What does this budget need to deliver genuine levelling up?
In less than two weeks the Chancellor Rishi Sunak will lay out his plan to rebuild the economy in the Comprehensive Spending Review.
Levelling up must tackle the fundamental barriers at the root of the North-South productivity gap and, with this in mind, we have written to the Chancellor to outline our eight-point plan to rebalance the UK economy, including:
- Transport infrastructure
- Towns and cities
- Health devolution
- Industrial policy
1. Transforming the economy through major transport investment
Levelling up cannot be achieved without HS2 and Northern Powerhouse Rail delivered in full.
Building HS2 from the North downwards to meet up with Phase 1 and 2b is the next step, such as on the east from Leeds station to Clayton to complete a key leg of Northern Powerhouse Rail, as well as connecting the North with new line across Pennines and upgrades to improve capacity and frequency between Liverpool to Hull and Newcastle via Manchester Airport and new Bradford City Centre station. This is fundamental to realising the potential of the North and creating a more balanced country with the North pulling its weight in contributions to the Exchequer.
The continued delays to the publication of the Integrated Rail Plan, and the continuing rumours about the Eastern leg of HS2 being scaled back and downgrading of new lines on NPR, have led to uncertainty and a lack of confidence from businesses looking to invest, while at the same time investment is pouring into Birmingham where work is forging ahead. Committing to the Eastern Leg would create more than 150,000 jobs and stimulate investment from all over the world as we recover from the pandemic.
2. Levelling up education outcomes
Long-term disadvantage is the single biggest root cause of the educational attainment gap between the North and the rest of the country. The pandemic has accentuated this disparity, leaving those without the access to good schooling and digital support falling further behind their better off peers.
We need to reform Pupil Premium to better target funding for disadvantage by allocating more to pupils eligible for free school meals throughout their schooling, addressing the most entrenched barriers to social mobility.
Development of Opportunity Areas and their extension to include health and wider determinants of children’s life chances across the North, where partners from across the public, private and voluntary sectors can work with schools to tackle the multiple barriers faced by disadvantaged children on a daily basis, delivered in partnership with local and combined authorities.
We need to widen and deepen devolution across the Northern Powerhouse, whether in the form of metro mayors or county deals, giving our mayors the full resources for levelling up, including skills funding and housing.
Plans for North Yorkshire, Cumbria and the North Bank of the Humber are now starting to take shape and we want to see devolution deals explored in Lancashire, Cheshire and Warrington and the extension of North of Tyne to the south of the river to include Gateshead and Sunderland.
Backing three initial distinct but complementary innovation clusters across the North could kickstart major economic growth.
The Northern Powerhouse Independent Economic Review (NPIER) set out the routemap for securing the scale of productivity growth needed to be able to close the North-South divide. It identified four prime capabilities – advanced manufacturing and materials, energy, health innovation and digital – in which the North of England is already UK-leading and, with the right investment, innovation and collaboration, could be world-leading.
In order to drive growth in these capabilities, we need to create clusters of innovation across the North to generate maximum growth potential, including:
- Innovation Greater Manchester
- North East clean energy innovation
- Innovation South Yorkshire
We must also expand the catapult network across regions based on industry partnerships and clear Northern strengths – such as on advanced materials in Greater Manchester. This will enable accelerated innovation diffusion. The scaled up Made Smarter across the North is helping drive ‘deep digital tech’ adoption in the manufacturing sector, this driving productivity & wage growth. On a pan Northern footprint, we submit the case for Net Zero North innovation programme by the N8 group of Northern universities, focused on areas including the hydrogen transition with a linked skills programme in partnership with FE colleges.
Business Secretary Kwasi Kwarteng launched the government’s new Innovation Strategy at the AMRC earlier this year
5. A skills revolution
We launched the Northern Coalition on Skills at the end of August alongside businesses such as Co-op, Sage and WANDisco to work together to supercharge the skills agenda by building on the work of previous governments, including the apprenticeship levy introduced by former Chancellor George Osborne. According to our research, the number of people starting an apprenticeship over the past two years has fallen by 58,000, a drop of 19%. The impact has been worst in the North of England, where the number dropped by 23,000 – a 22% decrease.
We know that in order to increase productivity, and close the North-South divide, Northern businesses must be able to access a highly skilled, highly trained workforce which meets the needs of industry. In the aftermath of the pandemic, and within the context of the Government’s stated commitment to level up as part of the recovery, there has never been a more pressing time to reset the North’s skills agenda and institute wide-ranging, systematic changes to ensure the future prosperity of our businesses, towns, cities, and people.
Our objective is to restore the number of apprentices in the North to pre-pandemic levels with a higher limit on levels of levy sharing by large businesses, and to join up skills planning locally, utilising the existing close work between combined authorities and business, taking day to day delivery into areas to meet agreed shared outcomes. By default, skills funding where placers have capacity should be spent this way and not via national bureaucracies.
6. The future of towns and their relationships with cities
Our upcoming report into the economic performance of Northern towns will highlight that there cannot be a one-size-fits-all approach to the future of towns. Some towns owe their success to their proximity and strong mass transit links to a major city, such as the towns like Bury that make up Greater Manchester, others like Goole rely on the presence of one or more major industry but could benefit from better interconnectivity with their nearest core city, in that case Leeds (a business case for which has been developed supported by the Towns Fund).
The focusing of new catapults and wider innovation deals should be around linking assets, such as Newcastle University, with their towns with major businesses and investors undertaking R&D (such as in the case of Blyth and offshore wind, where the catapult has played a key role). New catapults, such as that proposed by us for Greater Manchester, can help re-create the success of the Advanced Manufacturing Park in Sheffield and Rotherham on major sites like Northern Gateway (near Bury and Rochdale).
There needs to be a place-based solution to kickstarting the economy of Northern towns that goes beyond physical infrastructure, recognising the unique set of productivity levers that allow these places to succeed or perpetuate their decline, with devolution deal based powers to address underlying population health and education issues which constrain economic growth.
At the level of neighbourhoods, we need to define overall minimum levels of prosperity and social capital to turn around every left behind place in towns or cities, driving up places to all be functioning for families at whatever point in the lifecycle. This means building trust, learning form the most successful towns like Bury, moving in the right direction with the backing of the council and Greater Manchester Combined Authority. They are turning around their most economically deprived places with both targeted services and wider regeneration, such as in Radcliffe, unlocking substantial housing delivery including affordable homes.
7. Health devolution and decentralisation
As we recover from Covid, we have the opportunity to build back our health systems in a way to improve patient outcomes and minimise centralised decision-making. Health should be improved by addressing entrenched inequalities in least well off areas to address overall gap between North and South. Levelling up health outcomes through locally-led, integrated health and care services would drive closing the productivity gap holding the North back.
According to recent data from the NHSA, improving population health would reduce the £4 gap in productivity per-person per-hour between the Northern Powerhouse and the rest of England by 30% or £1.20 per-person per-hour (generating an additional £13.2 billion in UK GVA).
We are calling for greater integration of services at a local level, the right approach for planned NHS reforms to offer patients a better quality of joined up local care. There is already evidence that this approach can have a significant impact on local communities, such as the devolution of health in Greater Manchester.
8. Industrial Policy with place dividends
We need to create the next generation of jobs and take advantage of the North’s assets and expertise to lead the country’s route to net zero. This should focus around the opportunity for Carbon Capture Use and Storage (CCUS), hydrogen and Small Modular Reactors (SMRs). The roll out of any further devolution should be tied to local priorities in the Plan for Growth – deals for North Yorkshire and the North Bank of Humber should be alongside CCUS and hydrogen production, linking major innovators like Drax to Teesside and beyond, and for Cumbria, to allow SMRs to be rolled out using the country’s expertise in nuclear and the well-established supply chain in cities like Sheffield at Forgemasters.
Working with businesses and organisations accross the North