How To Improve Regional Policy In England

Ten lessons from 20 Years

This is a guest blog by regional policy expert David Higham. It has been very popular since it was first published in December 2022 in my (now discontinued) Wordpress blog. I am repeating it here (a) for those who have not already seen it, and (b) so as to ensure that it remains available to new readers.

Henry Williams, a former Bishop of Carlisle, once said: “furious activity is no substitute for understanding”.  The 20 years that I spent on regional development as a civil servant based in the North West of England were certainly ones of furious activity; unfortunately, they were also ones of limited effect. For example, the UK2070 Commission found the UK to be the 28th most regionally divided of the 30 economies it studied.

Here are my ten suggestions to improve regional policy.

Stop looking for simple quick solutions to long term complex problems.

Regional inequalities are the result of major economic change – such as the decline of traditional industries, the globalisation of trade, and the rise of the knowledge economy – over decades, which have led to a vicious circle of inter-generational unemployment, low aspirations, low skill levels, and ill health. Addressing them requires sustained action across a broad front, at scale and over time. The tricky bit is that the actions required will vary both by time and by place; things that work in one place may not work in another and things that worked in the past may not work in the future. Furthermore, actions that make sense as part of a broader framework can risk making problems worse if undertaken in isolation.  Fiscal devolution favours already successful areas with their larger tax base. Planning reform increases the attractiveness of London and the South East. HS2 might make Manchester a more attractive place to invest but could also turn Manchester into a suburb of London.

Set clear objectives.

Don’t promise what you can’t – or won’t – deliver.  Traditionally regional policy has focused on reducing inequality in outcomes such as GDP. For example, New Labour had a target “to improve the performance of all regions and to reduce the disparity in growth rates with London and the South East”. Sometimes the objective is about reducing disparities in inputs such as transport spending per head. Johnson’s “levelling up” agenda added two further objectives: moving decision making away from London and the South East and tackling the decline in what is termed social capital or “quality of place” – boarded up shops and the loss of facilities like banks, police stations and post offices.

Better co-ordinate Whitehall activity

Regional development is about much more than industrial policy – it includes science, health, housing, skills, education and transport. But taking action across such a broad front is always challenging for Whitehall. The traditional response is to group as many activities as possible together in a single Department. Currently that’s the Department of Levelling Up, Housing and Communities (DLUHC). In the past, it’s been the various iterations of the old DTI under Heseltine and Mandelson, and the Office of the Deputy Prime Minister under Prescott.

But there remains the challenge of coordination across Whitehall.  The usual way to tackle this is by a Cabinet Committee/Subcommittee underpinned by cross cutting targets such as those in the LU White Paper.  Ultimately, however, success comes down to the political power of the minister charged with coordination. That’s why Heseltine, in No Stone Unturned, the report he did for Cameron in 2012, recommended a Committee chaired by the PM.

Stop reinventing the wheel.

As these charts show, regional policy has seen endless changes in both structures and policies.  Either, in isolation, is a problem. Together they make effective action almost impossible.

Learn from the past and preserve institutional knowledge.

We’re not short of evidence on what works in regional policy. There have been many innovative policies (Urban Development Corporations and the Single Regeneration Budget), institutions (Government Offices, Combined Authorities), and funding and accountability arrangements (Regional Development Agency Single Pot and the Regional Select Committees established by Brown). Yet, we seem determined to repeat less successful initiatives such as Enterprise Zones and Freeports. Moreover, in February 2022, the National Audit Office concluded that DLUCH “has not consistently evaluated its past interventions to stimulate local economies, so it doesn’t know whether billions of pounds of public spending has had the impact intended” For anyone familiar with the guarded tones of NAO documents that is a damning indictment.

The Coalition’s decision in 2010 to abolish Government Offices (GOs) and Regional Development Agencies without even a token attempt to capture the knowledge and experience of staff was nothing more than political vandalism. More forward-thinking bodies (such as the Greater Manchester Combined Authority) were more than happy to take advantage of what ministers clearly didn’t value.

Engage with people who have local knowledge in developing solutions

As Tolstoy might have said “Successful places are all alike: every unsuccessful place is unsuccessful in its own way”.  Barrow, Blackpool and Burnley all have the same problem – the decline of a dominant industry – but need very different solutions which can’t be designed and delivered by Whitehall. Any serious attempt to regenerate Blackpool as a leisure destination of choice must address the interaction between the benefits system and the local housing market, with its large number of Houses in Multiple Occupation in former small hotels/B&Bs.  Both Barrow and Burnley have opportunities in high tech manufacturing but issues with poor quality housing stock, and both need better transport links: rail for Burnley, and road and rail for Barrow.

Build a better relationship between Whitehall and local areas.

Not all decisions are best taken locally but all decisions would benefit from local input. Whitehall and local areas need to work better together. That requires change in both culture and in institutions. Whitehall needs to trust local government and any serious attempt to address regional disparities has to recreate something the GO network in England. Established in 1994, GOs brought together several departments in various locations under a single management chain. Interestingly, they were retained and expanded by New Labour. Relocating individual departments to single locations (such as DLUHC to Wolverhampton) is no substitute. The Treasury’s Darlington Campus, which does include other departments, is a more promising move (not least because HMT stayed apart from the GO network). But it is only in one location and, quite frankly, staff based in Darlington will have no more insight into Blackpool’s problems then those based in London.

Stop ignoring local government but address structure and capacity.

Local government ought to be at the centre of addressing regional inequality both because of the importance of local knowledge and because strong local institutions are crucial if areas are to marshal and utilise their assets effectively and respond to new opportunities.

In practice local government is far from this position. Its strategic capacity has been eroded (LAs are spending 40 percent less on spatial planning than they were in 2009) because it has struggled to deliver its statutory responsibilities as ministers have slashed funding and restricted its ability to raise revenue. The consequence of the latter has increasing reliance on investments in commercial business in the search for alternative revenues (by 2019 English councils had borrowed £6bn for this purpose, an approach – as Thurrock shows – not without its risks) and  bidding into a multitude of competitive funding pots. Local government in England is a patchwork quilt of unitary authorities, combined authorities and elected Mayors alongside traditional county structures with lines of accountability “more puzzling than a Rubik’s Cube”. (See, for instance, these governance structures in the Oxford – Cambridge Arc).

This is not a recipe for effective performance. Ministers must ensure that local government is coherently structured and address the missing layer of sub national government identified by the Redcliffe Maud Commission back in the 1960s, and reiterated most recently by the UK2070 Commission. Without this it is impossible to deliver effective strategic planning of things like energy, housing and transport.

New Labour came closest to tackling this issue with their proposal for Regional Assemblies. Local government funding needs to be put on a long term sustainable basis by moving away from short term funding settlements, competitive bidding into funds with centrally drawn criteria, and bilateral “deals”. Strategic capacity needs to be rebuilt. Heseltine recommended in No Stone Unturned that local authorities be given financial assistance and resources from the civil service to help rebuild the strategic capacity needed if they were to act as effective leaders in their areas. Perhaps predictably, neither recommendation was accepted.

Recognise that serious change requires serious – and consistent – funding.

Not everything in regional development is about money, but most things are. Fiscal devolution is desirable to bring decision making closer to people but won’t reduce regional disparities. That requires fiscal transfers and governments simply haven’t committed enough money to make a material difference. For example, at its height, the North West Development Agency had an annual budget of £400m to influence a regional economy of £120bn. In No Stone Unturned, Heseltine suggested a budget of £12bn pa spread over four years. The UK2070 Commission suggested £15 bn pa over 20 years based on the experience of German reunification. These sums need to be protected from short term political considerations.

Stop micro managing local authority funding.

Given the need for large fiscal transfers it is naive to expect Whitehall not to want to have a say in how those funds are spent. The trick is to develop an approach which maximises local input and local discretion and allows single pot funding. The model used by the European Commission for managing Structural Funds in England is one that could be used, as could the approach outlined in No Stone Unturned.  These would involve an open and transparent discussions between Whitehall and the appropriate level of local government on things like priorities, financial allocations and investment and evaluation criteria. Local government would then be left to get on with delivery without micromanagement. 

David Higham

David has also written a very interesting history and ‘lessons learned’ analysis of Government Offices for the Regions (b. 1994, d. 2011). You can find it here on my Understanding Local Government website.

Martin Stanley