Two influential think tanks have questioned the Government’s ability to reduce regional inequalities and boost economic growth, with one criticising Rishi Sunak’s lack of leadership on the agenda.
The machinery of central Government is not set up to deliver the promise of levelling up or Labour’s plans to reduce disparities across the country, according to report by the Institute for Government (IfG).
Meanwhile, a study also published on Thursday by the Resolution Foundation said the “twin second cities” of Birmingham and Manchester must be central to the Government’s strategy to boost productivity, but argues there is a lack of “seriousness” about the scale of the challenge.
The IfG said efforts to reduce inequalities have been stifled by frequent ministerial changes, with 17 individuals responsible for regional governance since 1990.
It added long-running failings on the issue were also due to shifts in policy direction, changes to institutions, a lack of clarity on policy aims and an inability to coordinate across Whitehall departments and local government.
Based on evidence provided by current and former officials in Whitehall and combined authorities, the IfG warned that these mistakes are now being repeated, with Rishi Sunak “failing its first test of needing to ruthlessly prioritise levelling up and demonstrate sustained leadership”.
The report adds that interviewees said levelling up had been difficult to coordinate from the Department for Levelling Up, Housing and Communities because “most of the levers” enabling progress “sit outside the department”.
“Especially since Rishi Sunak became Prime Minister, it has not been a priority for other departments,” it said.
On Labour’s plans, the IfG also warned that shadow levelling up secretary Angela Rayner must define Labour’s “opportunity for all” vision or the party could be accused of creating an “empty slogan”, as the Opposition has described levelling up.
Rebecca McKee, senior researcher at the IfG said: “Successive governments since 1990 have tried to reduce large regional inequalities in the UK, but gaps remain as large as ever.
“Political rhetoric is not enough. Any government serious about delivering long-term change will need to meet the six tests we lay out.
“Most importantly, the Prime Minister prioritising the agenda within Government and setting out clear and measurable objectives for what constitutes success.
“Levelling Up has faltered without the first, while Labour must flesh out what it is trying to achieve with its opportunity for all mission in particular over the next year.”
The Resolution Foundation report said the “twin second cities” of Birmingham and Manchester must be central to the Government’s strategy to boosting productivity, but argues there is a lack of “seriousness” about the scale of the challenge.
It added wholesale changes in the “twin second cities”, including a major shift away from traditional industries and an expansion of “inadequate” town centres, are key to boosting national economic growth.
Reducing the productivity gap between the two cities and London so it is equivalent to the gap between Paris and its two next biggest French cities would provide a significant boost to average earnings for the combined population of 5.6 million inhabitants. It would also increase national output by 1%, the report said.
The “iconic” manufacturing sector in Birmingham is described as too small to plausibly provide the “main growth engine” for the city because it accounts for just one in 10 workers, compared to four in 10 in 1981.
Therefore, future prosperity will rely on developing sectors such as finance, technology, culture and education, where the UK is said to enjoy a competitive advantage over other countries.
The Resolution Foundation said Greater Manchester has made a “good start” in developing the required shift as its share of workers in these “knowledge intensive” sectors has doubled over 30 years to 17%.
But the city still lags significantly behind London which has a 26% share, while only 13% of Birmingham’s workforce are employed in these sectors.
Both cities are said to have productive city centres, with workers in central Birmingham producing 27% more than those based elsewhere in the region.
However, the report said there are not enough people working in central neighbourhoods to make both cities prosperous.
Birmingham is said to have the scope to build upwards to increase office space and homes for skilled workers in its low-rise city centre where buildings are just 3.3 storeys high on average.
In Manchester there is more competition for land, but the report says there is “plenty of scope” for developing areas immediately adjacent to the centre where 5% of land is used for storage and warehouses.
Modernising public transport is also identified as key to attracting and retaining the required workers, which would cost £5.4 billion in Birmingham by 2040 and £5 billion in Manchester.
Referencing Birmingham City Council recently declaring effective bankruptcy, Lindsay Judge, research director at the Resolution Foundation, said: “Too often we are distracted by popular narratives that Birmingham is broke or that crane-laden Manchester is already too successful.
“Turning Birmingham’s fortunes around, and turbo-charging Manchester’s nascent economic progress, requires policy makers to get serious about the scale of change required, including far greater investment needed to deliver more office space, skilled workers, decent housing and efficient public transport.
“Change and investment on that scale is not consistent with national politicians refusing to concentrate their efforts, or local politicians being unable to embrace the disruption involved because they lack the powers to shape it.”
A Government spokesperson said: “Our landmark ‘trailblazer’ deeper devolution deals for Greater Manchester and the West Midlands mark a seismic shift in power, funding, and responsibility for the regions.
“The deals put more cash and power in the hands of local leaders to invest in the priorities that local communities truly care about, such as better bus and train services, skills and housing.
“We will continue to capitalise on the existing success of Birmingham and Manchester by funding levelling up projects designed to improve transport, boost businesses, and create jobs.
“This includes £17 million to regenerate the former Wheels site in inner city Birmingham and £20 million to support plans to expand creative and technology sectors in Manchester.”