Boris should forget the levelling up agenda
Chinese style, big state interventionism is not the way forward for Western economies such as ours
It’s the Queen’s speech next week, with the Government promising to set the legislative stage for Britain’s post-Covid, “levelling up”, beyond-Brexit economy.
I’m not holding my breath. And nor should anyone else. For there is in truth no magic wand that can be waved, or levers the Government can pull, to make things better, especially when it comes to managing the economy in a way that delivers on Number Ten’s parallel “levelling up”, productivity, and zero carbon objectives.
I would go further, and suggest that the more interventionist approach the Government has all too plainly set its eyes on is almost certainly doomed to fail. We’ve been down that rabbit hole before, and it didn’t work.
The problem is endemic and deeply ingrained; confronted by almost any difficulty, we tend as a nation to look not to self help but to the Government for solutions.
The UK Government’s levelling up agenda is in itself a worthy enough ambition, but it has never been entirely clear what it even means, let alone how it is going to be delivered.
Step forward Neil O’Brien, the former Policy Exchange supremo and a veteran Downing Street adviser, now charged by the Prime Minister with giving it a degree of definition.
That’s not going to be easy.
As for equalisation, it’s never going to be anything more than an impossible dream. If all parts of the UK were as productive and prosperous as London, Britain would, in per capita terms and by some distance, be the richest major economy on the planet; there would moreover be no budget deficit, and no burgeoning mountain of public debt to weigh heavy on the land. The danger is that in attempting to level up, we merely level everyone down instead.
That risk is well chronicled when it comes to the Government’s flagship “free ports” policy, a key element of next week’s Queen’s speech. Rather than creating genuinely new enterprise and jobs, free ports all too frequently divert them from the rest of the economy instead.
Research aired in a newly published report by the Covid Recovery Commission finds that the pandemic has further deepened inequalities in Britain, from physical and mental health to employment and financial resilience.
Nor are these differences just inter-regional; many of the most disadvantaged live in the most prosperous areas of the country. The Government’s focus on “red wall” grievances may therefore in itself be misguided (my inference, not the Commission’s).
Chaired by Tesco chairman and former CBI president, John Allan, and including a top-drawer array of other business leaders, the Commission sets the goal of creating at least one new globally competitive industry cluster in every region and nation of the UK by 2030.
That would indeed be nice, but even as an aspiration, it is almost wholly meaningless and certainly isn’t going to be magicked up by a mix of “catapult quarters”, regulatory changes to unlock patient capital, “help to export” schemes and any number of other suggestions the Commission offers.
That’s not to argue that the UK Government should reject these proposals, only that they will not in themselves spark an industrial renaissance. The miracle of Silicon Valley in California didn’t occur because the US government wished it, nor was the success of the City of London down to deliberately pursued central government planning.
It is a long standing joke that the IT cluster that developed around Bangalore in India only happened because the government in Delhi failed to notice it; Bangalore succeeded despite the government, not because of it.
There is no great mystery behind what makes the US economy so dynamic. True enough, it is in part about critical mass, which the UK by itself can never hope to match. But it is mainly about simply creating an environment where business, enterprise, competition and markets can thrive.
By doing so, America makes itself a magnet for the best, brightest, and most inventive brains on the planet, hoovering up the available talent from Europe, the subcontinent and beyond. We used to call this the brain drain. To prosper, Britain has to offer some of the same attributes, including the freedom to profit unhindered by political and cultural hostility.
The UK is not going to succeed by fine tuning its state aid rules to the purpose of picking winners, investing in copycat enterprise, and supporting jobs in sunset industries.
The Government’s green energy agenda does admittedly hold some promise for job creation. Those jobs should moreover be well spread throughout the regions, given that the required transition requires nationwide investment in home installations, electric vehicle refuelling stations, and the like. That makes them almost perfectly suited to the levelling up agenda.
Unfortunately, all that green investment will also involve employment displacement in the hydrocarbon based industries it makes obsolete. As for Artificial Intelligenceand automation, these technologies are by definition going to be jobs destructive before they become employment creative.
It is delusional to think that China’s top down approach to economic success offers any kind of a way forward for the West; a country playing catch-up holds no lessons for a post-industrial economy such as the UK. Yet our rediscovered political fascination with big state interventionism suggests just such a strategy
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