Post-Brexit regional policy in England: exploring ‘Levelling Up’ in practice

ABSTRACT

‘Levelling Up’ has come to dominate debates around regional inequality in England, but has been criticized for lacking clarity and definition. This paper addresses this critique by providing an early assessment of the concept. It summarizes and critically reviews Levelling Up, arguing that the concept offers a mix of marginal and familiar policies, alongside aspirations for industrial policy and research and development. Furthermore, Levelling Up begins to diverge from recent policy in its spatial focus and approach to governance and devolution. As governments in Europe and the United States grapple with similar challenges, the paper has value beyond a UK audience.

KEYWORDS:

• Levelling Up
• decentralization
• governance
• economic development

JEL:

• H70

1. INTRODUCTION

Successive UK governments have attempted to devise regional structures and development policies to promote growth outside of London and the Greater South East. The post-2010 Conservative-led government replaced existing regional institutions with its Cities and Local Growth policy agenda that gave rise to current governance structures including combined authorities, ‘metro’ mayors and local enterprise partnerships (LEPs). Under the post-Brexit Conservative government, the rhetoric of levelling up began to replace that of cities and local growth as the policy approach hoped to reduce spatial economic disparities. Levelling Up has begun to generate interest exploring its policy objectives, political goals, and chances of success and political goals and tensions (Jennings et al., 2021; Newman, 2021), but is said to lack clarity and definition (Tomaney & Pike, 2020).

Focusing on the first post-Brexit years up to 2022 under Prime Minister Boris Johnson’s Conservative government, this paper addresses this criticism with an analysis of existing and emergent policy that provides an assessment of Levelling Up in practice. It contributes to current debates on regional policy in England by providing a critical review of the approach and what it means for regional policy and institutions, particularly local government, and combined authorities. In doing so, it provides the historical context to current policy and unpacks its key ingredients in order to consider what is different (and the same) in the current approach. Finally, the paper discusses the unresolved tensions that contribute to making it unlikely that Levelling Up will succeed in making a significant contribution to reducing spatial economic inequality.

In its excavation of post-Brexit regional policy in England, the paper contributes to ongoing national and international regional studies debates on the policy response to places that are perceived to have been economically left behind and the geography of discontent (Dijkstra et al., 2020) including political economic tensions around the growth potential of peripheral regions in contrast to larger agglomerations (Barca et al., 2012; McCann, 2016), and the effectiveness and correct scale of devolution to local and regional government (Martin et al., 2016).

In February 2022, government released a lengthy Levelling Up White Paper (a statutory document published in advance of an Act of Parliament), very broad in its analysis and stated goals. Much of the White Paper is given to a wide-ranging discussion of some of the academic and policy work on regional disparities and economic development, with an implicit nod to the agglomeration-focused rhetoric of Northern Powerhouse (discussed below), articulated in the White Paper as the ‘Medici model’, invoking Renaissance Florence, influenced by the business writer Frans Johansson (Johansson, 2006). More practically, the White Paper sets out four Levelling Up missions with a series of metrics, reminiscent of the 1997–2010 government’s public service agreements (Panchamia & Thomas, 2014), with the missions and targets covering most of the domestic business of government other than transfer payments (Department for Levelling Up, Housing and Communities, 2022).

A Levelling Up Bill followed the White Paper, which in 2022 was in the process of parliamentary scrutiny that precedes a Bill becoming law, although delayed by the stasis in UK government caused by the lengthy process to change the leader of the governing party (and therefore prime minister), itself a potentially significant development, given Levelling Up’s close personal association with former Prime Minister Johnson. The Bill amends existing legislation, providing for the creation further ‘devolution deals’ that have characterized regional policy over the past decade, including county deals, associated local government restructuring and some amendments to land-use planning. In addition, the Levelling Up Bill will make it a legal duty of government to act on the Levelling Up missions, although the consequences for failing to make progress are primarily political, with targets being movable. Significantly, the relatively minor provisions in the Levelling Up Bill do not match the scale of the ambition in the missions, with the main contribution being to set the missions in law (Department for Levelling Up, Housing and Communities, 2022). Given the scope of the White Paper, the relative modesty of the Bill’s contents and the uncertain future of Levelling Up as a conceptual underpinning for contemporary regional policy, this paper explores the aspects of Levelling Up that constitute post-Brexit English regional policy as it currently exists in practice up to 2022, much of which is independent of the Levelling Up Bill before Parliament.

In practice, Levelling Up features several key policy ingredients, including a shift in geographical focus and an emphasis on community and identity rather than the cities rhetoric of recent years. There are familiar themes of infrastructure investment, regional dispersal of civil service jobs, and special economic zones (SEZs) in the form of freeports, investment zones and perhaps a broader relaxation of planning regulations. In addition, Levelling Up includes ambitions to boost manufacturing through active industrial policy together with an interest in wider dispersal of public funding for research and development (R&D), although government has still to expand these in greater detail. The final and vital ingredient is a differing approach to local and regional institutions and their funding, particularly the relationship between central government, local government, and combined authorities.

The paper concludes by first noting that Levelling Up offers surprisingly limited specific engagement with the challenges of COVID recovery and the UK’s exit from the European Union (EU). At the same time, Levelling Up does offer a positive vision that has captured the imagination of many people with a mix of marginal and familiar interventions, alongside more radical aspirations for industrial strategy and R&D. Finally, the paper reflects on the historical context and ingredients of Levelling Up and discusses four interrelated tensions around its rhetorical tone (equality or competitiveness), spatial focus (towns or cities), shifting priorities (economic growth or community pride) and governance (devolution or centralization).

The remainder of the paper is structured as follows. The next section presents the methodology and is followed by a section that situates the paper within its historical political and economic landscape. Summarizing the challenges Levelling Up purports to address, the subsequent section debates the key ingredients of Levelling Up identified through the analysis of documentation and interviews. The conclusion explores whether Levelling Up can meet these challenges and identifies series of interrelated and unresolved tensions within the policy.

2. METHOD

Data collection involved two methods: document review and semi-structured interviews. First, an ongoing document review of relevant grey literature was conducted. This included national policy documents, ministerial statements and central government press releases which formed the backbone of the analysis, as they indicated the approaches used in practice, as well as the rationales underpinning them.

Second, we undertook a series of semi-structured interviews with stakeholders across two regions (the North East and East Midlands) to obtain an understanding of the interviewees’ perceptions and experiences of the evolving policy environment. Different locations were selected to access a range of interviewees across diverse geographical contexts. The selection also sought to include regions with different governance arrangements including those with and without combined authorities. Consideration also had to be given to issues of feasibility and pragmatism given that the interviews were being conducted relatively early on in the pandemic (2020/21) when interviewees were rightly preoccupied with mounting the emergency response and not on research participation. The research team considered a number of regions they had an existing research relationship with and from that pool selected two regions in England: the East Midlands and Northeast. Interviews were conducted with key stakeholders situated across the East Midlands, North East and Tees Valley and were conducted with those who held responsibility for economic development including senior officers in LEPs, combined authorities and local authorities.

Within these regions a series of 15 in-depth semi-structured interviews were conducted by a team of two researchers. Given the country was in lockdown at this time interviews were conducted over the telephone or using a video communication platform. An interview guide ensured the researchers line of questioning was consistent across a range of topics. The topics were informed by the document review and included: understandings and perceptions of emerging regional policy initiatives, how local and regional institutions were responding the economic impact of COVID-19 and (at the time) ongoing lockdown, and relationships between different levels of governance. Interviews were recorded with the respondents’ consent and once transcribed, the data from these interviews was analysed thematically and separately by each of the authors before comparing the emerging themes to ensure issues of bias were reduced (Marshall & Rossman, 2014).

This most recent fieldwork conducted in 2020/21 is situated within an ongoing programme of work that began in 2015, exploring the evolution of English regional policy in the period following the global financial crisis, which comprised 60 qualitative interviews with regional and national stakeholders.

There are some limitations to the approach to note. The inclusion of interviewees from two regions (East Midlands and Northeast) could be criticized for a lack of generalization due to the reliance on a limited number of localities (Yin, 1984). With more time and a less chaotic research environment the researchers could have included a greater number of regions, or within those regions, a larger pool of interviewees.

3. BACKGROUND AND HISTORICAL POLICY CONTEXT

Levelling Up is emerging in the shadow of COVID-19 and Brexit. COVID’s macro and regional economic impact is well documented (Bhattacharjee et al., 2020; Harari & Keep, 2021; Sensier & Devine, 2020) and evidence shows that economically weaker regions rebound less effectively from economic crisis (Martin et al., 2016). In addition, the UK has left the EU, and while the UK government and the EU reached an initial agreement, the COVID-19 crisis and unprecedented peace-time fiscal support for the economy make it difficult isolate a Brexit effect. However, there is work still to be completed on the UK’s long-term economic relationship with the EU and research indicates that even a managed situation with agreed trading arrangements may have a serious impact on the UK’s peripheral regions (Chen et al., 2018; Thissen et al., 2020).

Despite periods of relatively strong growth in peripheral regions and approaching a century of regional development policy, spatial economic inequalities in England remain exceptionally high for an advanced economy and have increased more quickly than in other major European countries (Martin et al., 2016; McCann, 2016). The case for tackling spatial inequality typically hangs on the twin strands of equity and social stability and/or economic efficiency. First, there is the normative claim for the desirability of social and economic equity. The recent rise of populist or anti-system politics, arguably visible in the UK vote to leave the EU, has added an additional dimension to this debate with the argument that political reality necessitates efforts to boost the economies of poorer, left behind places in view of the systemic risk posed by political backlash against an economic orthodoxy that favours richer cities and regions (Rodríguez-Pose, 2018). The economic efficiency argument cites wasted potential and underutilized resources in poorer regions alongside the possible inflationary effect of an overconcentration of economic activity in one place, including pressure on housing markets and public infrastructure (McCann, 2016).

UK governments have run regional policies for many decades during which the governance of economic development in England has been subject to ongoing change, including the regular restructuring or reinvention of subnational institutions (Evenhuis, 2017; Ayres et al., 2018). These successive attempts to address the tier of governance between central and local government (Hildreth & Bailey, 2014) have oscillated between regionalist and localist approaches (Pike et al., 2016).

The spread of Keynesian ideas on the regulation of the economy in the 1930s saw government increasingly willing to intervene in local and regional economies, albeit still at the margins, while a commitment to market adjustment continued to dominate policy thinking. Government implemented assisted mobility schemes to encourage migration away from ‘distressed areas’ while measures under Special Areas acts between 1934 and 1937 made limited attempts to stimulate employment in struggling places with fiscal incentives and capital investment (Pitfield, 1978). Heading into the 1940s, government intervention in the economy grew significantly as, alongside a broader expansion of the tax base and state provision of health, education and social security, governments around the world sought to manage national economies. A Royal Commission on the Distribution of the Industrial Population (the Barlow Commission) and subsequent report (Royal Commission on the Distribution of the Industrial Population, 1940) was an important driver in regional policy becoming more active and extensive in the post-war years and throughout the 1960s and 1970s (Martin, 2015). The Barlow Report explicitly linked unemployment in distressed areas with congestion in the South East and formed the basis of the post-war policy of distributing economic activity around the regions using centrally managed policy levers such as grants and loans or restricting industrial development outside of assisted areas (Gardiner et al., 2013).

This post-war policy cannon was retrospectively theorized as ‘spatial Keynesian’ in its combination of full employment and regional policy (Brenner, 2004). It was an approach in which policy has clear and deliberate spatial effects but is controlled from the centre and in which the nation state and economic imperatives of the centre were accorded primacy (Martin & Sunley, 1997). The broad approach remained in place until the 1970s and the gradual shift from post-war consensus and Fordism to a flexible regime of capitalist growth.

This shift has been theorized in various sometimes complementary ways, including as a shift from a Fordist to post-Fordist regime of accumulation or from a Keynesian welfare to a Schumpeterian workfare state (Jessop, 2002) but a key argument in the context of subnational governance and development is that it led to an era of state rescaling with a greater emphasis on decentralization or devolution and the emergence of governance from government (Brenner, 2004; Jessop, 2002). These shifts are intertwined with changing regional policy away from active attempts at equalization or convergence and towards a more growth orientated, competitive entrepreneurial regime in which regions and cities take on greater responsibility, often accompanied by dwindling local state capacity and resources (Peck, 2012) underpinned by a belief that regional equality is no longer a realistic policy goal (Pike & Tomaney, 2009).

During the 1990s, central government attempted to improve regional policy coordination with a new map of English regions, each with a government office to act as the ‘eyes and ears’ of central government (Pike & Tomaney, 2009). From 1997 onwards, the Labour government pursued a regional policy ostensibly focused on endogenous development, steered by new Regional Development Agencies in every region (not only poorer regions) and ‘regional chambers’, with the latter intended as a precursor to elected regional assemblies (Pike & Tomaney, 2009). Policy aspired in principle to raise the performance of the weakest regions based upon local designed interventions led by regional institutions but was criticized for being driven by central government targets, ‘treating unequal regions equally’ (Morgan, 2006, p. 189) with the presence of an RDA in every region, and a lack of democratic accountability (Pike & Tomaney, 2009). After 2010 the Conservative–Liberal Democrat Coalition government began to dismantle regional institutions and a narrative of failure was constructed around the RDAs in which they were accused of mission creep and wastefulness (although they controlled only around 1% of regional spending), and a failure to reduce regional inequality and working at an inappropriate geography (Pike et al., 2018).

Other governance spaces had begun to emerge, including city regions, which had been discussed in academic circles at least since the 1950s (Tewdwr-Jones & McNeill, 2000). City-regionalism in England became more prominent following the rejection of a North East regional assembly in a 2004 referendum (Harrison, 2007) and the government interest was reflected in the Local Democracy, Economic Development and Construction Act 2009, which facilitated the creation of combined authorities and statutory city regions. The attention given to city-regions reflected growing international interest (Rodríguez-Pose, 2018). For example, the Organisation for Economic Co-operation and Development’s (OECD) (2006) territorial review of Newcastle and the North East had recommended stronger government at the city regional level.

On assuming office in 2010, the UK’s Conservative–Liberal Democrat Coalition government began to implement its own Cities and Local Growth agenda. The approach remained ad hoc with the subsequent non-codified policy framework dispersed over numerous documents, memos, letters, articles and ministerial statements (Gray et al., 2018; Pike et al., 2016). Key characteristics included:

• A move away from regions, building on functional economic market areas (FEMAs), particularly cities and city regions and ideas of agglomeration and cities and drivers of growth (Lee, 2017). The cities focus was influenced by work in the field of New Economic Geography and New Urban Economics in part, promoted by individual or groupings of city regions, think tanks and commissions invoking claims of boosterism (Haughton et al., 2016).

• Devolution to new institutions at the functional/city regional level, reflecting an international trend and a tendency for English subnational governance to swing over time between regional and more local levels (Pike et al., 2016). Government introduced notionally private sector led LEPs and, later, statutory combined authorities, some with mayors.

• An emphasis on the mechanism of competitive challenge funds and conditional deals between central government and the new institutions, devolving control of resources and limited powers in return for commitments from local actors, often around institutional change (Giovannini, 2018; O’Brien & Pike, 2015).

• Familiar policy tools such as transport infrastructure and skills and some spatially targeted incentives for inward investment, but with a growing interest in industrial strategy and innovation policy (Gray et al., 2018).

Critiques of Cities and Local Growth pointed to a tendency to overstate relatively marginal interventions in the context of public spending reductions, its preoccupation with agglomeration, and (despite the devolution rhetoric) the dominance of central government priorities and politics. Spending cuts and limited funding meant the approach depended on competitive grant financing via conditional deals and exaggerated claims, theorized as ‘austerity urbanism’ (Peck, 2017a, 2017b). In addition, opaque financing presented difficulties in identifying genuinely ‘new’ funding (Gray et al., 2018). This was accompanied by a rhetorical concentration on agglomeration (Haughton et al., 2016). These tendencies came together in the high-profile Northern Powerhouse (Lee, 2017) even though, in practice, the deal mechanism was available everywhere in England (not only larger cities), and the emphasis on agglomeration was flexible, sometimes depending on central government’s intended audience (Gray et al., 2018). Critics argued that the approach was dominated by central government priorities, with the contracting out of policy where local delivery matched central government requirements. In this sense, Cities and Local Growth was argued to sit within the Westminster Model of central/local relationships in the UK wherein central government delivers its own policy priorities through local actors, who come together in grant coalitions to access funding from central government (Ayres et al., 2018; Sandford, 2017). Additionally, government increasingly employed regional policy as an instrument of national electoral politics with the suggestion that the Conservative Party wanted to cement its narrow electoral majority by being seen to do more for northern cities, which were seen as crucial to long-term electoral success (Gray et al., 2018; Lee, 2017).

4. THE INGREDIENTS OF LEVELLING UP

The following themes are drawn from document review and semi-structured interviews, including policy documents, ministerial statements and press releases.

4.1. From cities to towns: a change of scale

The scale of Levelling Up is likely to be critical but remains unclear, although ‘towns’, which began to occupy policy debates after the EU referendum remain prominent. The definition of a town is characteristically vague and there has inevitably been some political manoeuvring. When city regions were the focus of Cities and Local Growth it was pragmatic for policymakers to present their territory as such, and combined authorities could now seek to present themselves as made up of several towns in a polycentric region (local authorities within ‘metro mayor’ areas are currently delivering discrete ‘Towns Fund’ projects). Importantly, there is always an electoral dimension to regional policy that central government will wish to be seen to deliver on for constituencies that returned Conservative MPs, in some cases for the first time in many years or even the first time ever in their current form (Jennings et al., 2021). Whatever the political intention, the scale of Levelling Up lacks clarity. Fuzziness of scale dogged, for example, Northern Powerhouse from the outset leading to suggestions that it was more a brand than a strategy (Lee, 2017).

In addition, COVID-19 and the perceived risks around densely populated cities has prompted cautious debate on the future of large cities and fuelled arguments for more state intervention to promote economic activity outside of the densely populated London and South East. However, whatever the final spatial focus, the geographic fundamentals that have for many years been a problem for peripheral regions are unlikely to disappear and it is important to remain realistic about prospects of the death of distance or end of geography when considering potential change in policy (Nathan & Overman, 2020). In this sense, there has been surprisingly little discussion of any economic rationale for a shift in policy away from urban centres.

Accompanying interest in smaller places is a burgeoning interest in ideas of local pride and identity (Kruger, 2020), in many ways resembling previous Conservative Leader David Cameron’s ‘Big Society’ and consistent with the idea that many people feel that the place they live no longer matters in a globalized economy (Rodríguez-Pose, 2018).

4.2. Infrastructure and capital projects

With the cost of government borrowing low, infrastructure spending in peripheral regions, particularly on transport, is high on the agenda. In interview, regional policymakers welcomed this in the context of longstanding disparities in per capita transport spending between London/the Greater South East and the north of England in particular (Johns, 2021), but there is a recognition locally that this is unlikely to be transformative on its own. A focus on capital spending is visible in various new funding streams, and the agreement of multi-year transport settlements to combined authorities with metro mayors (HM Treasury, 2021). While some of this capital investment was already committed (HM Treasury, 2017), the 2021 budget went further in efforts at a fiscal stimulus for a post-COVID-19 recovery with, for example, a ‘super deduction’ capital allowance to promote private sector investment (Institute for Fiscal Studies (IFS), 2021).

High-profile infrastructure commitments were a key element of Cities and Local Growth, particularly in Growth Deals where transport was the largest element (Pugalis et al., 2016) but also in some of the more bespoke City Deals and Devolution Deals. As with Cities and Local Growth, this presents the risk of overreliance on capital investment, of politicians seeking out ribbon cutting opportunities or of using inputs as a measure of success; a standing critique of ameliorative regional policy (Barca et al., 2012). In addition, local and regional interviewees suggest that the trend for the Levelling Up initiatives built around capital investment is only one part of the challenge and a serious attempt to reduce spatial economic disparities will need increased day-to-day spending on the foundational services on which the economy sits (Marmot et al., 2020). However, analysis of the recent spending statements suggests overall public spending on services is likely to be significantly lower than previously planned (IFS, 2021).

4.3. Civil service relocation

With announcements such as ‘Treasury North’ in Darlington, government has made much of its aim to transfer 22,000 civil service jobs out of London (HM Treasury, 2021). Local and regional actors have welcomed these moves on the basis that peripheral places need more and better jobs, and that civil service job moves may also in the long-term lead to some policy influence. A high-profile emphasis on government job relocation is a clear demarcation between Levelling Up and the inherited Cities and Local Growth agenda. While devolution dominated Cities and Local Growth rhetoric, the policy agenda peaked during a period of sustained public spending cuts which saw a reduction in the number of regional civil service jobs including the closure of regional government offices and regional development agencies (Pike et al., 2018).

The choice of sites has prompted debate, with government in some cases preferring smaller or more peripheral places over larger cities. The Tees Valley Mayor made much of the case in advance for dispersals to smaller places, arguing that relocating civil servants to larger regional cities would make little difference to Levelling Up (Arnold, 2020). In contrast, the initial recruitment difficulties that the Office for National Statistics (ONS) experienced after its move to Newport has prompted critics to point to theories of agglomeration economies to argue that this kind of civil service move would have greater impact in larger cities (Nickson et al., 2020).

Questions remain around the economic and policy impact of these moves. Similar dispersals have been tried in the past and on an ambitious scale following, for example, the Lyons and Gershon reviews (Gay, 2006) and, while they can provide good jobs and make a contribution to regional growth, there is limited evidence of large transformative effects, with dispersals argued to have been hampered by increased communication costs, some difficulties in attracting skilled workers and the reluctance of senior civil servant to relocate, which in turn can reinforce a spatial division of labour seen in the private sector (Marshall et al., 2005). There is the additional context of a net loss of public sector jobs in peripheral regions; in 2021 England’s poorest region, the North East, had 30,000 fewer public sector jobs than it did a decade earlier. In addition, dispersed civil servants remain central government agents working to ministers, and, with a Devolution White Paper repeatedly delayed then subsumed into a promised Levelling Up White Paper, there is a sense that Levelling Up favours the spatial dispersal of central government jobs over local and regional institutions. Furthermore, in the context of wider public sector jobs cuts, local government has seen the largest reductions, and this is important when thinking about places capacity to devise and implement local policy.

4.4. Spatial policy: freeports, investment zones and planning reform

Government announced the site of eight freeports in the March 2021 budget (HM Treasury, 2021). While the sites where notionally distributed on a competitive basis with places enthusiastically submitting proposals to government following a bidding prospectus (HM Treasury, 2020), there is a broad spread across the English regions, with only the South East having two and West Midlands having none. At the time of writing and following the installation of a new UK Prime Minister, central government had called for expressions of interest from local and combined authorities in a series of new innovation focused and university-led ‘investment zones’, although as yet there is little indication of what these will mean in practice.

SEZs are a familiar tool of regional policy including the Urban Development Corporation of the 1980/90s and enterprise zones, most recently reprised on a relatively small scale in Cities and Local Growth (Ward, 2020) and while they might be part of a policy mix, they should look to generate deeper benefits for local and regional economies (Farole & Akinci, 2011). Alongside customs measures to facilitate exports, the initial bidding prospectus set out some of the potentially available tax and regulatory incentives including capital allowances and employer tax incentives on job creation. Most are relatively marginal and familiar from previous UK area-based interventions that aimed to compete on the cost of labour and produced mixed results, without proving a long-term solution to regional inequality (Cheshire et al., 2014). Furthermore, while there have been some ambitious claims (Sunak, 2016), there is little indication on the planned extent of the fiscal backing for the zones. The most recent enterprise zones were unsuccessful in their own terms, lacking fiscal muscle and consistently failing to create the predicted number of jobs (Swinney, 2019). It is not clear that failure to compete on the price is an obvious disadvantage to firms in England’s peripheral regions where land and labour are already comparatively cheap, and there remain well evidenced critiques on the problems of deadweight and displacement around SEZs (Chaudhary & Potter, 2019) although these are in large part recognized by local and regional actors who in interview tended to emphasize freeports’ potential in ameliorating post-Brexit customs friction or opportunities to encourage industrial clustering.

Elsewhere, reforms to the planning system have been widely discussed as a tool to promote economic growth; a recurring theme in regional development policy (Docherty & Mackie, 2010). The latest plans include proposals for growth zones designated by central government and familiar calls to speed up the process (Barton et al., 2021). The original plans met criticism and political difficulties within the Conservative Party, but the reform agenda remains live and was reiterated in the legislative programme in 2021 (Kelly, 2021). However, while deregulated zones might (arguably) be part of the solution to housing shortages in high demand places, there is limited evidence that planning restrictions are holding back peripheral, poorer regions (Docherty & Mackie, 2010). In addition, planning zones set by central government, contribute further to a sense of a centralizing government.

4.5. Active industrial strategy

Recent years have seen a growing international interest in industrial strategy (Aiginger & Rodrik, 2020). This was reflected in the approach of the pre-2019 Conservative government which developed a new National Industrial Strategy supported and scrutinized by an independent Industrial Strategy Council (HM Government, 2017). Government continues to emphasize industrial strategy and manufacturing but has abandoned the national strategy arguing that post-Brexit and COVID-19, a new approach is required, and the strategy is to be superseded by government’s new plan, Build Back Better (2021). In the wake of this local industrial strategies (that combined authorities and LEPs were required to produce and which, understandably, they sought to tie into the national strategy) have in effect been shelved, with several being removed from LEP and combined authority website. However, local reaction in interviews were muted, with a sense that local actors are familiar with and prepared for centrally directed churn of strategies that tend to speak to national political priorities, and this latest shift is in itself is unlikely to mean much medium-term change in local policy and delivery.

The focus on industrial policy partially echoes research interest in place-sensitive policy aimed at encouraging endogenous development and fostering demand for innovation and higher skills in poorer regions (Bailey et al., 2019; Barca et al., 2012; Iammarino et al., 2019), although so far there is limited evidence that central government policy is informed by systematic thinking. Historically, a strategy of attracting often subsidized investment and employment has dominated policy in peripheral English regions but embedding this kind of external investment for the long term or mobilizing sufficient endogenous potential has presented a bigger challenge and many places have remained vulnerable to external economic shocks and subsequent scaling back or removal of external investment (Harris et al., 2020). This might be a key test of the seriousness and long-term ambitions of Levelling Up and interviews suggest that local and regional actors anticipate that they will need the support of national government if they are to remain focused on longer term ambitions to nurture endogenous development.

Outside of central government, interviews reveal local and regional policy actors thinking in some depth on the future of development policy and practice and keen to share thinking on agglomeration, current sectoral policies, the possibility of ‘north shoring’ and shortened supply chains after COVID-19, and ideas around the foundational economy. In this context there are local concerns that the central government approach to Levelling Up is preoccupied with high-profile, high productivity areas such as advanced manufacturing that are unlikely to generate jobs either rapidly or in large numbers at a time of accelerating structural change in lower paid sectors. There are particular concerns around the impact on sectors such as retail and leisure, with the former less likely to recover to a pre-crisis state, and what this might mean for already struggling town centres in poorer places.

4.6. Research and development (R&D)

Closely related to active industrial policy, discussion of a wider spread of public funding for R&D is a longstanding feature of UK regional development policy, but the recent heavy emphasis on R&D is one of the more distinctive aspects of Levelling Up (Fraser et al., 2021; O’Brien & Miscambell, 2020). Government aims to increase national spending on R&D from 1.7% of gross domestic product (GDP) in 2018 to 2.4% by 2027 (a target set by the previous Conservative leadership), including a significant increase in public investment which now accounts for around 30% of R&D expenditure in the UK (HM Government, 2021). In 2018, R&D in the South East, East of England and London (the golden triangle) accounted for 53% of all UK R&D (Rhodes & Ward, 2021) and in this context, it is argued that if government were to invest in all regions at the same level as in the golden triangle it would spend £4 billion more (Forth & Jones, 2020). In a practical sense, there has been increasing interest in research and innovation among local and regional policymakers following a lull and lack of capacity after the abolition of the old regional development agencies, interest visible in later iterations of LEPs’ strategic economic plans and more recent local industrial strategies.

However, previous attempts to change the way government distributes R&D money have met resistance within government, sometimes woolly compromises, and limited success. For example, the Cities and Local Growth period saw science and innovation audits, ostensibly aimed at identifying excellence but which prompted some confusion amongst local actors some of whom approached the audits in the same way as they had other conditional deals and prepared in effect bids to win investment (Flanagan & Wilsdon, 2018). In essence, the audits were a compromise from a department (Department for Business, Energy and Industrial Strategy – BEIS) facing increasing calls for greater dispersal of public R&D money but determined that excellence should remain the principal criteria for funding. Given recent experiences and the commitment in parts of central government to a-spatial excellence, local actors are aware that they will need to work to keep discussions around a wider spread of R&D funding alive in the face of competing political priorities and inevitable counter lobbying.

4.7. A different approach to governance and funding

Emerging from the initial COVID-19 crisis, Levelling Up began to lean towards local authorities rather than regional governance institutions in the distribution of some of its key funding streams. Outside of London, most funding for local and regional development in England since 2010 has been routed through subnational institutions; most commonly either LEPs or (mayoral) combined authorities where they exist. Later fiscal statements began to give more indication on the shape of nationally driven policy and funding for Levelling Up and COVID-19 recovery. Several funds were announced, clarified, or expanded upon (Table 1).

Table 1. Funding streams for Levelling Up.

Fund	Total value and period	Lead bidding authority	Priority list scale of intervention
Towns Fund (England only)	£3.6 billion, of which £1.02 billion confirmed by June 2021	Unitary authorities or upper tier county councils	‘Towns’. In practice this can be as fine grained as town councils within local authorities such as Billingham or Thornaby within Stockton
Levelling Up Fund (UK)	£4.8 billion 2021–25	Unitary authorities (including metropolitan borough councils), London borough councils and district councils in two-tier areas in England; and unitary authorities in Scotland and Wales	Local authorities, down to district council level (where they exist)
Shared Prosperity Fund (UK)	£2.6 billion 2021–22	Mayoral combined authorities where they exist, otherwise unitary authorities or upper tier county councils	Local authorities, down to district council level (where they exist)

Source: Authors.

The financing of Levelling Up retains the fuzziness of Cities and Local Growth wherein it can be difficult to differentiate genuinely new funding from spending that has been relabelled and may have happened in any event. At the macro level, national budget estimates suggest that government capital spending is likely to increase while some departments’ day-to-day spending remains under pressure (IFS, 2021). Local government budgets in England have been under severe pressure for several years and with some central government departments protected during efforts to reduce the budget deficit since 2010, councils have taken a larger cut than most other areas of public spending (Gray & Barford, 2018). Subsequently, the COVID-19 crisis has reduced income further and increased cost pressures as councils continue to provide local services while working to protect communities. Central government has provided some support but offered no blanket guarantee, and large funding gaps and low levels of reserves mean some authorities are at risk of financial failure (National Audit Office (NAO), 2021).

Three of the main recent funds to support local and regional economic development, the Towns Fund, Levelling Up Fund and Shared Prosperity Fund built their criteria around local authorities but differ in their precise mechanisms. The Shared Prosperity Fund designates local authorities as priority areas but mayoral combined authorities where they exist are the lead body, requiring councils to submit projects via the combined authority. The Towns Fund and Levelling Up Fund partially bypass subregional institutions and invite bids from local authorities, although the latter is also open to combined authorities. This somewhat confused shift in scale reflects the ongoing interest in towns and contrasts with the Cities and Local Growth emphasis on city regions and FEMA. This is particularly the case in the choice to open the Levelling Up Fund to schemes in district council areas (some of which have populations of only 50,000–60,000 people and 20,000–25,000 jobs) and the Towns Fund to projects in sublocal authority level ‘towns’. The criterion used to identify priority places has generated debate and some controversy, with the suggestion that in the case of the Towns Fund there was deliberate targeting of marginal central government constituencies (NAO, 2020).

In addition, Levelling Up Fund proposals require the support of at least one local MP, with no requirement for the support of a mayor/combined authority, a decision that raises questions about government’s view on the governance institutions of Cities and Local Growth. In this sense the future role of combined authorities and mayors is unclear, although government has appeared keen to have more of them, having recently brokered a devolution agreement for West Yorkshire and the East Midlands and encouraging a mayoral combined authority for the North East. There are indications that mayors and combined authorities will retain some strategic responsibilities including over multi-year transport agreements and potentially the Shared Prosperity Fund but splitting different funding streams across different institutions operating at different spatial scales presents local and regional actors with an additional challenge when attempting to work strategically at a larger than local level. This shift in emphasis contrasts with Cities and Local Growth’s rhetorical focus on FEMA and adds to a sense of a move away from cities and agglomeration. Alongside this, it has become increasingly clear that LEP are out of favour. LEPs are under formal review having already been omitted from recent central government policy documents, including funding guidance and Build Back Better (HM Treasury, 2021). While LEPs’ demise has been rumoured almost since their inception, their removal from the policy landscape would cause confusion, with many areas lacking a larger than local level of governance without them.

Importantly, the shift in scale remains piecemeal and, so far, applies only to emerging funds. Existing commitments and some other funds continue at the subnational level including, for example, transport funding allocated through the Transforming Cities Fund announced in 2017 will be delivered at the regional and subregional level (HM Treasury, 2017). In this context, government has promised multi-year transport funding settlements for metro regions although the degree of local control is not yet clear. Furthermore, Build Back Better (HM Treasury, 2021) states the aspiration to have ‘a globally competitive city in every region’ indicating that the urban dimension is not absent.

Amid the introduction of new funding streams, central government displays great enthusiasm for the competitive challenge funds that characterized Cities and Local Growth. This follows several years of successive deals that eventually produced limited investment funds around which places with devolution deals have a degree of flexibility. Furthermore, while successive Cities and Local Growth deals required a formal strategic context (e.g., the agreement of strategic economic plans) emerging challenge funds are largely based around single projects. Local and regional interviewees had strong reservations around the enthusiasm for competitive bidding for project funds following a relatively lengthy process of attempting to secure limited but long-term funds via previous deals. In addition, the emergent funds have been argued to be insufficient for the scale of the Levelling Up task, failing to match the scale even of recent regional development funds and further eroded by high inflation (Gray & Morris, 2022; Shaw & Johns, 2022).

5. A RECIPE FOR SUCCESS?

This paper began with an examination of the political economic context, the challenges Levelling Up purports to address and the regional policy landscape it inherits. The final section asks if Levelling Up can meet these challenges. It is important to say first that there is limited overt acknowledgement that Levelling Up is shaped by COVID-19 or the UK’s exit from the EU. The vote to leave the EU has shaped policy over recent years, visible in the rhetoric of towns and left behind places. However, beyond the posited ameliorative effect of freeports on goods trade, it is difficult see that planning for economic life outside of the EU has significantly influenced the shape of Levelling Up. Similarly, while the idea of recovery via ‘building back better’ cuts through much of the rhetoric, emergent national government thinking does not give much specific space to the regional economic effects of COVID-19.

The mix of ingredients identified in this paper point to a series of interrelated and unresolved tensions within Levelling Up, in part the result of the approach beginning life as a political slogan that has subsequently struggled to differentiate itself from preceding policy. First, there is a tension between the rhetorical tone of spatial Keynesianism and the reality of a continuation of the lightly financed competitive regional policy tools that have characterized recent years. Second is the tension of scale and the role of smaller places (or towns) compared to that of larger cities/urban areas. Third, with limited resources, there is a tension between policies to promote community and pride in place, and policies to promote regional productivity and growth. Fourth, there is a clear tension between the rhetoric of devolution and a government that seeks to control regional policy from the centre, often bypassing subnational institutions such as metro mayors that purport to provide a regional strategic tier of governance. Discussion of each is now expanded within this concluding section.

The political communication around a shift of scale to smaller places and the message that nobody should have to move to ‘get on in life’ (Johnson, 2021) is in many ways consistent with the managerial spirit of spatial Keynesianism. However, tensions are revealed between this rhetoric and the policy mechanisms of Levelling Up which remain firmly rooted in the entrepreneurial approach that has emerged and come to dominate since the late 1970s. For example, territorial competitiveness with places encouraged to bid against each other for often limited and marginal public investments echoes Peck’s (2012) notions of tournament financing and placebo dependency. In this context, Levelling Up may have to see a shift away from the quasi-Keynesian suggestion of taking jobs to the people, given the scale of the challenge and the policy instruments (and resources) available.

Associated with the tensions around scale there is a sense that for peripheral places and towns, Levelling Up could mean physical regeneration of public spaces or community focused projects intended to promote pride in place, with growth orientated policy quietly refocused back towards metropolitan areas (with multiyear transport settlements from metro regions, while not as explicitly presented as Levelling Up funding), a possible early indication. In this context it is striking that Levelling Up contains so many familiar tropes, often from the very recent past; SEZs, moving civil service jobs out of London, physical regeneration of public spaces and infrastructure investment. Each of these interventions might be relatively and discretely successful but are unlikely to be transformative, and function in part to send a message to voters that government is trying and believes places matter. Other aspects of Levelling Up identified here, such as active industrial policy and a broader distribution of public R&D funding, have the potential to be more radical and, as part of a wider strategy of public investment, accords with some of the principles of place-sensitive development (Barca et al., 2012; Iammarino et al., 2019). Such an approach is broadly consistent with the spatial Keynesian aspirations of Levelling Up, particularly the core aim of seeking to maximize economic potential in all places (Gray & Pugalis, 2016). Importantly, an emphasis on boosting innovation capacity and R&D funding around the country might be an important shift for poorer regions that have relatively weak innovation networks, but if government is to prevent gains accruing mainly to the already stronger regions, an essential accompanying task would be to improve regional capacity to absorb innovation funds and provide locally rooted higher paid jobs. Even with additional funding, identifying potential areas of specialism will require analytic capability, detailed local knowledge and understanding of the national and international context. The need for local knowledge implies the devolution of additional R&D funding to local institutions where the capacity is there (and interim support to build that capacity where it is not) and there might also be a need for dedicated and complementary regional institutions, so called ‘translational research centres’, tailored to places’ social and economic needs (Forth & Jones, 2020).

At root, there remains a clearer theory of change behind the inherited Cities and Local Growth agenda (albeit heavily caveated and critiqued) than there is underpinning Levelling Up, particularly the move away from urban centres, where the economic rationale remains vague, with the case appearing to rest largely on calls for fair shares and perhaps the tacit assumption that some Levelling Up investments are intended to send a message that places matter, more than they are a serious economic intervention. Conversely, the positive case for Cities and Local Growth was predicated on the idea of economic growth via policy innovation and greater accountability through devolution, and a new spatial fix, building on functional urban area and cities as drivers of growth (Gray et al., 2018; Haughton et al., 2016). At the same time Levelling Up shares a fuzziness of scale with the earlier policy approach (Lee, 2017). While Cities and Local Growth tended to have a rhetorical focus on agglomeration and urban centres, this could fluctuate depending on the political audience and the approach’s policy levers were in principle available to all parts of England (Gray et al., 2018). Similarly, while towns continue to grab the Levelling Up headlines, elsewhere government discusses the importance of every region having a ‘competitive city’ (HM Government, 2021) and talk of fostering a ‘Medici effect’ that essentially mirror ideas around urban agglomeration (Forsyth, 2021).

Tensions of scale, with the notion of metro mayors governing functional city regions sitting somewhat awkwardly with a focus on towns, links with tensions around devolution and centralization. While government appears likely to retain some of the inherited institutions of Cities and Local Growth and particularly the mechanism of the deal, the status of devolution and decentralization within Levelling Up is unclear, with government apparently keen to dispense funding directly to local authorities and benefit from any political capital that Levelling Up initiatives and announcements generate. In contrast with the previous rhetoric of devolution, there are indications of Levelling Up taking a more overtly centralizing approach. This is visible in the early signs of a move away from limited discretionary powers for regional governance institutions towards a more project-based approach, the targeting of centrally administered funds at local authorities rather than combined authorities (or LEPs) and the suggestion of spatial planning zones set by central government. This centralizing tendency is also visible in the formal requirement for MP’s backing for some local authority funding bids; while MPs are constituency based, their political focus tends to be on central government politics and elections.

The political strategy visible in Levelling Up might be a logical conclusion of the tendency in Cities and Local Growth to see local and regional policy as a vehicle for national objectives and political messages. That is, with Levelling Up there are indications of a strengthening of the historic central government approach of contracting out of central government priorities that remained important in recent regional policy (Ayres et al., 2018; Sandford, 2017), together with an intensification of regional policy as an exercise in political performance, focused on national electoral politics and high profile ‘spectacles’ (Jennings et al., 2021). Taken together, the shifting scale of funding, together with the UK government’s centralizing tendencies, including the use of regional development as a tool for national electoral ends, and the (so far) silent omission of LEPs from policy debates, begins to raise questions about the future of the relatively young governance institutions of Cities and Local Growth and devolved governance in England more broadly. While these questions are for now tentative, repetitive change of institutions and geographic scale in English regional governance is recognized as a serious barrier to long-term planning and successful policy (Pike et al., 2016, 2018).

To conclude, Levelling Up offers a positive message of good jobs and local pride that appears to have caught the mood of many voters and, within this, there are ambitious ideas around industrial policy and innovation-led growth. However, decades of regional policy demonstrate that making progress in Levelling Up will be challenging (Taylor et al., 2021) and the current approach is unlikely to make a significant impact. Historically, the view that nothing works has been widespread in central government and there is a risk that Levelling Up becomes more about eye-catching initiatives, community identity and sending a message to voters (‘your town matters’) than it is a serious strategy to reduce spatial inequality. Notwithstanding tensions with the Conservative Party’s free market traditions (Newman, 2021), there are arguments that this might be politically sustainable provided government is able to create a convincing narrative of success with a supply of high-profile schemes (Jennings et al., 2021). However, many local and regional actors would find this disappointing at time when regional policy has seldom been higher on the political agenda. Spatial economic disparities in the UK and with them the politics of places that do not matter have been a long time in the making, and a return to ameliorative or symbolic policies would be a missed opportunity.

ACKNOWLEDGEMENT

The authors are grateful to the editor and reviewers for their constructive comments made on earlier versions of this paper.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.