In politics, the year just gone will be remembered for a number of reasons. It recorded a change of prime minister, a spell when the executive lost control of the parliamentary agenda, and a general election. One thing it won’t be remembered for is its budget: 2019 was the first year since the Napoleonic wars that there was no big day out for the chancellor of the exchequer.
By the time Sajid Javid stands up in the House of Commons on 11 March it will have been more than 15 months since Philip Hammond delivered the last budget. For those who can’t remember – most people, in all likelihood – Hammond’s main announcement was extra money for the NHS.
Javid is under pressure to do what Hammond – and few other chancellors – have ever managed: to deliver a budget that really counts. Boris Johnson owes his 80-seat majority to voters in the Midlands and the north of England wooed with promises of action to sort out the UK’s lopsided economic geography. And if the government is to deliver on its pledges there is no time to delay, because the task it faces is formidable.
That’s not to say that the focus on levelling up the regions is unwelcome. The fact that only three regions – London, the south-east and the east of England – contribute more to the Treasury coffers than they receive, speaks volumes. Nor is regeneration impossible.
But many of the seats that voted Conservative for the first time in living memory on 12 December have been struggling for decades. The idea that they can be turned round quickly is for the birds, which means Johnson and his ministers need to be careful of raising expectations that cannot be met.
That’s because it is a lot easier to identify the problem than to come up with the solution. The Conservative political narrative is that Labour paid the price for neglecting its “red wall” seats and allowing them to rot, but this is not really true. Labour has seen its dominance eroded in some of Britain’s industrial heartlands not because it took voters for granted but because the policies it tried failed to work, especially in the smaller, more isolated, towns.
Stian Westlake, the director of Nesta, the UK’s innovation foundation, made this point well in a recent blog. The government has been giving the impression that the failure in economic development in the less prosperous parts of Britain is simply a matter of political will, when really the issue is that no one is sure what policies work, or even if such policies are possible.
For Westlake, the starting point is to recognise four big themes. Firstly, Britain is not unique, because towns in every developed country are becoming less productive relative to cities. Secondly, UK cities are less productive than their counterparts in France, Germany and the US due to poor transport infrastructure and a dearth of investment in skills. Thirdly, over a prolonged period the UK has invested less in both physical capital and in research and development. Finally, the planning system makes housing prohibitively expensive for people who might want to move from less prosperous towns to places – Oxford, Cambridge and London, for example – where they have a better chance of finding high-paid jobs.
Spending cuts since 2010 have made the situation worse. Faced with the need to save money, a variety of public bodies – from councils to the NHS and police authorities – have tended to close facilities in the same places, which are those most remote from urban centres. Once the police station, the swimming pool and the hospital close it is not long before the shops start to close too.
But austerity has merely provided a cyclical twist to a deeper structural trend, exposing problems but not causing them. Likewise, an end to austerity does not mean the problems magically go away.
There are smart people around Boris Johnson who get this: Dominic Cummings for one. In a pre-election blog, the PM’s special adviser directed his followers to a paper that had ideas for “changing our economy for the better”. The paper in question is not a free-market tract but was written by Richard Jones, professor of physics and vice-chancellor for research and innovation at Sheffield University.
There is not a lot that is earth-shatteringly new about what Jones has to say. He proposes spreading innovation from the golden triangle of Oxford, Cambridge and London to the rest of the country. He thinks Britain is failing to bring its good scientific ideas to market. He wants more attention to be paid to skills and the creation of clusters of expertise.
Jones accepts that Britain is so far behind rival countries in some sectors – solar panels for example – that it will never catch up. But he says the way forward is to boost spending on research and development and direct it at industrial sectors where the UK has existing strengths. Britain needs to make the transition to a low-carbon economy and there is scope, he says, to build industrial capacity in wave and tidal power in Wales and Scotland, in wind power in Scotland, Northern Ireland, and in energy storage and electric vehicles in the West Midlands.
Make no mistake, this sort of approach involves no quick fix. It will be a long process and the main beneficiaries will be the big regional cities, with satellite towns benefitting through a process of industrial trickle down. The noises from the government suggest that ministers intend to deliver for their newly won constituencies. The budget will show whether they mean it.
