Tory plans to ‘level up’ the north are laughably inadequate

https://www.theguardian.com/commentisfree/2020/feb/06/tory-level-up-north-regional-inequality

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There’s no sign of the huge sums of money that would be needed to redress stark regional inequalities, says Guardian columnist Polly Toynbee

Boris Johnson’s mighty pledge to narrow the gap between the richest and poorest regions in the UK is the policy with everything – except the monumental sums to make it happen. The National Institute of Economic and Social Research reports today that the amount suggested so far gets nowhere near: it is probably generous in thinking the process could be anywhere near done in a decade. Every government talks of doing it, but Johnson’s capture of so many northern seats gives him a mighty new incentive to “level up”, as the Tories now call it.

What would it take? Ask around the thinktanks and the list of requirements is encyclopaedic. This is akin to running up a down escalator as, due to the lost austerity decade, the century-old north-south gap continues to widen. The economies in the north and Midlands rely more on public services, so cuts hurt them particularly badly. Add to that the £12bn cuts to benefits, especially to tax credits, and low-wage areas suffered most.

Local government is drained of funds, and the places worst hit are the very same now promised investment: Liverpool has lost the most, West Dorset the least. Unless there is a screeching U-turn, the so-called “fair funding review”, which has been delayed once again, is set to take “deprivation” out of the measurement, substituting it with “rurality” and “sparsity of population”. That means taking cash out of poor towns and city districts and giving it to Tory shires. The same is already happening to schools.

Here’s the challenge. Andy Haldane, head of the government’s Industrial Strategy Council, warned in a report this week that regional inequality of income is at 1901 levels. Other European countries face similar regional problems, but ours are worse. Yet as a small country, in geographical terms, with most “left behind” towns within 30 miles of a hub city, we are better placed to correct this.

In terms of equalising regions, Germany is the stand-out success. With gigantic effort over 30 years, it has levelled up the east of the country since the fall of the wall. Having started far behind, the former East Germany is now richer than England’s north. “They spent 10 times more than the [British] government is proposing, on research and development, gold-plated universities and business support,” says Tom Forth, head of data at ODI Leeds, a specialist in regional policy. Germany did it by using cities as hubs: he points to those cities needing fast train, tram and bus services to local towns.

Symbolic, in a bad way, was Grant Shapps grandly announcing £500m to reopen the Beeching lines closed in the 1960s – that’s enough for 25 miles of track. Too many cities, meanwhile, Leeds and Bradford being the biggest examples, have no metro or tram network. Rectifying this will be costly. But now we know that HS2 will cost around £100bn, no sum can ever be dismissed as too expensive.

Rhetoric and promises are already running dangerously far ahead of any “levelling up” that people will ever actually see. Local funds to revive high streets, and fleets of fast, frequent buses could be quick wins, funded by taxing the online companies that destroy shops.

Sajid Javid talks of “human capital”, and how it is much needed in these areas. If he means it, then the budget should reallocate investment in people to the capital spending balance sheets, rather than current spending. That would allow generous borrowing for a surge in further education courses for all ages, which are as good for growth as pouring concrete. It would take 30% more just to get back to 2010 further education spending – and that wasn’t exactly nirvana.

Faced with the Bank of England’s gloomy forecast of 1.1% growth for the next three years, Javid’s wildly optimistic promise of 2.8% will need very un-Tory boldness. Will he turn Keynesian and borrow massively to invest, against approaching economic tornadoes?

Of course, one easy way to narrow the north-south divide beckons. The south’s wealth relies on the glittering gold of financial services. Brexit plans risk dealing it a hefty blow, sacrificing bankers (unpopular, but a huge chunk of our economy), for fishermen (popular, but negligible economically). The City sent up distress flares after Johnson’s Brexit speech on Monday, reminding him finance is “critically important”. Without it, expect empty Treasury coffers for all this levelling up. Levelling down may be what we get.

• Polly Toynbee is a Guardian columnist