Levelling with the regions about levelling up– will the UK’s new regional policy prove to be the weakest link?

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By Dr Olivier Sykes and Dr Alex Nurse from the University's Department of Geography & Planning:

The present government is the latest to promise decisive action to address uneven development and ‘level-up’ UK nations and regions. Retreat from the EU creates a new context for the pursuit of this goal given its  predicted differential impacts on regions of the UK, and the loss of policy frameworks which previously supported regional development.

In the 1970s, the UK, working with other EEC countries, lobbied for the creation of a European regional policy. In the 1980s it promoted the completion of the Single European Market (SEM).

Since then the EU’s regional ‘Cohesion Policy’ has brought financial support and been transformative in some places like Merseyside. Its multiannual funding programmes have allowed local development agendas to be planned with greater certainty particularly in the context of austerity in the 2010s, whilst local policymakers have valued devolved place-based funding streams less subject to UK government centralisation and political calculation. Meanwhile, being in the SEM has attracted overseas investment, notably in the car industry, often to less prosperous areas.

These legacies of the UK’s time in the EU will continue to benefit other places in Europe. But what comes next for their UK counterparts?

 Towards a new regional policy – “Is that your final answer?”

A ‘UK Shared Prosperity Fund’ (UKSPF) to replace EU programmes was first proposed in 2017. Some consultation has taken place on this, but there has been a general lack of information, only partially addressed by recent government statements.

The 2020 Spending Review announced that the UKSPF would be worth only £220 million in its first year, but be ‘ramped-up’ over time to “at least match current EU receipts, on average reaching around of £1.5 billion a year”. This one-year funding horizon does not deliver the kind of 6-7 year funding certainty of EU Cohesion Policy whilst the Vice Chair of the Northern Powerhouse Partnership, Lord O’Neill, has described the UKSPF as “interesting in its scale of under-whelmingness”.

The £3.6 billion Towns Fund, has gained visibility due to how funding has been allocated in its first round. The House of Commons Public Accounts Committee has stated that the Ministry of Housing Communities and Local Government (MHCLG) “has not been open about the process it followed and would not disclose the reasoning for selecting or excluding towns” and that “This lack of transparency has fuelled accusations of political bias in the selection process”. They note that “In some cases, towns were chosen by ministers despite being identified by officials as the very lowest priority”. By contrast in the Liverpool City Region a bid for Kirkby was unsuccessful despite the town’s levels of deprivation being more than double the national average.

Under the UK Industrial Strategy (UKIS), also linked to the ‘levelling up’ agenda, Local Industrial Strategies (LISs) are expected to align with national sectoral goals. However, the places with strengths around its ‘Grand Challenges’ are not necessarily those seen as being in most need of ‘levelling up’, and the question remains as to whether the need to reflect UKIS goals constrains the capacity to tailor interventions to the ‘place-based’ development potential of different territories.

The Levelling up Fund, worth £4 billion for England, is specifically billed as supporting ‘place based’ development. But again, it is effectively centralised, giving Whitehall control over the disbursement of relatively small pots of money up to £20 million. Here some see a risk of a “pepper-potting” approach where proposals which “catch ministerial eyes” will be funded, rather than powers and funding being devolved to support locally developed programmes, and of a repeat of the issues around the Towns Fund.

Meanwhile in the EU - “Let’s have a look at what you could’ve won!”

Leaving the EU introduces new uncertainty and friction into trade and depletes market potential for many of the UK regions considered to need ‘levelling up’. Little wonder the ‘great majority of available evidence suggests that Brexit is likely to make the UK’s interregional equalities worse than they already are. So what is the policy response so far?

The UKSPF has yet to replicate the certainty over future funding lost by EU exit, the Towns Fund is mired in controversy around its allocation processes, and it remains to be seen whether the UKIS will support growth in a way that doesn't create more 'winning and losing' among regions. The spectre of re-centralisation and of a politicised, rather than criteria based, approach floats above the scene.  Beneficiaries of past EU programmes must now try to plan for the future in the face of such uncertainties.

Meanwhile, EU Cohesion Policy is set to be worth about €330 billion between 2021 and 2027 and different analysts concur that UK regions could have received more funding under this than in the 2014 – 2020 period.  Both the EU funds received and the ‘match funding’ they enable would have consistently steered resources to ‘less developed’ areas.

In sum, due to EU Cohesion Policy and their assured SEM access, places in the EU in need of ‘levelling up’ today enjoy greater certainty than their counterparts in the UK – ironically it is a certainty partly built on British contributions to the European Project.

This article is based on work undertaken for the Centre for Labour and Social Studies (CLASS) and published in the report What will it really take to level up?