Monday 30 November 2020 7:01 am

Got an idea to supercharge growth in left-behind Britain? Your country needs you!

Annabel Denham is director of communications at the Institute of Economic Affairs

A lot has changed since the nation last went to the ballot box. 

A generation will never again take freedom for granted. The national debt exceeds 100 per cent of GDP. Lives have been lost, attainment gaps have widened, dying industries have been dealt a coup de grâce.

But in one area the narrative has remained the same: levelling up. 

In economic terms, the UK remains two countries: a prosperous enclave in London and the south east, with a high performing economy that compares favourably on measures such as GVA per person with the richest parts of Europe, and the rest of the nation which, minus a few hotspots of urban success, lags far behind.

Successive administrations haven’t neglected northern towns. They have repeatedly failed to come up with effective solutions to reinvigorate large swathes of the country, throwing good money after bad in the belief that investment alone can somehow make the north more productive.

And nothing in this government’s recent announcements — the Prime Minister’s spending splurges awkwardly adjacent to the chancellor’s stark warnings last week that the “economic emergency has only just begun” — instils confidence that it grasps the problem, let alone the solution. 

It is hard to imagine that the £4bn Levelling Up Fund, unveiled at the Spending Review, will make much of a difference. Money alone will not fix the deep structural challenges of regional inequality.

The near-stagnant productivity growth that we have witnessed over the last decade has amplified the importance of agglomeration effects: the economic benefits we get when people are closer together. This usually means that larger cities will be more productive and richer than sparsely populated areas — and indeed this is what we see in Germany, France, the Netherlands or the US. 

But in Britain, only London really benefits from agglomeration — especially in financial services — and as a result it is a highly productive outlier to the rest of the nation.

One solution to Britain’s productivity puzzle would be to liberalise housing policy and allow more people to move to the south east. We have historically always had population movements, and freeing up housing supply would make it easier for motivated workers to relocate to London — or indeed anywhere that the jobs are.

But we can also bring agglomeration benefits to smaller towns by making it easier for residents to commute to more prosperous cities near them. The advantages are plain to see from London’s satellite towns spread across the south east — areas that prosper thanks to their proximity to an economic hub.

Yet local transport networks outside the capital are slow and under-developed. Residents near Manchester, say, find it far more difficult to capitalise on the city’s economic prosperity than those in Harpenden would for London. 

Scrapping the white elephant that is HS2 and putting those funds towards improving transport would not only bring benefits to commuters, but to the towns themselves. More people, more money, more opportunity — and therefore more regional equality.

And that’s just the start. One silver lining of the pandemic has been the national awakening about the viability of remote working. While the dizzy headlines about a wholesale shift to full-time home workers are misleading (only a minority correspond to the popular image of employees sat at their “home office” computer), the technology we’ve all become so familiar with could enable employers to choose from a larger pool of talent than they ever considered before and attract workers from regions where the cost of living is lower. Measures to inhibit the remote working trend, such as Deutsche Bank’s ill-conceived five per cent tax on a home worker’s salary, should be resisted.

More futuristic technology, like drones, virtual reality or self-driving cars, could have a similar effect, shifting the economic centre of gravity away from London. 

These are just some ideas to explore and address the issue of national renewal. And they’re the obvious ones.

But today, we are launching the Richard Koch Breakthrough Prize 2020/21 — an essay competition that carries a first prize of £50,000. If you have pro-market, pro-enterprise policy ideas to supercharge growth and employment in left-behind Britain, get typing.

Policymakers have failed to get to grip with the levelling up challenge. We’re counting on you to do better.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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