There are transformative moments in politics when the opposition gets gifted the political agenda. In the 1970s, it was the power of trade unions and inflation that gave the Tories control of the narrative, just as after 2008, it was the aftermath of the financial crisis. Today, Covid and Brexit have combined to make the condition of the people the number one political issue. The question of how to react to this threatens to overwhelm a Tory party that is divided between its libertarian wing and its one-nation advocates and whose leader is self-evidently unfit for high office.
It is a new transformative moment. The news last week that January inflation hit a 30-year high of 5.5% to produce the biggest cost of living squeeze for 60 years is the backdrop to a mounting social crisis. The pressure is reflected in a falling birth rate and stagnating, even declining life expectancy, desperately unfair life chances, disempowerment, justified post-Brexit economic pessimism and social neglect, all alongside phenomenal private wealth. Labour, for the first time in 15 years, has the chance to command the agenda and do to its opponents what was once done to it.
“Levelling up” is the talismanic policy that brings all this together. Boris Johnson, for all his glaring deficiencies, had the wit to see that. It was not his alleged campaigning genius or what the deluded Europhobes think is the compelling case for Brexit that won the 2016 referendum and 2019 general election. Rather, it was the massive disaffection of millions of working-class voters with the status quo. There had to be change and levelling up, whose need is reinforced by the lethal unfairness of Covid, represents his personal commitment to deliver the change.
Except, as the recent white paper on levelling up reveals in a way its drafters never imagined, this Conservative party cannot deliver. The first two-thirds of this at once intellectually exciting but finally disappointing document is among the best government analyses of Britain’s economic and social failings I have read. It is hard not to be impressed by the scrupulous marshalling of devastating data, ranging from the slow travel to work times to the disastrously higher prevalence of obesity in left-behind Britain – social science at its best. It recognises that the many self-reinforcing causes of this cruel inequality require numerous self-reinforcing responses. If the foundational framework it outlines is followed through, it could deliver, as the paper says, a generational £2.5tn increase in national output over and above whatever growth Britain might have otherwise expected. It is a fabulous national prize – except the last third of the paper demonstrates how far away such mobilisation is and the thinness of the government’s planned response.
For some time, economic theory has been moving away from the simplistic “market is magic” doctrines that defined the past 40 years, but the white paper’s opening chapter marks the first decisive official rupture with that orthodoxy. The new consensus is to focus on how the state must mobilise and integrate the six capitals – human, financial, intangible, physical, institutional and social – that together constitute the “six-cylinder” model driving growth and, in particular, catalysing the growth serendipities available in densely populated cities. This is the “Medici” effect, so called because of the growth of the culturally and economically vibrant city states of the Italian Renaissance. It is combining these “agglomeration effects” with the right amounts of the varying capitals, brought together by empowered, self-confident local leaders, which is the alchemy of self-amplifying growth.
No great economy can be built on a weak society; no great society can be built with a weak economy – and both need inspired local leadership. None of this is rocket science, even if it is a breakthrough for a Tory government, but it does require system change.
Chapter two calls for just that. It is scathing about the consequences of too much political centralisation, the constant chopping and changing of Westminster-driven policies – 40 policies between 1975 and 2015 to promote regional growth – and the bewildering plethora of at least 100 sub-scale mini funds and pots of money for which local authorities have to bid, often with wholly different criteria.
Instead, it argues there needs to be consistency over time, a massive streamlining of all the varying funds and a national consensus over interconnecting “missions” behind which the country can mobilise.
It suggests 12, ranging from spreading out the national research and development budget more fairly to targets for improved life expectancy. Progress must be regularly and publicly reported. Above all, by 2030, every citizen should have the opportunity of being led by a local, empowered mayor to make these missions happen.
So far, so good, then you hit the chapter on policy. The suffocating veto of Rishi Sunak’s Treasury is all too obvious. The imagination and verve disappear. Instead of streamlining all those sub-scale pots of money, the white paper boasts about them. Build up the British business and infrastructure banks to support local enterprise? Forget it. Serious transport investment so that journey times and frequencies match those of London? A joke. Search in vain for serious investment in the social infrastructure. New or repurposed institutions that might be decentralised to support the six-cylinder capitals’ growth model in all our localities? Conspicuous by their absence. The aim of creating one globally competitive city in each of our regions is noble – but over Sunak’s dead body. Nor is there any recognition that British capitalism itself is sorely in need of a makeover if it is to deliver its part.
This is where Labour could pick up the thread. The country is ready to rally behind genuine levelling up.
Money? Issue 100-year or even perpetual bonds to finance the vital capital spending. Create the institutions that will work with newly empowered mayors to revitalise our economy and society. Around the drive to net-zero, England from the Tyne to the Humber could reindustrialise around manufacturing windfarms, turbines, electric cars and batteries.
Get back into the single market and export those green manufactures into the EU. Economic prospects for the next few years are dire: a shrinking working population, diminished trade, squeezed demand and stagnating investment together with the risk of falling house prices as interest rates rise. Against that outlook, Britain cannot let that potential £2.5tn of extra output go begging. The narrative, the foundational framework and the prize are there for the taking. All that is required is the chutzpah and vision to go for it.