Miles BenningtonOperations Director, Chamber UK
Even before Liz Truss’s policy announcement yesterday floating regional pay boards for civil servants yesterday. Levelling Up as a policy, if not a slogan was on shaky ground. Her hasty backtracking today may represent a stay of execution rather than a re-embracing of the Johnsonian mission statement.
The Lady is for Turning
Liz Truss yesterday announced that in a bid to save £8.8bn she would introduce regional pay boards linking civil servant pay to the areas they live in. Currently civil servant pay is set by a national pay deal, though there is a mechanism for topping up those in the capital via “London weighting.”
According to Jacob Rees-Mogg, a Truss supporter, existing civil servants would not have received pay cuts, but new hires would have their salaries set by local market conditions. His justification was “if the government is the highest payer, it then crowds out private sector investment.”
The plan however quickly received criticism, including from Tees Valley Mayor, Ben Houchen, a Rishi Sunak support who said it was “horrifically bad.”
This led to a U-turn today with the Truss team saying that the proposal will not be taken forward. The inevitable response from the Sunak team, referring to Truss’s penchant for aping the Margaret Thatcher was “the lady is for turning.”
The question hanging over the Conservative Party and Government more generally then, is if a potential Prime Minister, seen as a Johnson loyalist can allow such a policy of regional inequality to be announced; is the Levelling Up agenda long for this world?
What is Levelling Up?
Almost three years into a Conservative administration that promised in their 2019 manifesto to level up the country, it’s still a remarkably difficult question to answer with any specificity. The phrase is an answer to those who would criticise the Conservative record on inequality. Traditionally, the Conservative answer to those who demand redistribution is that they want to “level down” the country, reducing people to equal states of misery.
Presumably ‘Levelling Up’ then is the opposite. Bringing people who are currently down into line with those at the top. It takes extra meaning from the stark regional inequalities that exist in the UK. According to research from the Institute for Fiscal Studies, the UK is “one of the most geographically unequal countries in the developed world” across earnings, wealth, health, educational attainment, and social mobility. The London Metropolitan area generates approximately 1/3 of the UK’s GDP.
The Government’s own Levelling Up whitepaper states many aims including a falling gap in living standards between top performing and other areas closing, areas outside of London transport connectivity “significantly closer” to the standards of the capital and “Pride in Place” to rise across the UK with the gap between top performing places and least narrowing.
Despite being written by the independently minded Michael Gove, the Levelling Up whitepaper is clearly a document of the Johnson era. In this document there are few trade-offs only solutions. A Johnsonian tide will lift all boats, only the least fortunate will rise faster. The document begins with a short history of regional inequality, “As social animals, humans have always congregated in groups”, in case you were worrying that the lessons of Byzantium have been forgotten. The word “redistribution” appears once, and then only to reassure you that there will be no redistribution between places.
The UK’s next Prime Minister will not have the luxury of ignoring trade offs. The economy is unlikely to grow fast enough to allow everyone to feel better off and with rising prices caused by restricted supply, the poorest will feel their finances squeezed this year.
Can Levelling Up survive this leadership contest? Our exclusive op-ed from Rishi Sunak suggests there is hope yet for the agenda.
Though it will require some trade-offs, Levelling Up overall has the potential to be a net positive for the UK economy and society rather than a pure exercise in distribution. Investment in underperforming areas, particularly urban centres, can increase productivity. The identification and support of economic clusters, for example in Life Sciences, can lead to globally competitive centres of excellence. Investment in transport and other infrastructure can spread opportunity to those for whom it is currently out of reach.
Overall faster growth, as well as reduced pressure on the capital to power the UK economy has the potential to increase the living standards even for those people and in those places that are currently doing very well out of our economic settlement. To achieve such gains however the next Prime Minister will have to ask for contributions from the better off to fund these investments.
‘Tough choices’, is the usual phrase in politics. Whether we’re in for a new Lizabethan age or a broad Sunak uplands, the time of trade-offs has come.