'The Levelling Up Bill is hugely disappointing. It is big on hype and allusions but with no real policies or resources'
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
Unpopular governments deflect attention away from their failures by coining new slogans and making promises that they think people want to hear. In the case of the UK government, the slogan is ‘levelling-up’.
The government has actually introduced a Bill with the deceptive title of “Levelling-up and Regeneration Bill”. It promises to “reduce disparities between regions and within regions of the UK across economic, social and environmental measures”. The aim of the measures in the Bill is to increase living standards: pay, employment and productivity, healthcare, life expectancy, investment in housing and infrastructure, public services, research development; decentralise decision-making, and empower local communities.
That sounds good, but the government has done the opposite for the last 13 years. It has cut real wages, pensions and social security benefits. The average real wage is now less than what it was in 2007 and is falling at the fastest rate for two decades. Last year, FTSE100 CEOs secured a median pay rise of 39%. Some 7.2 million people are waiting for a hospital appointment in England. Life expectancy is declining. In Blackpool, average life expectancy of males and females has shrunk to 74 years and 79 years, considerably lower than other regions.
Even with the recently announced increase, spending per pupil by 2024 will be 3% below 2010 levels in real-terms.
Tax laws are a huge contributor to individual and regional inequalities. For example, capital gains are taxed at the rates of 18%-28%, compared to 20%-45% for earned income. For the year 2020-21 capital gains tax (CGT) of £14.3bn was paid by 323,000 taxpayers on £80bn of gains. The biggest winners from the low CGT rates live in London and the south-east of England. Indeed, numerous policies prioritise London and the south-east and neglect welfare of the regions.
So how does the “Levelling-up and Regeneration Bill” address the problems created by defunct economic ideologies? The answer is that it doesn’t. The Bill does not contain anything that will reduce inequalities, increase disposable income, end regressive taxation, increase spending on schools, and provide social housing or anything else. Climate change has a significant impact on economic development, but is missing altogether from the Bill. It is a mish-mash of measures about planning laws.
The Bill claims to decentralise decision-making but centralisation has intensified. The Bill permits the Ministers to override, change or impose any plans on local authorities by claiming that something is a “nationally significant” development. Local authorities have no right of appeal. Ministers can make new regulations without a vote in parliament.
Some 4.2 million people are in need of social housing in England. In 2015, government promised to build 200,000 starter homes, but none were delivered by 2019. In 2019, it promised 300,000 new homes a year, but the target has not been met. The government now wants to make it easier for developers to buy land, but the private sector is always focused on profits. As Shelter, a housing charity puts it: “The current planning system prioritises maximum delivery of unaffordable homes that can be sold to the highest bidder, instead of well-planned developments with homes that people can genuinely afford.” The Bill contains no mechanisms for changing that.
The Bill enables local councils to charge up to double the rate of council tax on second homes, but without more up to date valuation of homes it will remain ineffective. Of course, the rich can own property through anonymous companies and under different family names and bypass the ‘second home’ charge. The Bill contains no anti-avoidance provisions.
Councils will also be permitted to levy an ‘empty homes premium’ to boost their income. That may help rich boroughs like Chelsea and South Kensington, where expensive homes are owned by rich foreigners, but won’t do much for poorer areas.
Even if all runs smoothly, the resulting revenues won’t compensate local authorities for the 37% cut in real-terms in central government grants during the period 2009/10 to 2019/20. Inevitably, local authorities are reducing services such as refuse collection and significantly increasing council tax, which in turn will deplete disposable incomes and possibilities of building a sustainable economy.
Regeneration requires investment in new industries, but the UK has no industrial strategy. This week, Northumberland-based Britishvolt, a start-up of lithium-ion batteries for the automotive industry, filed for bankruptcy. The government could nationalise it to get a foothold in the emerging industry but won’t. That leaves the Chinese-owned Envision AESC as the only UK car-battery manufacturer. The government wants to end the sale of petrol and diesel vehicles by 2030. The UK state has largely withdrawn from direct investment in new industries and Ministers wring their hands.
The Levelling Up Bill is hugely disappointing. It is big on hype and allusions but with no real policies or resources. Even investment in public projects is based on political favouritism. This week the government allocated £2.1bn for 100 regional regeneration projects, but the biggest winners are Conservative constituencies and many deprived areas have received little or no money. Incessant cuts to wages and workers’ rights can’t be reconciled with any claim of levelling-up or regenerating the economy.