Levelling up

March 6, 2020

On Friday 6th March, Onward launches its latest research programme: Levelling up

This report by Neil O’Brien and Guy Miscampbell is the first in a major programme of work on the government’s “levelling up” agenda. Following on from Onward’s opinion research on the 2019 election, which coined the term ‘red wall’ and the concept of ‘Workington Man’, this report exposes how the most growth-enhancing items of public spending – transport, innovation, housing and culture – are skewed towards London and other regions that are already productive.

The analysis reveals that headline figures published by the Treasury conceal even wider variations in the kinds of spending most likely to get the local economy moving:

  • Transport. Capital spending on transport in London was around £6,600 per head between 2007/8 and 2018/19. This was more than three times higher than in the East Midlands (£1,880) or South West (£1,980) and nearly three (2.75) times the average in the rest of England (£2,400).
  • Innovation. Taking direct government spending and research funding for universities together, London saw R&D funding per head nearly twice the UK average – £3,900 compared to a national average of £2,300 over the period 2001 to 2017. The next highest spending was seen in other high productivity regions: the East, South East and Scotland. The share of the core research budget spent in just three cities, Oxford, Cambridge and London, rose from 42.1% in 2002/3 to 46% in 2017/18.
  • Housing. Spending on affordable housing in the current (2016-21) programme is five times higher per head in the capital: £650 per head compared to £120 per head in the rest of England. Funding to unlock housing supply (including infrastructure to support private housing) is also concentrated in the south: the Housing Infrastructure Fund has spent £115 per head in the East of England, £97 in London, £95 in the South East, and £79 in the South West, compared to £10 in the West Midlands and just £4 in Yorkshire.
  • Culture. Taking Arts Council England spending and direct DCMS funding of national institutions together, London received around half (47%) of the total spending in England over the period 2010/11 to 2017/18. Over the period culture funding per head in London was £687. This was nearly five times the average in the rest of England (£144).

The report makes a number of recommendations to the Treasury ahead of next week’s Budget and the forthcoming Spending Review, urging the Chancellor to “use every tool at his disposal” to level up regional growth and prevent government spending further unbalancing the economy. The report proposes that Government should:

  1. Review the Treasury’s Green Book methodology to take into account the relative as well as absolute returns to local economies from infrastructure projects and weighting Benefit Cost Ratios (BCRs) to account for the economic and social benefits of balanced growth.
  2. Devolve transport powers to more places in England and make the business cases for all proposed infrastructure projects public to improve transparency..
  3. Ringfence public sector R&D funding for regions that combine low public and private R&D investment and devote the growth in the innovation budget to 2.4% of GDP to funding streams which are more industrially focused and as a result more regionally balanced. We should also reform the spending which does flow through universities in ways that would make for a more even spread.
  4. Review the rationale for the regional distribution of its housing spending, including immediately ending the 80:20 rule for the Housing Infrastructure Fund, and axing rules on affordable housing which mean spending is heavily focussed on wealthier areas.
  5. Redirect cultural funding away from the national institutions and reinvest the savings in growing cultural provision outside London, particularly for new institutions in areas where there is a clearer link to economic development and regeneration.

Neil O’Brien MP said:

“It is no wonder some parts of the country feel short-changed. For decades we have piled fertilizer on the parts of our economy that are already flourishing while refusing to water the seeds of growth elsewhere. The PM’s mission to level up poorer parts of the country is vital. To change trends that have gone in the wrong direction for decades will need not a few tweaks, but taking a bazooka to the problem. That means we have to use every tool at our disposal, starting by rebalancing the types of spending that do most for growth towards poorer areas.”

For media inquiries please contact Will Tanner at will.tanner@ukonward.com

If you would like to buy a hard copy of the report please email Ted Christie-Miller at ted.christie-miller@ukonward.com