Heroes: The Myth of Levelling-Up 

 

‘In my life 

Why do I give valuable time 

To people who don’t care if I live or die?’ 

 
Just over 3-yrs ago I wrote a piece entitled ‘Why did Turkeys Vote for Christmas?‘ What I was trying to understand was what motivated traditional Labour voters in seats such as the ‘red wall’ to vote Tory. 

There was lots of contributing factors, the GFC, income inequality, Brexit, disillusionment with ‘establishment’ politicians, but the overriding theme was the promise of ‘levelling-up’. Of course, this came from the lips of a well-known liar, but the masses swallowed it. 

Why? Because they wanted to. They saw it as a V-sign to establishment. And, because they were naive and believed the promise, he had a throw-away charm, he was dishevelled rather than Savile Row, he spoke a ‘language’ they could understand. Or, they were simply desperate!   

In fairness the promise was made by Boris Johnson, who is, in his own way about as anti-establishment as an Old Etonian can be. However, he is first and foremost, a Tory. And, he was leading a party in hock to the libertarian, small-state, low tax, hard-right . 

These are essentially Thatcherites, the person who’s free-market policies finished off the industries that had kept many of today’s disenchanted in work. It was these policies that gave rise to the ghost towns. Which, leads to the question, whatever possessed them to believe a Tory was going to fund levelling-up? 

The situation is desperate; if the north of England were a country, it would be second bottom of a league table showing levels of investment in OECD advanced economies, according to a report by leading thinktank, IPPR North. Only Greece, which is still recovering from a sovereign debt crisis and its aftermath, has lower levels of public and private investment. 
 

‘whatever possessed them to believe a Tory was going to fund levelling-up?’

 
Marcus Johns, the report’s author, said; ‘Of all the advanced economies around the world, ours is the most regionally divided and getting worse – the north is at the sharp end of these divides and that’s a barrier to prosperity. But what’s even more unacceptable is that our country is divided by design. It is the result of decisions.’ 

As a country we don’t fare too well either; out of 39 we were 35th, with the imagined country of the north of England 38th. 

The report attempts to quantify the extent of inequalities in the UK. For example, it says productivity is about £7 lower an hour worked in the north than the rest of England. Hourly pay is £1.60 lower. 

One of the points the report stresses is the need for government to put into law the requirement for areas have equivalent living standards and strong political leadership. Carsten Schneider, a German politician, endorsed this saying: ‘If regions are drifting apart, it is bad for everyone, including for the growing regions, If a variety of regions flourish, the whole country will prosper.’ 

Andy Burnham, the mayor of Greater Manchester, said, ‘East Germany has seen long-term support and investment since the fall of communism – and it has worked. Cities in eastern Germany are now powering ahead of cities here in the north.’ 

The situation in Germany proves how successful levelling-up can be, it also proves why it will never happen in the UK. 

Directly after reunification, productivity in former East Germany (including Berlin) was at around 60 per cent of former West Germany, it is now at around 85 per cent. Whilst there is still a gap the former East Germany now has a GDP per capita higher than many parts of Northern England and Wales and has made great progress on employment and wage growth. 

The reason it won’t happen here is because it is estimated that C.€2 trillion was spent on the reunification project between 1990 and 2014, around £71 billion every year. By comparison, the UK’s levelling up fund is £4.8 billion in total.  

Funding aside, one of the key reasons for the success of the German model was that they completely transformed its centralised governance structure to a federal system with strong municipal self-government. Something similar is being proposed by Labour  

This focus on strong local government and greater devolution was accomplished by reducing the number of local councils. In 2001, the number of municipalities in former East Germany had dropped by 44 per cent, and by 65 per cent by 2017. This concentration replaced numerous, weak local authorities with fewer stronger ones, enabling  local government in former East Germany to play an important role in catching up with western Germany’s prosperity.  
 

‘the government doesn’t understand, or doesn’t want to understand the situation in the north’

 
The derisory amount of levelling-up funding aside, it is clear that the government doesn’t understand, or doesn’t want to understand the situation in the north. Last weeks round of funding handouts saw >£140m of funding  granted to six projects across Kent and Sussex  

Successful bids included £45m to improve the flow of traffic from the UK to the EU at the Port of Dover and £19m towards the transformation of the art deco De La Warr Pavilion in Bexhill. 

However, Eastbourne Borough Council’s leader urged ministers to ‘urgently rethink‘ after missing out on funds. He clearly doesn’t understand! 

This week, in Manchester, there is the Convention of the North. 

Michael Gove, the levelling-up minister, gave the keynote speech after which he met with Andy Burnham for just 15-20 minutes. However, he couldn’t be bothered to make time to meet with the mayors of the Liverpool, West Yorkshire, South Yorkshire or the North of Tyne. 

Dehenna Davison, a levelling up minister, was supposed to be appearing at the conference but cancelled because of ‘business in Westminster’. It is the second big northern event she has missed in recent months, following her absence from the Great Northern Conference in November. 

In short, this typifies the governments total lack of commitment. 

As Andy Burnham wrote, ‘Whitehall’s version of levelling up – where places have to plead on bended knee for funding and the names of winners and losers are handed down from on high – only confirms to many what is wrong with the way the country is run. Do they realise how they are coming over? I doubt it’. 

It wasn’t always this way, in the 19th century the great cities of the north built Britain’s wealth. Liverpool was one of the most powerful ports in the world; Manchester was the global hub of the cotton industry. These two cities pioneered rail travel. An illustration of Manchester’s economic and political power came in 1862 with the refusal of its mill workers to handle slave-picked cotton helped end the American civil war. 
 

‘hostile national policy, particularly towards industry and infrastructure’

 
The decline of these areas was driven by hostile national policy, particularly towards industry and infrastructure.  In the NE, heavy industry, such as coalmines, steelworks and shipyards all closed within a few short years. As a result, GDP per capita in the NE fell from 93% of the national average in 1981 to 73% by 2017. The biggest decline of any English region. 

One of Burnham’s proposals is to convert Greater Manchester’s funding into a single grant – similar to the way Whitehall funds Scotland and Wales. This would allow them to break out of the constraints of the departmental silos and deploy funding more flexibly. 

Of wider significance is the fact that it could create the first building block in a new funding settlement for the regions. If all areas were allowed to move to the same model, with a commitment to equal living standards hardwired into UK law, we would at last have an architecture to support German-style levelling up.  

The fact is that there are examples which show that devolution works. 

Jamie Driscoll has been mayor of the North of Tyne Newcastle, North Tyneside and Northumberland, up to the Scottish border for 3.5-yrs. During this time they have created 14 years’ worth of jobs, all paying at least the real living wage. Every £1 we invest returns more than £3 to the Treasury in payroll taxes alone.  
 
Another issue for the regions is foreign ownership of industries and utilities makes other people rich, E.G.
 

• Northern PowerGrid, which is owned by Warren Buffett, generates £125m profit each year on a turnover of £355m.  
• Northumbrian Water, owned by Hong Kong-based Li Ka-shing, enjoys similar returns. 

 
Local MPs and councillors have no power to change this. As Driscoll says, ‘until we get control of how we generate wealth, we’ll always be going to Westminster like Oliver Twist, saying: ‘Please, sir, I want some more.’ 

If we don’t take this seriously there will be repercussions. People cannot continue to be treated as free-market commodities, and, by dint of birth, be consigned to the scrapheap. We saw in America what can happen with the ascent of Trump. Yes, there was a few loonies, but the majority were working-class people who felt that the system had let them down. They bought into Trump’s rhetoric that he was on their side, he would make America great again, and the would all share in the spoils. 

This is little different to Hitler’s rise to power in Germany; extremism thrives on disappointment   

In a previous article, ‘Them and Us’, I quoted Marlene Engelhorn, a multimillionaire heiress, co-founder of campaign group’ taxmenow’ understands the implication of this inequality. The full quote can be found in that article, the bit that interest me is this; ‘If we care about the safety of democracy, about our communities,….?’ 

She gets it, frustration, desperation boils over, and the repercussions are frightening. 

Closer to home, the Guardian published an article based on a focus group organised by ‘More in Common’ covering the residents of Stoke-on-Trent. (2) 
 

‘frustration, desperation boils over, and the repercussions are frightening’

 
Constituencies in this area turned blue for the first time in years at the 2019 election, as voters, deceived by Johnson’s, believed that, with him as leader, the party could resurrect their working-class dreams. It is these same voters who could decide the next election. Levelling up, the phrase that defined the last election, is still only a myth. 

When asked to define the phrase one said ‘My guess it’s the government’s way of saying we’re going to try and bring the northern part of the country in line with the southern part.’ Another said: ‘It’s putting everyone on the same [wage] package … isn’t it?’ 
 

‘Levelling up, the phrase that defined the last election, is still only a myth’

 
The first respondent continued, saying, ‘I’ll be going somewhere different,’ [at the next election]. ‘I can’t abide by a political party that goes from one leader to the next without allowing the public a say on who’s leading our country. We’re not acting democratically. Also I’m very much aware of Sunak’s ability to manipulate the bankers and to make people [who want immediate solutions] happy with the right choice of words. But right now, the Conservatives have pushed me to think, actually why do I have to vote red or blue? If Labour’s not the answer maybe it’s time to give someone else a go. How much worse can it get when you’re at the bottom of the pit?’ 

Several things stand-out in his comments. The lack of democracy as the Tories play pass the parcel with the leadership. He clearly feels he is of no consequence, ‘at the bottom of the pit‘. He has lost faith in both main parties, ‘maybe it’s time to give someone else a go’. 

The last point is the one that frightens me. These people are not going to vote LibDem, its ReformUK for them. As I have written before, they could hold the balance of power after the next election. 

The right still marches. 
 

„Aufstehen 

Abstürzen 

Einstürzen 

In die Luft sprengen’ (3) 

 
Notes: 

1. https://www.centreforcities.org/blog/what-can-german-reunification-teach-the-uk-about-levelling-up/ 
2. https://www.theguardian.com/politics/2023/jan/25/he-doesnt-care-rishi-sunak-is-failing-nurses-and-nhs-say-voters-in-stoke 
3. ‘Stand up, Crash, Collapse blow up’ 

 
A double-header on the theme of inequality from Philip this week, and an article pretty much dedicated to the north/south divide. I suspect it’s difficult not to be thoroughly disappointed if you were one of those duped by hollow promises, but equally difficult not to be very nervous if you’re defending a Tory red wall seat.

What is shocking is that not only is the inequality great, and growing, it is all set against a country seemingly fading fast. So, what was Philip thinking?

‘The north-south divide is the one of the biggest, and most worrying divides. Whatever they might pretend this is never going to change under a Tory government. They are too well entrenched with vested interests, and besotted with tax cuts that it isn’t feasible to even contemplate it.

The fact that they are allocating levelling-up money to the South sums up how daft the whole thing has become.

Labour are well intentioned, but, under Starmer, they are light blue. He is so frightened of losing the election that he will forget to win it.

In my opinion this one strengthens my fear that ReformUK will hold the balance of power in two-years’ time.

This is underpinned by a simple truth, we are now a poor country. We can’t fund what we have let anything new. The thought of us getting anywhere close to €2trn is laughable. Even the €71bn annual spend in Germany is 14x greater than our total budget.

Lyrically, we start with the Smiths, and “Heaven Knows I’m Miserable Now”. Just perfect. To close we look to Germany and  “Krieg in den Städten” by Einstürzende Neubauten. Enjoy!’

 
@coldwarsteve
 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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