Does This Budget ‘Level Up’?

After a decade of Conservative rule, Britain is the most regionally unequal economy in the developed world. The new government was elected on a pledge to redress this inequality – but today's budget does the bare minimum.

It’s unsurprising that the chancellor’s hastily-prepared budget has been dominated by the coronavirus. For a Conservative government wedded to the idea that the market must be ‘free,’ the calls for intervention seem to have thrown ministers into a state of panic. But act they must, and their measures to enable the economy to weather the approaching storm are welcome. Whether it will be enough remains to be seen. 

However, as the chancellor pointed out, the coronavirus is not the only crisis facing our country. It has long been the strategy of successive governments to assume that in the long run, the disparities between regions in the UK, particularly with London, would equalise over time. As IPPR North’s own figures show, the UK remains the most regionally divided economy in the developed world. It has taken an electoral upturn to hammer this point home, but it does seem as if England’s regions finally have the attention of the Treasury.

Regional inequality isn’t just about numbers on a spreadsheet. It means lower incomes and fewer job opportunities for people living in the North and other regions, as well as different health and education outcomes depending on where you live. Today’s announcements, while welcome, will not necessarily lead to meaningful change in the quality of people’s lives.   

Take transport investment for example. IPPR North’s most recent independent analysis of transport expenditure based on Treasury figures shows that over the last ten years for which data is available (2008-2018) the average public spending on transport has been £739 per capita on London compared with £305 on the North. Worse still, the gap between London and the North widened by more than 2.5 times during the same time period. 

Indeed, IPPR North have estimated that if the North had received the same amount per person as London over the last ten years, then £66bn more would have been spent in the North. Today’s announcement makes grand claims about the billions that are being spent but this expenditure is long overdue and given the shortfall, the bare minimum that is required to close the gap.  

The Budget made much of its promise on new infrastructure spending. However, the government cannot simply build its way to a more equal England. ‘Levelling up’ also means rebuilding the foundations of our local communities through a restoration of local government funding. IPPR North have shown that public spending in the North has fallen by £3.6 billion in a decade, while the South East and South West have seen a rise of £4.7 billion.

Billions have been taken out of local budgets for health and social care, education and policing. IPPR North’s own research has highlighted how some of the most vulnerable have lost out. Take funding for special educational needs for example, which has been cut by 22% per pupil in the North of England since 2015 (compared with 17% across England). 

One positive move was the government’s proposed reforms to the Green Book, which could be the trigger for a more equitable distribution of resources across the UK. These reforms at last recognise the imperative to incorporate social and economic needs into Treasury calculations of returns on infrastructure investment. But as always, the devil will be in the detail, and long-term political commitment will be required to embed the policy in the highly fiscally conservative Treasury. 

The question of power lies at the heart of levelling up. Proper devolution for regions, towns and cities is essential if sub-national governments are to make decisions for themselves, rather than always having to wait for the machinery of Whitehall to crank into motion. We’ve started to see a general shift towards devolution but it has been slow, patchy and hasn’t gone far enough. The announcements in the budget about a new combined authority for West Yorkshire are welcome, but a long time in the making. With this announcement, 62% of the population in the North will be able to vote for a directly-elected mayor. 

Perhaps most disappointingly, we are still lacking detail on the government’s post-Brexit proposals for the regions, particularly on the Shared Prosperity Fund. How much money is proposed and how it is intended to be used will be very important in helping regions like the North to adapt and evolve in a post-Brexit economic landscape. 

The divides in our country are supposed to be at the heart of this government’s priorities for the future. The budget was a chance to level up public investment, to give regions like the North the opportunity to fulfil their potential. However, it’s clear from today’s modest offering that there is still much work to be done.