Other countries have made progress in upgrading – here’s how the UK’s plan compares

The UK is currently one of the most regionally unequal countries in the developed world. The leveling up white paper outlines the government’s plans to address this issue through 12 “missions” to increase economic and educational opportunities in all regions.

The UK is far from the first country to try to “level” regional areas. Our research with the Chartered Institute for Public Finance and Accountancy examined similar efforts in France, Germany, Japan and the United States to determine what works in tackling regional inequalities.

We reviewed policies and interviewed policy makers, academics and third sector workers to identify the factors that led countries to successfully reduce regional inequalities. We focused on Fukuoka in Japan, Leipzig in Germany, Cleveland in the United States and Nantes in France. To use UK parlance, these are all cities that previously would have been considered “left behind”.

Leipzig, for example, suffered from mass unemployment and rapid population decline after the reunification of East and West Germany in 1990. Today, the city’s economy is one of the most dynamic in Europe.

Overall, there are ambitious ideas and goals to welcome in the white paper. But the UK’s race-to-the-top policy remains more short-term and less well-funded than in the cases we have studied. Here’s how the UK compares:

1. Long term investment

Our research revealed that high and sustained levels of funding are imperative to transforming city-regions. The 2030 target in the white paper means UK commitments are planned over an eight-year period. By contrast, despite high funding levels, it took 15 years for unemployment to start falling in Leipzig and another 15 years to bring it closer to the national average. This shows how upgrading is likely to be a long-term process. Cleveland’s flagship project to build community wealth and create a more inclusive economy is planned over a 20-30 year horizon.

Policies to tackle regional inequality in Germany totaled nearly €2 trillion (£1.69 trillion) between 1990 and 2014, while funding committed to the UK plan is meager. The white paper did not include any new funding, with financial support for the majority of the initiatives having already been announced. For example, of the £500m announced to support innovation in the Midlands, £400m for the British Business Bank appears to have been announced in the 2021 autumn budget.

2. Responsive Revenue Collection

Both Leipzig and Nantes have systems that allow funds to be redistributed between regions and cities to tackle regional and urban inequalities. They show how taxing powers can be designed to compensate for low tax revenue areas. But strengthening the tax-collecting powers of local and regional institutions was not proposed in the white paper, so their revenue-raising capacities will remain limited.

3. Key players

Cleveland’s experience shows that anchor institutions, such as hospitals and universities, can play a key role in upgrading. The city was hit hard by deindustrialization, which exacerbated issues such as racial segregation and high levels of poverty. The main anchor institutions work with municipal authorities and a philanthropic organization, the Cleveland Foundation, to support the growth of local communities.

They largely focus on procurement, that is, how services and goods are procured by government. The Greater University Circle initiative aims to change the way people are hired and services are purchased, in order to increase local spending and employment. More than 50,000 people are employed by the program, demonstrating the value of anchor institutions in stimulating local economic activity.

The Nantes experiences show the importance of ensuring that the purchasing teams, which are in charge of purchasing services on behalf of the municipality and the town hall, have sufficient resources.

The UK plan stresses the importance of anchor institutions to support regional economies, but questions remain about the extent to which government departments and other actors will work together to facilitate economic development. What weight will ministries and agents give to using public procurement for leveling if it differs from the lowest cost option?

Leipzig saw the benefits of successful leveling efforts in Germany.
Rudy Balasko/Shutterstock

4. Shared political will

The four city-regions we studied had stronger local and regional powers than comparable regions in the UK. For example, the German states, including Saxony, where Leipzig is located, enjoy competences relating to public health, public finance, education and planning. The Leipzig City Council has powers over administrative services, community integration, tourism, transport and the environment.

The deconcentration proposals announced in the white paper are a step in the right direction to increase the capacity of local and regional governments to put in place appropriate strategies.

However, although all regions are being asked to enter into London-style decentralization agreements with the central government, it is unclear what additional powers they will get. For example, will employment support and training budgets be decentralized? Substantial devolution of authority and resources will be essential if upgrading is to meet local and regional needs.

The UK white paper sets out a tight timeline, with limited funding to progress towards upgrade missions. While a comprehensive comparison is impossible, given the differing political systems and priorities, the government’s white paper could learn plenty from proven examples of the race to the top.

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