Time For Levelling Up: What Michael Gove's White Paper Will Say

Earlier this month the UK cabinet took a day out to focus on what 'levelling up' means.

That a brainstorming session should be necessary two years after the flagship policy was announced — and just a few weeks before a defining white paper is published — suggests the clouds of confusion that have dogged levelling up from the start.

The anger generated by this weeks' leaks about the government’s Integrated Transport Review hasn’t helped. Many in the regions believe the transport review will fail to deliver the infrastructure that economically backward areas need. If they are right, levelling up has been torpedoed before it even set sail.

So is government rethinking the economic future of the English regions, or is it lost and confused? In an effort to answer the question Bisnow has spoken to some of those who have the ear of Michael Gove, the recently appointed secretary of state for levelling up responsible for writing the white paper.

The main takeaway is that turning a casual slogan into a workable policy is nobody's idea of fun. The usual civil service solution — to borrow a policy from elsewhere in the world – would point to Germany. That is because reducing the gap in income and achievement between the north and London is a task on the same scale as reuniting communist East Germany with the democratic West after the fall of the Berlin Wall.  Unfortunately, deploying the full £2 trillion-plus German solution would send the Treasury into a meltdown.

It will also take decades, as the German experience also shows, where after 30 years of effort productivity in the east still lags the west.

Lots of time and lots of money is something Gove probably does not have. So what can he do that is quick and relatively cheap?

The German Example

The answer here may also come from Germany, where one of the most conspicuous engines of growth was the creation of strong, regional-city government. 

A few more Andy Burnhams, Ben Houchens and Andy Streets — respectively mayors of Greater Manchester, Teesside and the West Midlands — could be a cost-effective and appealing solution. Not only would it give local people control of the policy levers they need, but evidence (also from Germany) suggests city-regions are able to drive growth. Centre for Cities data shows that even poorly placed East German cities, if given serious power, attract more and better-paid jobs than equivalent English cities. This is the kind of evidence Gove is said to be lapping up.

If a dose of devolution is part of Gove’s plan, then it will win a round of applause from the property industry’s chief lobbyist.

“We’ve always supported devolution, and think combined authorities have worked and government should allow local authorities to take action themselves,” British Property Federation Chief Executive Melanie Leech said.

“We have consistently argued for greater devolution to local authorities — look at our work on town centres, and locally driven town centre investment zones which require local authority powers on compulsory purchase, retaining and attracting investment, and so on. Things like that feel to us like delivery mechanisms the government should be seriously considering because they can’t deliver levelling up from Westminster.

“If you want to deliver thriving regions, that will require action from the regions themselves. What Westminster needs to do is give regions the ability to drive their own agenda, with powers devolved from the centre. It has to have the courage to give those powers.”

Buses, Clusters And Other Good Ideas

Devolution on its own is unlikely to provide an answer and there are, in any case, other low-hanging policy fruit that Gove could choose to harvest.

Top of the list is probably buses. Improving bus transport would answer a long-felt need in many struggling towns and provides a tangible sign the government gets what matters to real people outside the London bubble: 57% of all public transport journeys are by bus.

Improving bus provision also plays to the devolution agenda: Mayor Burnham is the first English mayor to regain full control of bus services, and if the Greater Manchester experiment works, others will want to follow.

Focusing on intra-city rather than inter-city transport already appears to be on Gove’s mind. In a speech at the Conservative Party conference in Manchester he made pointed reference to the need to spread wealth and connectivity within city-regions, and the smart money is on reforms of this kind. It could open up new spaces for commercial property, particularly outside traditional city centres.

The same speech also mentioned skills, and here too the property industry will be ready to applaud.

“Long-term investment in skills and support that would forge better links between further education, universities and industry, would help to bridge the gaps between education and future employment opportunities," Knight Frank UK commercial research partner Darren Mansfield said. "This also further aids the creation of innovation-led economies.” 

An emphasis on skills opens the door to a renewed effort to foster industry clusters. Once again, Greater Manchester provides the model (along with Oxford and Cambridge’s science arc). The aim will be to create several overlapping clusters, not just a narrow focus on an area’s predominant source of employment. Occasional Gove references to the economic miracle of renaissance in Florence have been glossed as referring to this layered-cluster approach.

Why Science And R&D Spending Matter

This is where the government’s research and development spending becomes significant. Although Chancellor Rishi Sunak pushed plans to grow the R&D budget back to 2026-27, the fact remains that a £20B annual spend is to be maintained and will grow to £22B annually.

There is a large body of opinion, inside government and the property industry, who think this pot is the ideal tool to accomplish the expensive business of levelling up.

“Will the government wrap levelling up in bureaucracy, almost certainly," First Base Chief Executive Barry Jessup said. "Will they try to do things on the cheap, yes they will. But it’s the budget for research which provides the real opportunity. This is hard money and there are places you can put it that will drive growth away from the usual places which, frankly, don’t need any more stimulus,” Investing beyond the 'Knowledge Triangle' of London, Oxford and Cambridge will be a popular solution.

Jessup has his eyes on Milton Keynes where First Base has plans for a 220K SF office development and 35-storey residential tower, but he confesses there are many English towns and cities that could benefit.

“The government could target research money in ways that produce real levelling up if it can see beyond the traditional geography,” he said.

Going Nowhere Fast

The second big win for commercial property will be the white paper’s focus on high street regeneration. But this is also the policy area that generates the highest level of anxiety among property folk, who fear the return of off-the-shelf policy initiatives they hoped never to see again.

Top of the list of unwelcome potential initiatives is the 'City Challenge' style competition between local authorities, each bidding for a share of a government funding pot. This method of distributing resources has traditionally been popular with Conservative governments.

From the government’s point of view it imposes some discipline on local councils, whilst retaining a large measure of control (and hence political benefit) for the government.

From almost everybody else’s point of view it simply means lots of time spent preparing bid documents which, in the cases of the losers, is both futile and a distraction. It also tends to reward those best placed to produce bid documents rather than those who most need the help.

John Merry is chair of Key Cities, a cross-party network of 25 cities as diverse as Southampton, Salford, Norwich, Sunderland, Wrexham. He has been talking to Gove’s team and hopes for the best. But his big fear is that the government opts to distribute funds not on the basis of need, but on the basis of who is sharpest with PowerPoint. 

“The danger is that the civil service rolls out all the ideas they’ve had before, and we end up with not much new thinking,” Merry said.

“What we absolutely don’t want is a series of competitions in which each town has to waste time demonstrating to government how much better they are than each other. Rather than that, let’s put forward our plans and get into serious negotiations about what happens, but I suspect we won’t get that, instead we’ll get funds available after competition, which will be a total waste of time.” 

Merry’s view is widely shared in the property business, particularly among developers who (as local authority partners) are veterans of the bid-writing process.

The Choice

The levelling up white paper is due for publication before Parliament rises for Christmas. 

It could simply be another iteration of England’s never-successful regional policy, led from Whitehall, under-funded, and doomed to fail. There are plenty in the property business who fear exactly this.

Or it could mean a focus on local delivery, empowering regional mayors, spreading wealth within cities, and focused on creating overlapping business clusters with improved skills and R&D investment.

Within the next few weeks we will know which vision — the easy politically expedient answer, or the complex and expensive one — wins out.