The UK is made up of numerous distinct functional labour markets spread across the country. These are often, but not always, focused around a city or core urban area. Each labour market has its own unique challenges and strengths in terms of sectors, skills supply, employment and wage levels. It follows, therefore, that employment policy for the new Labour government should not simply focus at the national tier. Instead, a rethinking of regional development policy is needed to allow the UK’s often disparate labour markets to flourish.
Regional policy in the UK has been dominated by the Levelling Up agenda in the past decade. However, this policy – as with many before it – has been criticised for not actually doing enough to address the uneven regional development evident in the economy. The UK remains among the most unbalanced in the Western world with the economic performance of London far outperforming that of the rest of the country. However, as I shall outline below, the focus on London has conversely been one of the factors in successive regional policy failures.
In setting out the priorities which I believe should inform Labour’s regional policy, I will draw on my previous research as an academic as well as my experience while seconded to the Industrial Strategy Council. These priorities can be grouped into four main areas as follows;
- End the obsession with London
Levelling Up as a policy mechanism failed both in terms of outcomes and its failure to land with the public and business. UK regional policy has moved in cycles, with successive governments altering the terminology and scale at which interventions are made but, with one or two exceptions, little else is altered. The term ‘Levelling Up’ entered the place-based policy lexicon as recently as 2019 and had no commonly agreed definition, resulting in vague commitments to the UK’s subnational economies with little substance. It is therefore pleasing to note that Labour has already committed to erase it from use. Regional policy needs to be communicated in a clear and coherent manner to encourage buy-in from both businesses and the public.
The first priority should be to end the focus on comparing places with London and to remove the notion of rating the performance of regions against each other. The focus instead should be on giving regions and cities the ability to develop regardless of London. An example here is transport policy which, with HS2, retained a focus on travel to London rather than improving links between other UK cities. The current system encourages meaningless comparisons and actually masks areas of success and projects with an image of failure when small towns or cities do not meet the performance of a global megacity.
- Funding should not be competitive
The second area requiring attention is the funding mechanisms used to allocate money to cities and regions in the UK. This is not simply a call for more funds to be distributed at the subnational tier, although that would certainly be welcome. The current system for allocation relies on a competitive model whereby places bid against each other for a share of an overall pot of central government funding. As work by the Industrial Strategy Council’s Places Insight Team showed, these competitive funding processes actually harm regions and cities, rather than support them. Their work found that successful areas feel compelled to bid for funds regardless of their particular needs in relation to a given scheme, while areas with little or no capacity struggle to bid even if they are the ones with the most need. The short-term nature of many current schemes adds a layer of uncertainty to local economic development planning.
What is needed is a funding model based on supporting local needs and providing longer-term fiscal security to interventions in subnational economies. Possible areas to consider for the new government include a funding model which guarantees levels of financial support. This could be achieved through a remodelling of the Barnett formula for fiscal redistribution to increase support for the English regions, or by allowing local authorities to retain and spend a higher proportion of business rates within their area.
- Capacity building power, decision making and representation
Moving on to the next priority area, the new Labour government will need to do more to ensure that cities and regions are in a position to make the most of whatever shape the government’s regional policy takes. This means there is a crucial role for central government in capacity building (through resources, infrastructure and training) in the regions so that they can then drive strategies based on local needs.
The introduction of elected mayors in a number of areas of England is a welcome one and something that should be extended to other cities and regions across England as well as in Scotland, Wales and Northern Ireland. However, having an elected figurehead is not enough; power and decision-making abilities need to flow from Westminster to these elected representatives to allow them to develop policy interventions based on local economic and social priorities rather than central government diktats.
- Think about the geography, flexibly
Finally, place matters. And this needs to be taken into account. Whether a new government retains the current mayoral combined authority approach, reverts to Regional Development Agencies or develops a wholly new core approach to regional economic development in the UK in the future, it needs to be conscious of place identity and sense of belonging. In order to gain buy-in from the public and businesses, interventions need to be based on areas with which they identify and in which they can see a rationale for playing a role. It is no coincidence that the elected mayors based on city geographies have larger turnouts in elections than those leading combined authorities. Looking further back, the Regional Development Agencies of the Blair government were, in places, stymied by their fuzzy geographies which often included overlapping and competing labour markets.
Here, a bold approach would be to design a flexible, multiscalar policy which recognises the disparate make up of the UK rather than attempting another one-size-fits-all intervention. This could involve deliberately starting a scale that may ultimately be too large but with a principal of ‘slack resources‘ so that as the capacity I called for in priority area three takes hold, a further stage of devolution of power and fiscal resource to a smaller tier based on a coherent area of economic functionality can occur.
In conclusion, the new Labour government has an opportunity to rethink and relaunch regional policy in the UK, but it must be bold in doing so if the benefits are to be felt in the labour market. Focusing on the cities and regions of the UK themselves rather than in comparison with London, a more equitable system of fiscal distribution and a flexible approach to geography should all be high priorities in any new approach to regional development.
Dr Martin Quinn is a Reader in Organisation, Work and Technology at Lancaster University Management School. His research interests cover regional development, the craft and creative industries and the Anthropocene. As well as working in academia he has also been seconded to Government with the Industrial Strategy Council.
Image credit 2ebill via Alamy Stock Photo