February 3, 2022

What’s the point of levelling-up? The government’s white paper on the subject was published yesterday — to less than glowing reviews. 

But there’s a school of thought that its authors were doomed from the start. If you believe that geography is destiny then the North-South divide can’t be fixed. At best, the government can redistribute resources as a kind of consolation prize. Or, as Victoria Wood’s snooty continuity announcer once put it: “We’d like to apologise to our viewers in the North — it must be awful for them.” 

Except that the lesson of history is that geography is not destiny. Time and again, we see examples in which the relative fortunes of different regions draw level, or even reverse altogether. Take Belgium, whose Northern and Southern halves are distinguished by language as well as location. 

For many years, Flemish-speaking Flanders was poorer and less powerful than French-speaking Wallonia. Following Great Britain, Belgium was the second country in the world to industrialise — but because the coal deposits were concentrated in Wallonia, it was a lopsided revolution. The Walloons weren’t just part of a larger linguistic zone — they dominated the economy too. 

All that changed with de-industrialisation. For the Flemings, the cultural and political dominance of the French-speakers was always hard to swallow — but once the latter began demanding subsidies, it became unbearable. Today, Belgium is a rare example of a country in which the ethnic majority has separatist tendencies. 

But perhaps the industrial revolution was a unique moment in history that gave early adopters a one-off boost which then faded away. Certainly we see shifts in the geographical distribution of power and wealth that are too big and began too early to be explained by coal deposits or anything like that. Look at the whole of Europe. In classical times, the Mediterranean was where it was at. Ancient Greece, followed by Ancient Rome, were the dominant powers. To the north lay the abode of barbarians — to be civilised at the point of a sword or walled-off behind fortifications.

And yet long before the industrial revolution, the balance between the Europe of wine and olive oil and the Europe of beer and butter began to swing the other way. There was an intermediate period in which the south held its own — for instance, the Renaissance had an Italian origin and Spain and Portugal pioneered the Age of Exploration. But by the time of the Enlightenment, it was clear that the future of Europe — indeed the whole world — would be shaped in northern cities like London, Paris, Berlin and Moscow

Of course, I’m describing a mega-trend that unfolded over centuries and millennia. A conscious policy of levelling-up needs to show progress over a much shorter time frame — decades at most. So do we have any examples of that happening?  

Michael Gove, the Secretary of State for Levelling Up, looks to the Republic of Florence for inspiration. Under the rule of the Medici family, the city-state became the birthplace of the Renaissance. As Gove himself makes clear, there’s a wider range of reasons for its success than the Medicis’ famously lavish patronage of high culture. Nevertheless, a key part of his levelling-up strategy is to redistribute arts funding from London to the rest of the country. 

For a more recent — and more significant — example we need to look east. When the Iron Curtain fell, it revealed a profoundly unequal continent. The ex-Communist countries are still much poorer than the countries of Western Europe, but the extent to which they’ve levelled-up has been impressive. Indeed, in recent years we’ve seen the richest parts of countries like Poland and Hungary overtaking the poorest parts of the UK — much to the horror of British tabloids. 

But from a British perspective, the most relevant ex-communist state is the former East Germany. That’s because since reunification, the story is one of levelling-up within the same country. 

It’s not been a total success. After three decades of living together, the East is yet to catch-up with the West. But, again, there’s no denying the progress made. Immediately following reunification, economic output per head in the former East Germany was only 60% of that in the former West Germany. It’s now more like 85%.

This has produced a sobering outcome for the British. The fact is that, today, most of East Germany is as rich or richer than most of northern England. Data analyst Tom Forth illustrates this by comparing the English region of Yorkshire and Humberside with the German state of Saxony. At first sight this might not appear to be a fair contest. Saxony had a pretty rough 20th century: in the post-war period it passed from Nazi to Communist rule — until, that is, the Berlin Wall fell and East German industry collapsed.

And yet since 1990, Saxony hasn’t just caught up with the Yorkshire region, it has overtaken it. The crossover point was around 2010. By 2017, GDP per head was €28,000 in Saxony compared to less than €25,000 in Yorkshire.

So what can we learn from the German example? Well, there’s one thing that stands out — but, for a Conservative government, it’s rather awkward: the Germans spent a whole heap of money. According to Kathrin Enenkel of the Centre for Cities, the total sum between 1990 and 2014 averages out at £71 billion a year. She puts the UK’s levelling-up fund at £4.8 billion in total.

Of course, the German challenge was much bigger. After 45 years of democracy versus communism, there was a lot to be levelled-up between the two Germanies. But even if we focus on the policy areas that are relevant to the British situation, it’s obvious that we’ve been out-spent. To return to the Yorkshire example, Forth puts the level of government funding for R&D at €150 per head per year. The figure for Saxony? €450.

It’s encouraging that today’s white paper includes a promise to increase R&D funding for the rest of the country beyond London and the South East. But by how much does it intend to boost the total? Just one third. The Yorkshire-Saxony comparison would suggest that’s simply not enough. 

Transport is another area in which south-eastern England gets the lion’s share of public funds. So how much levelling-up can we expect from the Government here? Again, not much. In recent months we’ve seen funding for the “Bus Back Better” initiative slashed; the Northern Powerhouse Rail project has been downgraded; and the eastern branch of HS2, which would have run to Leeds and Sheffield, has been chopped. Meanwhile in Saxony, the city of Leipzig has been part of the German high-speed rail network for years. 

The problem with the white paper, then, is what’s not in it: ambition and a sense of urgency. Levelling-up the land is not an impossible dream. The lesson of history is that economic miracles do happen — but only if you put in the investment.