity in health inequalities across the nation? Throughout the pandemic, the average unemployment rate in the north was almost 20% higher than in the rest of the country. Furlough was good but it worked less well in the manufacturing and service sectors. Inward investment in infrastructure and higher skills work is one key area to help here. I highlight transport. The inequality between our capital city and the rest of the country can clearly be seen in the difference in government spending and the service provided. London has received nearly two and a half times the public spending received by the north, according to the IPPR.

Since the publication of the Northern Powerhouse strategy in 2016, local transport chiefs are still waiting for the integrated rail plan to make this transport investment a reality. Therefore, as part of the future planning, will the integrated rail plan be published and will it favour the most poorly served regions? I look also to foreign direct investment. The International Trade Committee has reported that FDI is unevenly distributed between the regions and, despite its importance as an instrument of levelling up, it is reinforcing the inequalities it is intended to correct. What will the Government do to address the inequalities of investment in the north?

We all recognise that tackling inequalities of place is a highly complex issue. The Government’s welcome and much needed levelling-up agenda will not succeed without a coherent, cost-effective and long-term regional strategy to tackle inequalities of place within England. We could have a jubilee.

There has been reference to the National Infrastructure Commission report produced a few weeks ago. It says that, to deliver greater regional equality, the Government should give more control over funding to local areas to help their levelling up. Rightly, it criticised the Government’s policy of ring-fencing pots of money and demanding bidding and competition. It said that we should move instead to five-year devolved budgets so that local areas can develop their own infrastructures strategies.

The National Infrastructure Commission is right, but missing from the debate on levelling up is, first, the need for local government to have greater powers over sources of taxation; it cannot all be about government block grant. Secondly, the private sector has to be prepared to invest more in those areas needing greater investment, because it cannot all be done with public money. Private sector companies have social responsibilities to places and should not think simply in terms of shareholder returns. It might help too if the Government looked at some of the rules around the investment of pension funds, which could be an additional source of investment funding if more pension fund money could be accessed.

Finally, one trend could prove helpful to levelling up, and it is the consequence of the current dislocation of our supply lines. We should actively promote reshoring more production so that we make more, produce more and consume more sustainably, thereby in turn creating more jobs in areas that need greater support.

Levelling up requires a place-by-place plan, helping education, skills and new industries, but that will happen only if local places are empowered to lead it.

This country is rightly proud of its national academies. Indeed, only this week the president of the Royal Society wrote in the Times about the need to fund science properly. I support that. Indeed, a number of national bodies have also written to the Chancellor this week to express concern that, in effect, a cut may be on the way if the Government shelve their £22 billion commitment on R&D by 2024-25 in favour of a vaguer commitment stretching out to 2027.

We cannot be a science superpower unless and until the Government finance science and R&D properly. That means levelling up to the level of our competitors, and it is a very competitive world. The House will be familiar with the basic figures: the UK spends 1.7% of its GDP on science; the OECD average is about 2.5%; and countries such as the USA, France and China are spending far more. The Government’s announced commitment of a target of 2.4% by 2027 is very welcome but nowhere near being reached yet.

I welcome the appointment of the current Minister for Science and wish him well in view of the challenges ahead. The Secretary of State for BEIS last night addressed the Foundation for Science and Technology and talked about the UK Innovation Strategy. He said, if I may put it this way, broadly all the right things, but I just hope that the BEIS Secretary can secure the level of funding needed with the Chancellor—always assuming that they are still on speaking terms and “in discussions”.

We have in this country a wide range of scientific societies and organisations, all of which have expressed their concerns about the inequalities of place; for example, the Royal Society of Biology, the Nutrition Society, the Council for the Mathematical Sciences, the British Pharmacological Society, the Institute of Physics, the RSC, the Geological Society, the Royal Astronomical Society and many others. The House should take every opportunity to listen to what they have to say, especially as they have members from all over the country. That is why we should also listen to the persuasive argument of the Campaign for Science and Engineering, in its document The Power of Place, that the Government should use the UK shared prosperity fund to

“give greater emphasis towards supporting scientific research and innovation to tackle regional inequalities and promote UK-wide economic growth.”

As a major science country, which we are, and however proud we may be that we are punching above our weight, which we do, we cannot really be the science superpower that we aspire to be unless we make full use of the scientific expertise throughout the UK and unless the Government recognise the inequalities of place and really do more to end them.

We hold an annual STEM for Britain event here in Parliament, and every year it shows that there are brilliant early-career research scientists from every part of the UK. It is vital that they are funded, nurtured and encouraged, because not to do so would be a shocking waste of a diverse and talented science base. And besides, you can never be sure from where the next scientific breakthrough may come. You do not have to be a scientist to know that all the major challenges that the world faces—climate change, the biodiversity crisis, energy supply, food security, health or access to water—will depend on science and technology and engineering to help solve them.

The Covid crisis and the development of the vaccines has been a triumph for science, and the UK rightly takes its share of the credit, yet we live at a time when there is a discernible anti-science movement. If science is under attack, it is all the more important that Parliament and this House stand up for it. We need science now more than ever. I look forward to the Minister’s reply and commend my noble friend’s Motion to the House.

I wish to ask the noble Lord about one specific issue: the decision that is widely known, though I do not think that it has yet been formally announced, to cancel the eastern leg of HS2. At the 11th hour, as it were, I implore the Minister to revisit that decision and speak to his friend the Prime Minister, with whom I know he has an extremely close relationship, to make the argument that, if the eastern leg of HS2 is cancelled, the whole future of levelling up half of the country—the eastern side—will be vitiated.

To understand the significance of the potential cancellation of the eastern leg of HS2, you just need to consider what will be the journey times between the major cities of the Midlands and the north and London after HS2, if it is not built. Birmingham to London would be half an hour, Manchester to London would be an hour, Leeds and Sheffield to London would be two hours, and Newcastle to London would be three hours. Where is all the investment and the new social activity in the country going to happen if, for the next few centuries—because we build railway lines to last centuries—that is the pattern of communications between the Midlands and the north of this country and the economic powerhouse of London, which will always continue to be so because it is our dominant city? It is absolutely essential that the eastern leg of HS2 proceeds.

Because we are a democratic community, with very powerful political spokespeople from the eastern side of the country, it is stark staring obvious that, if, by an act of great negligence, Her Majesty’s Government do not proceed with the eastern leg of HS2 now, when the leg to Manchester opens and there is a massive political controversy about the delayed journey times, much poorer communications, much lower capacity and lack of connectivity with Crossrail—because the Old Oak Common interchange will of course be available only to people coming from Birmingham and Manchester—the political campaign to build the eastern leg will be unrelenting. In a classic failure of planning, we will build the eastern leg of HS2 and it will go through to Sheffield, Leeds and Newcastle, but it will be done 30 or 40 years later than it should have been. In that interval, an enormous amount of damage will be done to the society and the economy in the east Midlands, Yorkshire and the north-east of the country and to the connectivity between Edinburgh—because the HS2 trains would go there—and London.

I implore the noble Lord, with the great influence that I know he holds with the Prime Minister, to urge him to revisit this decision, which could be the single most important decision that the Government make in terms of the long-term capacity to level up the north with the south of this country.

First, a narrative of failure is often essential to attracting government or charitable funding but when you start to talk about the positives, you find that Blackpool is still a place of fresh air and fun, with 18 million tourists a year while Bradford, as the youngest city in the UK, is a melting pot of raw talent and has award-winning curries. Secondly, while creating local partnerships is tough, achieving joined-up national government is nigh on impossible. Blackpool has £300 million of committed investment from a company called Nikal, but needs the Treasury to fund moving the law courts off the site. Bradford, which is bigger than Liverpool or Bristol, has the worst rail connectivity of any major British city and needs a new railway station. I think Bradford would be a worthy winner of the DCMS “City of Culture” competition, for which it has just been longlisted. Wisbech needs the Government to pool funds to invest in the future Fens proposal, a strategic rather than piecemeal approach to climate adaptation.

What does this tell us about a proposed national strategy? First, any strategy needs to be long term and capable of surviving changes of political leadership, and implemented in a way which facilitates local leadership rather than providing one-size-fits-all Whitehall solutions. But even then, the old adage applies: no plan survives first contact with the enemy, so alongside the plan we need the Secretary of State for Levelling Up to champion these areas and bring all government departments, including the Treasury, to the table. We need a hit squad of motivated, caring, listening senior civil servants who are prepared to go out on a limb to achieve success for our deprived communities—people who can persuade across government and who will join local partnerships as full partners, alongside local government, business and the voluntary sector. If the new Department for Levelling Up can deliver all this, then perhaps we can reduce the UK’s regional inequalities.

Policies and resources need to be well directed. Increasingly informed commentary acknowledges that a new governance model is needed that is not just centralised on Westminster and Whitehall. The UK has one of the most centralised decision-making systems among OECD countries, but that brings inefficiencies when the UK is so economically imbalanced, resulting in national decisions made without a full understanding of their impact achieving different levels of success or impact, depending on geography. There needs to be greater decentralisation of decision-making and revenue collection, harnessing the understanding of need held by representatives, employers, universities and other key partners in different geographies.

Decentralising decision-making has to be backed by strong governance to ensure that it achieves what is necessary, and that will include building robust institutions, capacity and fiscal discipline in those geographies. Informed observers are also pressing the need to build a knowledge base of data, equivalent to that existing in many advanced economies, on the flow of public expenditure into regions, the quality and quantity of linked data and regional and sub-regional issues more generally. That could be utilised to make good policies, understand what works, measure evidence of success and define the need of a geography more objectively, mitigating the growing perception that the definition of need is becoming more political. I acknowledge the pioneering work the ONS is doing on its integrated data service.

Policies and strategic outcomes need to be long-lived, but that requires a broad consensus. Lack of policy continuity in the past and constant changes to institutions have contributed to regional inequalities persisting. The Government have announced a lot of funding initiatives, but it is unclear how they all co-ordinate. It is difficult to follow what flow of public expenditure will go to where, and for what. The Government have not provided the White Paper, the strategic plan, into which all those initiatives fit. We do not know the targets, the key milestones or the intended metrics for measuring success. We also do not have clarity on the governance model within which their plans will sit.

Finally, the decentralising of decision-making is extremely important, but it should be done in a way that does not prevent central government from discharging their role in directing and redistributing resources across the UK on the basis of need or common interest. We saw the importance of that central social role so clearly during the pandemic, and in response to large economic shocks such as in 2008.