My Lords, your Lordships will be relieved to hear that, as speaker 65, I will sidestep the big issues of housing, planning and devolution —essentially what the Bill is about—and focus instead on the economics and funding of levelling up, on which the Bill has curiously little to say.
While most of us here support the concepts of levelling up and regeneration, the scope and ambition of the 12 missions requires massive long-term funding at a time when our public finances are severely squeezed. A word of warning: the world is littered with half-baked attempts to level up. In many countries these were politically inspired ambitions, announced around election time, which often led to underfunded, poorly executed programmes that were quietly abandoned, with billions of dollars wasted. That said, there are important examples where levelling up has delivered. Three are prominent: Leipzig in Germany, Cleveland in the United States and Nantes in France. Noble Lords will notice that I am citing cities rather than whole regions or countries.
As my noble and right reverend friend Lord Chartres and others have said, Germany is something of a poster country for levelling up, but let us remember its unique trigger—the reunification of east and west—and that it required more than €2 trillion in funding over 30 years. By contrast, the UK levelling-up fund is currently £4.8 billion over four years, together with the £2.6 billion shared prosperity fund, formerly the European Social Fund, and other schemes. Arguably, the total amounts to just about £2 billion per annum. That is barely 5% of the German run rate.
My first point is therefore: let us be realistic. Our levelling-up budget simply will not be able to fund an all-regions regeneration programme. It is 12 volts rather than 240 volts, as my noble friend Lord Stevens pointed out. We will have to adopt a selective clustering approach, and there will be winners and losers.
That brings me to my second point. Levelling up is critically dependent on the private sector. Indeed, the second mission statement says that additional government R&D funding will
“leverage … twice as much private sector investment over the long term”.
Could the Minister elaborate on that key assumption? I remind your Lordships that the private sector employs 82% of the UK workforce. Therefore, while you can relocate Civil Service jobs to the regions—and arguably should—sustainable economic regeneration depends on private investment, from SMEs as well as multinational corporations, across the service sectors, tech, food, engineering and manufacturing. In my experience as both entrepreneur and investor, the key question for most businesses is to do with the local workforce and the challenge of recruitment, training and retention of staff—quality and quantity, skilled and unskilled labour—especially in the tight employment market we see now.
Levelling up should focus on the relevant three Ps: people, productivity, and the private sector. That involves education, health, training and skills and, dare I say it, less emphasis on the other three Ps: places, property, and the public sector. Raising productivity in our poorer regions is crucial and a worthy objective. Wales,
the East Midlands, Yorkshire, Humberside and the north-east all lag behind London and the south-east in productivity by a disturbing 30% to 40%. It is no coincidence that R&D spend in all those areas runs at less than 50% of London’s. PwC estimates that there is a £72 billion upside in bringing low productivity areas up to the national average, but that will not happen on a £2 billion annual budget.
Let us be realistic. Given financial constraints, levelling up will not deliver for
“all people in all parts of Britain”.
We will have to be selective in targeting regions and cities that have the potential to close the gap in the eyes of both the public and private sectors.
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