{"id":31014,"title":"Get Out to Get on? Levelling Up the UK After Three Decades of EU Cohesion Policy","link":"https:\/\/bst-europe.eu\/de\/investment-budget\/get-out-to-get-on-levelling-up-the-uk-after-three-decades-of-eu-cohesion-policy\/","date":"6. September 2022","date_unix":1662446860,"date_modified_unix":1754482235,"date_iso":"2022-09-06T06:47:40+00:00","content":"

Britain’s new Prime Minister Liz Truss has pledged to continue the government’s „levelling up“ agenda, a set of ambitious policy proposals designed to transform the UK’s famously unequal economic geography. Three decades of EU cohesion policies, created for the continent with similar goals in mind, suggest that while funding is important, strong regional infrastructure is vital to tackle place-based inequality. This will be a challenge for the UK, which has one of the most centralized political systems in Europe.\u00a0 <\/em><\/p>\n

Striking a chord<\/strong><\/h2>\n

Levelling up \u2013 a manifesto pledge<\/a> to\u00a0substantially reduce geographical economic inequality in the UK \u2013 took a back seat in this year’s Conservative party’s leadership contest, which was instead dominated by the cost-of-living crisis and competing visions of which policies would best serve to alleviate it in the short term.<\/p>\n

This is unsurprising, given that after 12 years of center-right rule, the current combination of high taxes and low growth presents a frustrating contradiction to fundamental Conservative beliefs, which extoll the virtues of a small state, light-touch regulation and low taxes to enable a thriving economy and individual success.<\/p>\n

Yet both Liz Truss and Rishi Sunak, the two final candidates in the race to succeed Boris Johnson, were asked during the campaign to affirm their commitment to tackling regional inequalities in the UK with new dedication and vigor, often followed by polite (and sometimes less than polite) invitations to spell out the detail.<\/p>\n

The winner and new Prime Minister, Liz Truss, routinely obliged, stating, for instance, „What I want to do is make sure that everybody, regardless of where they live or where they come from, has the same opportunities across our country.“ More specifically, she has said \u201cI strongly believe that levelling up means broadening economic growth from beyond London and the South East and supercharging the North.\u201d<\/p>\n

Rishi Sunak, her defeated rival, who could nevertheless continue to play an important role in British politics, has equally blessed this ambition with „an unequivocal massive yes.“ Both have been less forthcoming on the minutiae of the policy, at least in the context of the leadership hustings. But what is clear is that the theme seems to have struck a chord and is unlikely to go away.<\/p>\n

„Stagnation nation“<\/strong><\/h2>\n

That „levelling up“ should resonate amongst the British public is borne out by the facts, best summed up in a recent assessment of the UK’s performance on economic productivity that makes for somber reading.<\/p>\n

„Having almost caught up with the economies of France and Germany from the 1990s to the mid-2000s,“ the Resolution Foundation reports<\/a>, „the UK’s productivity gap with them has almost tripled since 2008 from 6 percent to 16 percent \u2013 equivalent to an extra \u00a33,700 in lost output per person.“<\/p>\n

As for the societal effects of this predicament, income inequality in the UK was higher than in any other large European country in 2018, with a particular impact on those at the bottom of the income ladder: „Low-income households in the UK are now 22 percent poorer than their counterparts in France, and 21 percent poorer than low-income households in Germany.“<\/p>\n

The UK’s lackluster productivity has not only lagged behind other advanced economies since the global financial crisis of 2008 but also exacerbated the already considerable disparities in prosperity between UK regions and nations. According to the Resolution Foundation, in 2019, „income per person in the richest local authority \u2013 Kensington and Chelsea (\u00a352,500) \u2013 was 4.5 times that of the poorest \u2013 Nottingham (\u00a311,700).“<\/p>\n

Disparities in productivity across UK regions are even more striking than those in income, especially compared with European counterparts. „[Gaps] between the leading city and potential high-performing others are greater in the UK than in peer countries such as France (\u2026) London is 41 percent more productive than Manchester whereas Paris is 26 percent more productive than Lyon.“<\/p>\n

In short, a failure to tap into the economic potential of the whole country has resulted in significant disparities in both productivity and income, resulting in immense variations in living standards, ascribing to the UK an outlier status on regional inequality when measured against other advanced economies in Europe.<\/p>\n

The missing link<\/strong><\/h2>\n

„Getting Brexit Done“ and „Levelling Up the UK“ were the two central election promises of the outgoing Johnson government. But the links between the two hardly featured in public discourse, with assessments of how they hang together confined to expert circles.<\/p>\n

But hang together, they do. The EU spends more than a third of its budget on its Treaty-enshrined commitment to reduce regional economic disparities \u2013 i.e., levelling up \u2013 both between and within member states across the continent.<\/p>\n

This commitment originally stems from a desire to counteract the risks of liberalization that came with the creation of the single market, risks that were exacerbated by the energy crises of the early 70s and two successive waves of EU enlargement. Against this background, EU cohesion policy<\/a> developed a deeper political vision over the decades.<\/p>\n

The vision, regularly re-affirmed at the EU level, was to counteract dangerous territorial imbalances, by ensuring that „all EU citizens, independently of where they live\u2026 have an equal chance of benefiting from the opportunities created by the unification of markets and of avoiding the risks [that arise from such unification].“<\/a><\/p>\n

In the words of the Commission official long responsible for its implementation, „The idea is that the EU needs on the one hand sectoral and macro-economic policies and on the other hand a territorial development policy.“<\/a> The term \u201ccohesion\u201d entered the Treaties in the late 1980s \u00a0through the Single European Act.<\/p>\n

Standing to gain<\/strong><\/h2>\n

The UK received around \u20ac11bn between 2014 and 2020<\/a>, the last funding period of its EU membership, and stood to receive a further \u20ac13bn for the next seven years<\/a>, had it remained an EU member \u2013 a rise that reflects both growing regional inequality in the UK (by one estimate, new UK regions were likely to have been qualified for the highest level of support) as well as of the EU’s renewed dedication in pushing for more regional cohesion on the continent.<\/p>\n

Since its inception in the mid-1970s, the UK has received \u20ac76bn in funds from Brussels’s cohesion policies<\/a>, which amount to \u20ac115bn in total when the requirement of matching domestic funding is included. The UK was indeed a net beneficiary throughout much of the 1980s until its support package decreased slightly after the 2004 wave of EU enlargement.<\/p>\n

While the success of EU cohesion policy is notoriously difficult to assess, evaluations of the economic impact of EU cohesion funding in the UK are largely positive. Analysis from the University of Liverpool Management School points to „important achievements and genuine additionality“<\/a> despite the influx of EU money equating to an almost insignificant amount of GDP. For instance, one evaluation<\/a> of the 2007-2013 funding period pointed to the creation of 152,000 jobs and an increase of 0.1 percent of UK GDP.<\/p>\n

Of equal importance to creating new jobs, according to the University of Liverpool, is the central role of cohesion funds in „driv[ing] local economic trajectories\u201d in specific regions, such as in Liverpool, where EU funds have notably \u201cmitigate[ed] the significant socio-economic decline that has taken place since the 1960s\u201d<\/a>. This comes in addition to prominent local regeneration projects, such as the King\u2019s Waterfront, which comprises the Liverpool Echo Arena and BT convention centre, funded to the tune of \u00a37 million from EU structural funds<\/a>.<\/p>\n

Well-defined\u2026 <\/strong><\/h2>\n

So what can be made of the set of proposals designed to replace this form of regional support from the EU? Published in February this year, the UK government\u2019s White Paper<\/a> \u201cLevelling Up the United Kingdom\u201d in essence argues that geographical economic inequality can be countered by ensuring a more even spread of opportunity and investment across the UK.<\/p>\n

The proposals \u2013 some of which will be enacted in legislation \u2013 are prefaced by a wide-ranging analysis of the roots and causes of inequality in the UK (\u201ctalent is spread equally across the UK while opportunity is not\u201d) and why previous measures had failed (\u201cshort-term, lacked scale and coordination, hamstrung by a lack of data and effective oversight\u201d).<\/p>\n

It acknowledges that the UK has \u201clarger geographical differences than many other developed countries on multiple measures, including productivity, pay, educational achievement and health.\u201d And interestingly, \u201cdisparities are often larger within towns, counties or regions than between them. They are hyper-local and pockets of affluence and deprivation may exist in the same district.\u201d<\/p>\n

What also shines through the White Paper is a take on cohesion that goes beyond economic aspects, such as infrastructure and skills. Instead, there is a strong focus on intangibles, such as a need to \u201crenovate the social and cultural fabric\u201d of parts of the UK that have not shared its prosperity.<\/p>\n

The proposals flag the power of innovation and ideas and they go to pains to stress the significance of social and institutional \u2013 in addition to financial capital as a prerequisite for the envisaged \u201cvirtuous circle of agglomeration.\u201d Livability, then, is deemed as important as productivity.<\/p>\n

The proposals have won some praise amongst UK think tanks<\/a> for their ambition and comprehensiveness and for the government\u2019s state-of-the-art approach to measuring success, which centers around the achievement of 12 clearly defined \u201cmissions.\u201d<\/p>\n

Incidentally, this approach is reminiscent of the EU\u2019s Horizon programme, which adapted the concept of \u201cmissions\u201d to steer its \u20ac100bn flagship Research and Development. The term has been borrowed from NASA\u2019s Apollo program, which succeeded through focus and dedication in landing a man on the moon.<\/p>\n

\u2026 but hard to deliver<\/strong><\/h2>\n

Yet, unlike NASA in the 1960s, the levelling-up agenda is faced with a limited budget. As of now, the proposals will receive no new funding, with resources to be drawn from within the existing spending review, prompting accusations on the part of the Labour opposition<\/a> that the government is not only \u201ccobbling together recycled policies\u201d but also \u201cfiddling the figures.\u201d<\/p>\n

A closer look at these figures reveals the scope of the challenge. The UK, according to the Institute for Government<\/a>, has seen local government spending decline by 15 percent since 2009<\/a>. But the pain is not evenly spread. While the North East and North West of the country saw declines of 24 percent and 22 percent respectively, the South East, the UK\u2019s most prosperous region, saw a decline of only 12 percent.<\/p>\n

Against this background, meeting the objectives in the field of public transport, for instance, where the White Paper aims to bring local transport connectivity across the country \u201csignificantly closer to the standard of London\u201d by 2030, will require staggering amounts of funding.<\/p>\n

According to the IPPR<\/a>, another think tank, from 2009-2019, the North of England received \u00a3349 per person, while London received \u00a3864 from the central government. Filling the gap, according to rough estimates, would cost \u00a38bn over a decade. And improving transport is only one sub-section of 12 levelling-up missions overall. The Institute for Fiscal Studies points out additional difficulties in seriously costing <\/a>the project, not least because the policy overhauls required across the board will also come with a price.<\/p>\n

How vs. how much<\/strong><\/h2>\n

The UK government plans to replace EU structural funds with a new UK Shared Prosperity Fund (UKSPF)<\/a>, which, according to the last spending review, will build up to around \u00a31.5bn a year and \u201cat least match current receipts from EU structural funds.\u201d<\/p>\n

More qualitative assessments of the impact of EU cohesion policies, however, point to significant effects of the previous EU-inspired scheme that, in terms of long-term impact, could be more important than funding.<\/p>\n

At the heart of the EU\u2019s cohesion policy are so-called Regional Operational Programmes agreed upon between Brussels and member states. These are managed on a seven-year funding cycle, require domestic co-funding and, crucially, require all strategic programming to be based on the \u201cpartnership principle,\u201d meaning all levels of government, from EU to local, work together.<\/p>\n

Against this background, the University of Liverpool points out that \u201c[This] policy framework, often referred to as a system of multi-level governance, arguably provides sub-national authorities with increased opportunities to influence economic development policy at the European and national levels.\u201d<\/a><\/p>\n

According to this academic research, \u201cthe practices of managing funding [have become] embedded in domestic policy activities and governance structures\u201d in the UK, leading to the question whether such partnership structures \u201cwill continue to be integral in any future domestic regional policy interventions.\u201d<\/p>\n

The end of the UK\u2019s participation in the EU\u2019s cohesion policy does not only mean potential changes to the amounts of regional funding (the UKSPF was launched in April but has yet to deliver).<\/p>\n

More importantly, according to the University of Liverpool, it represents \u201cthe effective dismantling of a well-developed governance system of regional policy, built upon several key elements, including strategic partnership working, multi-level governance relations and transparent, long-term budget allocations.\u201d<\/p>\n

This reading is shared by former Labour Member of Parliament for Liverpool Riverside and former Leader of Lancashire County Council, Dame Louise Ellman. She points to the significance of regional structures successfully created in Liverpool, not the least for the purpose of administering EU cohesion funds: \u201cCreating a structure that brought local government together with the private and voluntary sectors was essential in devising and delivering a successful regional strategy.\u201d<\/p>\n

The elephant in the region<\/strong><\/h2>\n

The experience of three decades of EU cohesion policies in the UK highlights the need for an appropriate institutional set-up to make policies designed to tackle regional disparities work \u2013 in other words, a strong, political, regional infrastructure.<\/p>\n

The White Paper acknowledges this, admitting that in the past, \u201clocal leaders also lacked the powers and accountabilities to design and deliver effective policies for tackling local problems.\u201d Such an admission of the merits of devolution is significant, given the highly centralized nature of UK politics.<\/p>\n

The White Paper indeed sets out a new devolution framework for England, aiming for regional structures to be \u201cextended, deepened and simplified.\u201d Above all, every part of England is set to get \u201cLondon-style\u201d mayors and powers if they so choose. The proposals have been welcomed by the Local Government Association<\/a>, which is keen to \u201ctake forward a devolution deal.\u201d<\/p>\n

Yet, at the regional level, skepticism remains. The Heseltine Institute at Liverpool University, in an assessment of the government\u2019s proposals, points out carefully that \u201cwhile the commitment towards enhancing and stabilizing devolved structures across England is welcome, more work is required to ensure local and combined authorities have the tools and resources to develop local economies and establish the foundations for prosperity.\u201d<\/a><\/p>\n

And this is easier said than done. The UK has a long history when it comes to the search for appropriate regional structures that goes back more than 30 years. John Major\u2019s reforms in the 90s, which established \u201cGovernment Offices for the Regions\u201d<\/a> were followed by Tony Blair\u2019s \u201cRegional Development Agencies\u201d as well as a number of Regional Assemblies.<\/p>\n

Yet plans to strengthen these by devolving further powers from the Westminster Parliament were met with a resounding no in a 2005 referendum held in the North East of the UK, ending the \u201cmarch of regionalism\u201d in the English regions<\/a>, according to one assessment. David Cameron\u2019s approach of \u201cNorthern Powerhouses,\u201d another initiative to reposition the UK\u2019s economy away from London and the South East, was in turn stifled by his successor Theresa May.<\/p>\n

Levelling up, then, is the latest ambitious attempt in this direction. While much of the debate centres on adequate funding as a prerequisite for success, experience from three decades of UK engagement with EU cohesion policies suggests that good governance and administrative capacity \u2013 in other words, strong regional political infrastructure and local government involvement \u2013 are at least as important when it comes to combatting regional inequalities that stifle people\u2019s lives.<\/p>\n

This long-standing, thorny and deeply political issue will have to be resolved if the new Prime Minister and her team genuinely seek to strengthen the foundations that offer everyone, no matter where they live, a chance to thrive.<\/p>\n

About the author
\n<\/strong><\/p>\n

Jake Benford works on Bertelsmann Stiftung\u2019s Europe Programme, currently focussing on innovation and technology. He previously developed the foundation\u2019s work on impact investing.<\/p>\n

Read More on EU Cohesion Policy<\/strong><\/p>\n

A Smart Europe: Digitalization and Regional Economic Development<\/a><\/p>\n

A Green Europe: Regional Strengths and Weaknesses and the Green Transition<\/a><\/p>\n

A Fair Europe: Strengthening European Regions for a Just Twin Transition<\/a><\/p>\n","excerpt":"

Britain’s new Prime Minister Liz Truss has pledged to continue the government’s „levelling up“ agenda, a set of ambitious policy […]<\/p>\n","thumbnail":"https:\/\/bst-europe.eu\/wp-content\/uploads\/sites\/24\/2022\/09\/AdobeStock_486667284_KONZERN_ST-EZ_High_Res_99343.jpg","thumbnailsquare":"https:\/\/bst-europe.eu\/wp-content\/uploads\/sites\/24\/2022\/09\/AdobeStock_486667284_KONZERN_ST-EZ_High_Res_99343.jpg","authors":[{"id":29234,"name":"Jake Benford","link":"https:\/\/bst-europe.eu\/blogger\/jake-benford\/"}],"categories":[{"id":598,"name":"Investment & Budget","link":"https:\/\/bst-europe.eu\/category\/investment-budget\/"}],"tags":[{"id":202,"name":"eu","link":"https:\/\/bst-europe.eu\/tag\/eu\/"},{"id":263,"name":"European Union","link":"https:\/\/bst-europe.eu\/tag\/european-union\/"},{"id":448,"name":"Levelling Up","link":"https:\/\/bst-europe.eu\/tag\/levelling-up\/"},{"id":449,"name":"UK","link":"https:\/\/bst-europe.eu\/tag\/uk\/"},{"id":450,"name":"United Kingdom","link":"https:\/\/bst-europe.eu\/tag\/united-kingdom\/"}]}