Britain’s economy is broken, and the prospects just got worse. Soaring energy price will hike energy bills by £700 over the coming months. April sees a 1.25 percentage point rise in National Insurance contributions, a regressive tax on labour. Even after the Chancellor’s promise to cut temporarily council tax by £150 and energy bills by £200 will leave millions of households £1,000 worse off at a time when increasing inflation is wiping out wage growth.
Covid has laid bare the erosion of our everyday economy
As the economy emerges from the fading shadow of Covid, about 2 and a half million people will be plunged into destitution, lacking the basic necessities to feed or clothe or house themselves properly. Poverty and precariousness are not limited to the urban precariat but also affect a growing section of the working- and lower-middle classes that struggle to make ends meet.
With economic growth in 2023-27 projected to be just one and a quarter per cent, Britain is stuck in a vicious circle of low investment, low productivity, low skill, low wage, and low growth.
The fragile foundations of the UK model are clear to see. The 2008 financial crash exposed our country’s over-reliance on the City of London as an engine of national growth, but our financial system remains as concentrated in the metropolitan South-East as before and still fails to properly support productive activities elsewhere.
Brexit revealed the deep disparities between more metropolitan areas of prosperity and suburban, rural and coastal areas of deprivation, but we have not begun to rebalance wealth or power to the parts of the country that never recovered after deindustrialisation.
And Covid has laid bare the erosion of our everyday economy, stripped down to “just-in-time” delivery and dependent for the supply of critical medical and other equipment on hostile foreign powers we cannot trust.
These three shocks shine a cold light on the hollowing out of society, built on an atrophied polity and anaemic civic institutions. Our institutions are at once over-centralised and weak in terms of policy implementation. Both state and market mechanisms have suffered from excessive short-termism, fragmentation and over-concentration in Westminster and the City. London and the metropolitan parts of the South such as Cambridge or Oxford are doing well enough, but the rest of the regions are falling further behind.
It fails to set out a radical decentralisation of decision-making
The Levelling Up White Paper launched last week tries to tackle these deep-seated disparities. Written by Michael Gove and the Bank of England’s former chief economist Andy Haldane, it is right on two fundamental counts. First, it takes a longer-term view by enshrining into law (subject to parliamentary approval) twelve ambitious missions on reducing regional inequalities in areas from life expectancy via affordable housing to crime by 2030, with metrics against which government action will be measured.
Second, it recognises that “levelling up” requires connecting economic to social and cultural issues by raising not only growth and living standards but also regenerating high streets and rebuilding social cohesion. Pride of place is as important as productivity. Human flourishing has many sources, from civic government and banking to all the way to architecture and from the arts. Hence the numerous references to Florence and the Medici model.
But there are fundamental flaws. The purported promotion of local self-government is at odds with a process of devolution driven by the hyper-centralised system of Westminster and Whitehall. While the paper acknowledges that the UK is “one of the most centralised countries in the industrialised world”, it fails to set out a radical decentralisation of decision-making and revenue raising powers that are independent of the Treasury.
For example, education is in theory a shared competence between local, regional and national tiers, yet in reality it is Whitehall that defines the curriculum, sets the targets and has its hand on the money tap. Universities are described as anchor institutions, but government is engaged in a culture war on woke instead of properly funding research. Nor is there a vision to renew universities and vocational and technical colleges — many of which lack autonomy, ethos and genuine excellence.
A weak, wounded PM and a penny-pinching Chancellor
Another flaw is the lack of funding. The UK Shared Prosperity Fund — the “centrepiece” of the government’s attempt to fix the fragmented funding arrangements for ‘left behind’ towns and regions — is worth less than £5 billion. Compare that to £70 billion per year for 25 years spent on levelling up Eastern Germany where certain regions are now much more vibrant than many northern English counties.
Communities will have to compete with one another for funds, paving the way for yet more dependency on the centre and pork-barrel politics. Indeed, twenty areas dubbed #BorisBoroughs are due to receive extra funding. But the notion that that these areas will remotely resemble Renaissance Florence is as fanciful as the idea that the name #BorisBoroughs will inspire pride in place.
The worst flaw is that Whitehall’s direction of policy from London and the Treasury’s control of the pursue remain undiminished. That, in turn, reduces the prospect of transforming the centralised, extractive economic model that locks many northern, rural and coastal areas into a cycle of low productivity, low growth, low wages and low-quality work. The forces of financialised capitalism with its centre in the City of London are centralising power, concentrating wealth and commodifying labour, land and life itself. The White Paper tries but ultimately fails to break the logic of the system that has produced the problem in the first place.
Seventy years of government failure in tackling regional disparities have left Britons in an economic mess that will get worse over coming months. What hope is there for sustained regeneration with a weak, wounded PM and a penny-pinching Chancellor? The UK will only thrive with more virtuous, humble elites and greater popular participation in decisions that shape people’s lives. With no new money and continuous central control from Whitehall, we face another decade of doubling down rather than levelling up.
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