What levelling up policies will drive economic change?: The need for a long-term focus on skills and cities

Levelling up will not deliver the changes promised by Boris Johnson unless the next prime minister’s government is more ambitious in tackling regional inequality, finds a new Institute for Government Analysis paper.

What levelling up policies will drive economic change?: The need for a long-term focus on skills and cities says the government has pursued the right types of levelling up policies but at a scale which would only make a small dent in regional inequality. New analysis shows that levelling up missions on schools, skills, transport, broadband and R&D would boost GDP by £20 billion per year by 2030 but only reduce the gap in productivity between London and the South East and the rest of the country from 41% to 39%. This is enough to increase average annual wages outside of the South East by £400, but wages would still be £7,000 lower than average wages in the South East. 

The report draws on evidence and case studies of successful levelling up, including in Germany post-reunification, and is published alongside three Insight papers analysing what skills, infrastructure and innovation policies will work to boost productivity outside London and the South East.

With the UK’s longstanding regional gaps at record highs, rebalancing the UK economy means changing where people and businesses choose to live and locate. The IfG paper says the government should act on its levelling up mission to create a “globally competitive city in every region” by focusing big economic investments on cities such as Birmingham and Manchester, which have the biggest capacity to attract highly skilled workers and jobs but which under-perform economically.

The report also recommends that the government adopt more ambitious policies:

• A bigger expansion of adult education – to return course starts to 2010 levels, requiring a 500,000 increase over current levels – could increase GDP by an additional £8 billion per year in the long-term.
• More focus on early years and universities could both be sources of further economic gains outside London and the South East but are not currently captured by any of the missions.
• A more ambitious mission on R&D to ensure that the share of public R&D spending outside the South East increases

The report also calls on the post-Johnson government to commit to delivering the levelling up white paper’s ‘system reforms’ - which included missions, more policy evaluation and more devolution – to address a historic lack of coordination and consistency in UK regional policy.