By Rob Whiteman CBE, CIPFA CEO
We've entered a new decade and await the new budget, from a new chancellor. Regional inequality is an issue that has shot up the political agenda, underscored recently by the flooding that's affected communities throughout England and Wales, not least in Yorkshire's Calder valley. Government investment should bring growth and prosperity to local communities, yet increasingly many of these communities feel they are not getting their fair share.
The discontent in what have been called 'left behind' communities was evident following the recent general election – when the historic 'red wall' across the North and Midlands, seats traditionally held by the Labour Party, collapsed in a spectacular fashion. The emphatic rejection of decades-long political hegemony in these historically left-leaning, working-class areas sent the message that people are tired of being ignored by what they perceive as remote and complacent representatives, a sentiment echoed in the 2016 Brexit referendum.
The government under Boris Johnson has made some encouraging noises about 'levelling up' areas in the North of England and other parts of the country that have suffered from years of underinvestment – although their slow response to the flooding crisis calls this into question.
But let's give the government the benefit of the doubt: what can it do in practice? It’s right that special attention should be given to these regions. The budget next month offers the government a prime opportunity to reset expectations around where public investment is directed and take some meaningful action that could really transform those communities that have been left behind.
One of the reasons we see a spending gap between the regions in the UK is because of the government’s own frameworks for economic appraisal. This is set out in something produced by the Treasury called the Green Book, which provides guidance for officials on how government can most effectively finance projects and policies. Everything from major projects, like railways and motorways, to changes to taxes and benefits go through a Green Book analysis. Its rules currently work in a way that gives most of the immediate gains to London and the South East, because the method of appraising projects is based on the higher value of land in these already-affluent areas.
Reassessing the Green Book will help the government make effective and hopefully enduring changes to these rules for the benefit of the diverse groups of people throughout all regions of the UK. A revised Green Book will support an investment strategy that helps to rebalance the economy and spread the benefits of growth and prosperity more evenly across the country.
While reform is needed on the part of central government, there is evidence that local authorities may not be using the Green Book in the best way when they draw up their investment bids and submit them to civil servants for appraisal. Failing to use the Green Book to their best advantage means councils are losing out on opportunities for greater investment in their areas. Providing councils with resources to navigate the book more effectively could result in fewer projects falling through at early stages of the appraisal process.
Other ways public investment is judged also need to change. Transport projects for example tend to be appraised on how quickly they can be delivered, rather than how much value they will add to communities in the long run. Business cases need to be evaluated with greater consideration of the environmental, social and economic impacts – positive and negative – that could potentially arise as a result. If we continue to focus on short-term gains and quick fixes, nothing will change. We know that the government is already looking at ways of rewriting the Green Book to help boost the North, and this is encouraging, but it should be radical in its approach and consider a further set of policy levers. Regions could be economically empowered with greater control over council tax and potentially new revenue sources such as tourist taxes.
Further fiscal devolution may provide some of the answers to squeezed local government funding and would also create greater local accountability. Local authorities have been under immense pressure to provide the same standard and quality of public services while soaking up substantial spending cuts imposed on them by central government. After ten years of austerity, many Northern councils, as well as those around the rest of the country are confronting difficult questions about their future financial sustainability. Providing these councils with powers to raise more funds local themselves will help them put their finances on a more stable footing and allow them to invest and deliver for their local areas.
Levelling up the North of England and other underrepresented regions can and should be a priority when the government is making major investment decisions. This begins with a fundamental reworking of the investment rulebook – and some bold action on fiscal devolution – to ensure that those who have been left behind have the tools to catch up.
This article first appeared in the Yorkshire Post.