Will new Levelling Up Fund round repeat ‘beauty contest’?

By Dr Nicola Headlam | 12 May 2022

The 12 missions set out in the Government’s Levelling Up White Paper have now been enshrined in law, following Tuesday’s Queen’s Speech.

Departments across government will now have legal duty to report on progress against key metrics of inequality.

Making levelling up a statutory obligation is clearly an important step towards it actually being delivered. But the environment in which the Levelling Up and Regeneration Bill has been brought forward underlines just how wide the gap remains between legislation and lived experience in those places that should benefit most from levelling up.

The gap between the North and South of England has widened in the two years since Boris Johnson became Prime Minister, according to recent analysis by Bloomberg.  Although there are some exceptions to this rule – notably in the North East and Greater Manchester – most areas have fallen behind London since 2019.

Of course, the pandemic – which had a more detrimental impact in the North than anywhere else in the UK (northerners were, on average, 12% more likely to die of COVID-19) – is an important factor. However this, alongside the cost-of-living crisis, spiralling inflation and a looming recession, shows how much further we need to go to make levelling up a reality.

Levelling up will not be delivered without strong local leadership, and it was positive to hear the Government renew its commitment to empower local leaders in the Queen’s Speech. As yet though, the reality does not match the rhetoric and nowhere is this more evident than in funding for local growth.

The latest round of the Government’s Levelling Up Fund looks set to replicate the ‘beauty contest’ model that still has not delivered for the most deprived communities, as the recent BBC Panorama programme, in which I took part, made clear.

Under-pressure local authorities will once again have to spend scarce time and money bidding for funds. And once again, those councils with the greatest resources at their disposal are most likely to come out on top.

In parallel, existing funding levels are being scaled back. The long-awaited UK Shared Prosperity Fund is also under fire. Although strongly denied by the Government, the Fund, which has been created to replace EU funding, will see several areas up to 40% worse off than they were previously. Likewise funding for growth hubs, which have provided a lifeline to businesses during the pandemic and, in many areas, are the only source of business support, have seen their funding slashed by half in this financial year.

What will this mean for local communities that have already lagged London and the South East for decades, that are already grappling with recovery from the pandemic and where residents are facing the twin threats of soaring living costs and a possible recession?

Many have argued that funding settlements to date have fallen far short of what is required to truly deliver on levelling up, citing the amount of investment ploughed into East Germany post-reunification, and the benefits this has created, as an example of the scale of funding required to reverse decades of structural under-investment.

With resources scarce and demands on councils increasing, access to quality data is key. Traditional macroeconomic data often masks what is happening in the real economy, whereas firm-level data can give councils, LEPs and growth hubs insights into how individual businesses and sectors in their area are behaving and put in place appropriate, targeted interventions.

One trend that needs discussing with much greater urgency is the imminent business insolvency crisis. Our Red Flag data on insolvency is tracking a record breaking high of 29,000 firms – well in excess of the previous high of 27,000 recorded in 2009, after the financial crisis. Insolvencies are disproportionately northern and Midland-based – yet again, those areas in greatest need of levelling up.

Businesses becoming insolvent of course means people becoming unemployed and the consequent impacts on town and city centres. This is a gloomy note on which to end, but if the Government doesn’t put in place measures to address the scale of the problem – and genuinely empower local areas to do likewise – the 12 missions now codified in law will not be realised.

Dr Nicola Headlam is chief economist and head of public sector at data firm, Red Flag Alert, and former Head of the Northern Powerhouse Unit within government.

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Business Legislation Data Funding inequality LEPs Coronavirus Levelling up
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