For far too long our economy has focused on wealth, power and opportunity in our major cities, and this has come at the expense of industrial, rural and coastal areas. The result has been wealth and talent has moved from villages and towns in communities like Aberavon to cities. These communities have been hit hard by years of decline and job loses, while big cities have prospered, and this has left them feeling increasingly left behind.
This economic model is not working, it’s creating regional inequality. Industrial towns like Port Talbot are the heartlands of British manufacturing and to change the fortunes of these areas there needs to be a shift in the economy with an emphasis on manufacturing and fostering growth in UK manufacturing.
The Chancellor’s Budget did nothing to move beyond the city-centric economic model, something we desperately need to do if we are to tackle regional inequality and make a fairer Britain, which is what I spoke about in the Commons debate:
It is a pleasure to follow the hon. Member for Bolton North East (Mark Logan), and I particularly congratulate him on that bit in Mandarin, which was blatant showing off. Nevertheless, it was quite impressive.
As the country struggles to deal with a global health pandemic, the very structure and foundations of our economy are coming into focus. Today’s debate is an important opportunity not just to talk about how we deal with the immediate impact of the virus, but to consider the foundations and structure of our economy. We must build resilience. We know that this shock will not be the last that our economy faces, and we need to build an economy that is able to absorb and bounce back from future shocks.
The introduction of the Government’s so-called levelling up agenda reflects what many economists, politicians and commentators have recognised for many years: the gross inequalities that exist in the UK economy are, in no small part, down to where someone is born. Tackling regional inequality must be central to any strategy to create a fairer Britain.
In London, Britain plays home to the richest area in the whole of northern Europe, but the UK is also home to the five poorest regions in northern Europe, with west Wales and the valleys the poorest of all. In 2016, average incomes in London were 77% higher than the UK average, which is as staggering as it is unsustainable. We need a commitment from Government that they will bridge the widening gap between our cities and our towns.
The economic story of the past 40 years has been one of a job market that has shifted from manufacturing to services, boosting metropolitan cities, but leaving industrial towns bereft of opportunity, wealth, power, investment, and a sense of security. Workplaces have changed beyond recognition, with productive and meaningful industrial work evaporating, and high streets being ripped up due to rapid technological change. A winner-takes-all post-18 education system has whisked certain young people off to university, but delivered nothing for the individuals and communities left behind. All that has been compounded by a decade of self-defeating Tory austerity—a party that responded to seismic shifts in the global economy by treating industrial areas with a toxic mix of indifference and incompetence.
Now, for electoral reasons, the Conservatives have put levelling up front and centre of their agenda. They know that their success in keeping hold of leave voters in the north, the midlands and parts of Wales will be largely dependent on how they manage to transfer wealth and opportunity in those directions. That aim is worthy in itself, but will the strategy succeed when the motives are skin deep?
Let us look at the baby steps that the Conservatives made with this Budget. Commitments on improving infrastructure and devolving power to city Mayors are central to the Chancellor’s promises, but we get the sense that this Budget is really a continuation of the city-centric model on which the British economy is based, and which has failed our economy and country for far too long. There is plenty to say about Leeds; not that much about Leigh. Policies for Birmingham; pittance for Bassetlaw. As a country we must be far more ambitious in tackling regional equality, as well as the gaping chasm that exists between our towns and our cities.
The likes of economist Paul Collier, the Institute for Public Policy Research and the Industrial Communities Alliance have each identified important levers for the levelling up agenda. Across the board there is recognition of the need to focus on local political autonomy. Whitehall simply cannot plan the economy of a distant area; it must devolve more power everywhere, not just via piecemeal city devolution deals. We also need a locally based finance industry. It was a huge mistake for the Bank of England to force the merger of regional banks, because local knowledge is essential in knowing where to lend. We need locally organised business communities that work closely in lockstep with locally based college education. Local youth should be trained in pertinent skills, which in turn will help the surrounding firms. For example, German tertiary education has much stronger links with local business.
For a decade, the Conservatives have failed those who do not go to university. Far from reviving vocational education, the Government have poured money into universities which, as well as failing to defend free speech, have loaded students with debt, and too often failed to provide them with any significant return on their investment. That cycle must be broken and must change.
The Government must also support the clusters of industries emerging around the UK—steel and clean energy in south Wales, tech in Cambridge, chemicals in Hull and metals in Yorkshire, for instance. We need a comprehensive and integrated policy agenda. Investing in transport is important, but it will not suffice. A continuation of the city-centric model will lead to more social damage and increasing travel congestion, and will do nothing to green our economy.
The most critical part of rebalancing our economy has to be a commitment to a modern manufacturing renaissance. UK manufacturing has been in decline for decades, dropping from 30% of GDP in the 1970s to a meagre 9% today. That is very much a political choice; it is not an act of God. Germany’s manufacturing base has remained strong, at more than 20% of GDP, thanks to proactive Government support and a proactive industrial strategy. Its economy is more resilient as a result.
Of course, any UK manufacturing renaissance must be underpinned by a thriving UK steel industry. Steel is the backbone of the British economy. It is not a sunset industry but a 21st century industry that continues to underpin our entire manufacturing base, from defence to aerospace, and our everyday lives, from the houses we live in to the offices we work in and the trains, buses and cars we travel in—including the electric vehicles of the future. Steel jobs are well-paid manufacturing jobs, offering people in so-called left-behind communities real opportunities in life, yet the Chancellor’s Budget did nothing to address the sky-high energy costs that are crippling the steel industry—UK steelmakers pay 80% more for their energy than their French counterparts —or to tackle the extortionate business rates that are crippling our industry.
If the UK Government are serious about levelling up, steel simply must be front and centre of that strategy. Without its steel backbone, the British economy will not be able to stand up, let alone level up. There is still no word on the UK shared prosperity fund, which will replace EU development funding from 2021. The clock is ticking, but there is still no sign of the consultation on that fund, which the Government promised at the end of 2018.
Levelling up cannot just be a buzzword. Getting Brexit done is already starting to come unstuck, with the Prime Minister’s “oven-ready deal” seemingly stuck at the back of the frozen food section. The levelling up agenda must not be left to thaw, and neither must it come out of the oven half-baked. We need a whole-nation industrial strategy that actually reaches places such as Aberavon—one that goes beyond the city-centric model laid out in the Budget and begins to reunite our deeply divided country.