The UK firmly remains one of the most centralised states in the OECD. Reflecting on successful regional policy in the UK and other countries, Alan Harding discusses what a new government would need to do to ensure a devolution dividend is realised and that inclusive growth is achieved both between and within UK regions.

As Chief Economic Adviser to the Greater Manchester Combined Authority I was asked one question more than any other whenever I celebrated the improvements the Manchester city-regional economy had experienced since the dark days of the 1980s.

‘This is all very well’, my inquisitor would begin, ‘but isn’t there a danger that Manchester will just become the London of the North?’

My answer, invariably, was ‘let’s hope so’.

My response was mischievous, but it made a serious point. If the jobs-rich centre of the North West’s biggest conurbation had wielded more than a fraction of the economic clout of London’s over the last forty years, we wouldn’t now be talking about the challenges that nearby ‘left behind’ towns face in transitioning to brighter economic futures. Greater Manchester’s Ashton-under-Lyne would function more like Acton, Bolton more like Bromley and Wigan more like Welwyn Garden City.

Escalator and fountain effects: Economic centres’ impact

Theory tells us that the big employment centres in major conurbations generate ‘escalator’ and ‘fountain’ effects. Their well-rewarded jobs offer in-migrants and residents alike the chance to escalate quickly upward along their chosen career paths. Then, when things like green space, affordable homes and good schools become more important to household plans, the fountain effect sees them migrate in search of a better trade-off between work and home life.

For all its recent job-creation, Manchester as a regional centre doesn’t drive prosperity across its own city-region, let alone the north of England.

In London’s case, the fountain mainly scatters people within an eighty-mile radius of Trafalgar Square. Around Manchester it serves southern city-regional towns and suburbs and leafy north Cheshire perfectly well, but head north from Albert Square and it quickly peters out. For all its recent job-creation, Manchester as a regional centre doesn’t drive prosperity across its own city-region, let alone the north of England.

Reducing disparities between places in England may therefore feel deceptively simple. We only need find ways of getting the same sort of comparatively modest but sustained productive public investment – in infrastructure, R&D, culture and high-level public service jobs – that London has enjoyed for decades into the Manchesters and Leeds’ and they will surely begin to refresh the surrounding areas that their ‘agglomeration economies’ have yet to reach.

Experience warns us, though, that escalator and fountain effects don’t work for everyone. Whilst the number of areas in London ranked amongst the UK’s most deprived has long been declining far faster than in the rest of the country, parts of Hackney are still just as poor as Harpurhey. And even in the Home Counties, there is more than one Clacton-on-Sea to match Collyhurst for deprivation.

We have spent forty years privatising and marketising the capacity and resources that are needed to face place-based challenges out of our public service delivery organisations.

Reducing disparities between people within places is more complicated and many of the challenges involved are tricky combinations of the national and the place specific. It clearly does not help, though, that we have spent forty years privatising and marketising the capacity and resources that are needed to face place-based challenges out of our public service delivery organisations. Markets work well enough for people and places of means, but hollowed-out public services cause people with fewest means to fall further behind.

Lessons from Germany: A model for balanced economies?

The good news for whichever party wins this year’s election is that better outcomes are demonstrably possible. The social science community has been painfully slow to understand it, but the current vogue for lionising Germany as a place that ‘levels up better’ demonstrates two things (beyond the banal observation that it has taken trillions of post-reunification Euros to turn areas of former East Germany around).

One is that powerful, autonomous and well-resourced subnational government, in Germany as elsewhere, is associated with more geographically balanced national economies, featuring many more thriving places than is common in countries with more centralised regimes.

The other, less remarked upon, is that a powerful system of resource redistribution between rich and poor places reduces disparities between people as well as between places. Hence federal, but highly redistributive Germany, along with non-federal but similarly redistributive Scandinavian countries, are more equal than the federal US and Australia, where subnational States are forced to fend for themselves. The Brits who helped write the post-war German constitution, with its commitment to ensuring equal living conditions across all Germany’s regions, knew this, just as they appreciated the dangers of centralisation. But even though post-war UK Governments were guided by the same decentralising spirit and presided over a unique thirty-year period in which regional disparities declined as sub-national governing capacity expanded, when the going got tough in the 1970s we forgot all about the design principles we imposed on others.

Rhetoric vs. Reality: Challenges in ‘Levelling Up’

What chance, then, that a new Government will start the long overdue process of building and rebuilding subnational governmental capacity and autonomy in England and strengthening the forms of fiscal redistribution that are proven to deliver in other countries? UK Governments have excelled in rhetoric; today’s ‘levelling up’ follows in the wake of George Osborne’s ‘rebalancing’ and the Blair Governments’ ‘reducing regional disparities’. They’ve been good, too, at setting long-term targets they won’t be around to be judged against. But all of them have been miserably poor at short term delivery.

Just over a year ago, the Brown Commission report made an excellent start to defining a series of constitutional principles that could begin to roll back the centralisation that has left the UK economy and society lacking resilience in the face of fundamental challenges. Since then, a vague Labour promise to introduce a Take Back Control Bill and some tentative independent calls for more fiscal devolution apart, we have witnessed precious little interest in turning a promising but incomplete blueprint into a fully-fledged set of reforms.

With party manifestos allegedly close to final draft stage, it is already too late to convince a sceptical British public with better things to worry about that their future lies in constitutional reform. Unless a new Government is prepared to put down a marker that it sees more effective and thoroughgoing devolution as key to future shared prosperity, however, it risks being blown off course by the tsunami of events it will inevitably face. Announce a review of how to make the Brown blueprint implementable and effective and there is every prospect that the search for the capacity to deliver Labour’s missions will produce practical evidence of the benefits of devolution in action during the next Parliament. And the opportunity to use the following five years to prove it works in theory as well as in practice.

A longer version of this article is due to appear in a ‘Capabilities in Academic Policy Exchange’ (CAPE) collection of essays edited by Professor Andy Westwood.

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

Image: Aerial view of Manchester City in the UK. Credit: Uldis Laganovskis on Shutterstock.