Inequalities of Region and Place — House of Lords, 2021-10-14
Topic: Macroeconomics
Jean Lesley Patricia Drake (Labour, Centre-left): My Lords, I compliment my noble friend Lord Stansgate on his maiden speech. The Prime Minister has blamed previous Governments of all hues for lacking the guts to tackle regional inequalities, but politics cannot outrun economics indefinitely. The UK’s regional and subregional economic inequalities are major, increasing and far greater than exist in most other democratic advanced economies. Their origins go back to before the Second World War and are deep-rooted, entrenched and complex. They accelerated in the 1980s as the country transitioned into a service and knowledge-based economy In 2020, the Industrial Strategy Council published a research paper, UK Regional Productivity Differences: An Evidence Review, which confirmed the complexity of the challenge. In the forward, Andy Haldane, its chair, observed that "reversing the cycle of stagnation is possible provided policy measures are large-scale, well-directed and long-lived." He added that "none of these conditions has been satisfied" but hoped that the report could "help the Government in designing and implementing a policy response equal to that challenge." Reflecting on those criteria, "large-scale" means the inequalities cannot be fixed in five years, or even 10 years, or with insufficient funding or competitive bidding against criteria not necessarily reflective of geographical need. As the National Infrastructure Commission observes, "Competing against other councils for multiple pots of cash creates a focus on the short term" and "continuing uncertainty". For many decades our productivity performance has been modest, and the major reason is the geographic problem. Geography is central to the solution, but in the UK we have so evidently not sufficiently addressed it. By comparison, Germany has been transferring about €70 billion a year for 30 consecutive years to level up the country internally Policies and resources need to be well directed. Increasingly informed commentary acknowledges that a new governance model is needed that is not just centralised on Westminster and Whitehall. The UK has one of the most centralised decision-making systems among OECD countries, but that brings inefficiencies when the UK is so economically imbalanced, resulting in national decisions made without a full understanding of their impact achieving different levels of success or impact, depending on geography. There needs to be greater decentralisation of decision-making and revenue collection, harnessing the understanding of need held by representatives, employers, universities and other key partners in different geographies Decentralising decision-making has to be backed by strong governance to ensure that it achieves what is necessary, and that will include building robust institutions, capacity and fiscal discipline in those geographies. Informed observers are also pressing the need to build a knowledge base of data, equivalent to that existing in many advanced economies, on the flow of public expenditure into regions, the quality and quantity of linked data and regional and sub-regional issues more generally. That could be utilised to make good policies, understand what works, measure evidence of success and define the need of a geography more objectively, mitigating the growing perception that the definition of need is becoming more political. I acknowledge the pioneering work the ONS is doing on its integrated data service Policies and strategic outcomes need to be long-lived, but that requires a broad consensus. Lack of policy continuity in the past and constant changes to institutions have contributed to regional inequalities persisting. The Government have announced a lot of funding initiatives, but it is unclear how they all co-ordinate. It is difficult to follow what flow of public expenditure will go to where, and for what. The Government have not provided the White Paper, the strategic plan, into which all those initiatives fit. We do not know the targets, the key milestones or the intended metrics for measuring success. We also do not have clarity on the governance model within which their plans will sit Finally, the decentralising of decision-making is extremely important, but it should be done in a way that does not prevent central government from discharging their role in directing and redistributing resources across the UK on the basis of need or common interest. We saw the importance of that central social role so clearly during the pandemic, and in response to large economic shocks such as in 2008.