Chancellor Rishi Sunak - May 2020
The stage is set for Rishi Sunak, chancellor, to tackle the specifics of how the economy can be jump started © Simon Walker/HM Treasury

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Last week, Prime Minister Boris Johnson repackaged his pre-pandemic “levelling up” agenda as a post-Covid recovery programme. He set the stage for Rishi Sunak, his chancellor, to tackle the specifics of how the economy can be jump started. But this week and in the autumn, Mr Sunak will have to go far beyond the proposals his boss has trailed if levelling up is to become anything more than a slogan. 

UK regional disparity is an economic and political challenge that will take more than one stimulus package to tackle. Productivity differences are among the widest in Europe, even though redistribution takes off some of the worst edges. The places suffering the biggest decline over recent decades were also particularly likely to upend the established political order by voting to leave the EU in 2016 — and many of them switched their Labour MPs for Conservative ones in Mr Johnson’s December landslide election victory.

The bulk of the “levelling up” effort focuses on investment in infrastructure in transport. The March Budget’s promise to spend £640bn over five years went some way towards addressing years of under-investment in the economy. But that is a big hole to fill; it is not clear that Messrs Johnson and Sunak plan to expand this commitment even though the pandemic has only made the need more urgent.

Commendably, they have shown they know local networks matter as much as big national projects; Mr Johnson’s predilection for buses has a positive side. But the bigger problem is transport and connectivity is at best a necessary condition for levelling up, not a sufficient one. For left-behind places to thrive once again current, as well as capital, spending matters. Regional recovery lies not in restoring a golden age of factory jobs, but in attracting investment in high-productivity jobs. A few of these can be found in specialised manufacturing but more often in knowledge-intensive services. That means aiming for something better than dormitory towns or lower-paid auxiliary service hubs for economic centres in the biggest cities. 

High-value-added activity presupposes a certain level of density — a critical mass of knowledge jobs makes it attractive for others to move there. Improving the quality of life of residents too, many of whom emphasise pleasant town centres as what they most sorely lack, helps retain and attract the talent that the most productive businesses seek. A government that listens will have to find money for schools, cultural amenities and the environment. It must also combat the scourge of low pay and unpredictable incomes that make high-quality local service trade unsustainable.

The government has flirted with relocating civil servants out of London. It should consider this more seriously. Crucially, regeneration will not come from routine clerical jobs or call centres, but from high-quality jobs. Ministers should find ways to encourage the setting up of private research institutions in more places to seed an ecosystem of knowledge jobs.

Even a full portfolio of such policies is not sufficient. Local ownership, and knowledge about where advantages lie, are key to success. This is not something Whitehall’s heavy governance is good at promoting. Whether formally or not, a better balance between local and national decision-making is needed. This is a tall order, and it is not clear Mr Johnson understands the full demands of the ambition he has set himself. But he is right about one thing — the current state of affairs leaves an awful lot of human talent and potential to waste. The prize for getting regional convergence right is enormous. 

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