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Skills and Subsidies: Reviving Deprived Areas and Rebuilding One Nation

The Labour strategist and pollster, Deborah Mattinson, ran an interesting experiment in the 1980s when she asked voters to describe the political parties as if they were individuals. What would they wear? What would they eat and drink? What would they chat about? In the 1980s, the Labour character was a stereotypical worker: he wore a cloth cap, ate pies and drank pints. He read the mirror and was active in his local trade union. This was no means a positive image to most voters, but it did reflect a party interested in the concerns of ordinary people.

When Mattison ran the experiment again in 2018, this time in Crewe – a seat the conservatives would win decisively the following year – Labour’s image had changed beyond recognition. No longer the party of the worker, Mr Labour was now posh, snobbish and woefully out of touch. The pie had been exchanged for quinoa and the setting of the pub for a grand house in London. That Mr/Mrs Labour has migrated from a working-class community to London is particularly telling; throughout Mattinson’s Beyond The Red Wall – where she surveys and questions former Labour voters – the resentment towards London is palpable. One voter from Hyndburn summed it up like this: “you could draw a line right across the middle of Britain. The bottom half is the ‘haves’ and the top half is the have nots’.”

While obviously rather simplistic – there is severe poverty in parts of the south, particularly coastal communities – it is not wholly inaccurate. According to a report by the Joseph Rowntree Foundation, “many northern cities are characterised by relative decline or low growth”. Of the twelve cities with the highest levels of decline – defined as experiencing population and job losses, high land/housing vacancy rates and upticks in social deprivation – ten are in the North of England. In fact, no city in southern England appears within the worst 24.

While productivity in London and the South-East is generally considered to be world-class outside of these areas the story is very different; in Europe, only Poland and Romania experience higher disparities between regions. Tragically, economic underdevelopment has impacted public health. Blackpool – often considered to be the UK’s most deprived city – has twice the rates of early mortality compared to the more prosperous part of the country. While poor health outcomes and facilities are not limited to the north – for instance, medical services in Plymouth are “on the brink of crisis with the possibility of some… surgeries closing permanently” according to local health authorities – they are more prevalent there. A comprehensive report into healthcare across the UK concluded that “there is a need for economic development and regeneration in poorer parts of the country and for high-quality health improvement programmes and care services in these areas”.

Thankfully such issues are now well documented and think tanks across the political spectrum have devoted considerable time and effort towards devising solutions. Research by the Centre for Cities indicates that the most important way of reviving deprived areas is solving the local skills shortages that currently deter business investment. Good transport links and affordable real-estate are a rather distant second and third (although still important). The UK currently experiences a severe brain drain from the rest of the country to the southeast; while London has 13% of Britain’s population and 19% of all jobs, it attracts 38% of all new Russell group graduates with good degrees and 22% of all new graduates overall. This is particularly problematic since proximity to college-educated workers also enhances lower-educated workers wages.

This is more than an economic issue; segregation by educational attainment is becoming an increasing problem across the western world. As economists Angus Deaton and Anne Case write (referring to the United States) the “firms are outsourcing many low skills jobs that used to be done in-house, where people with differing levels of education worked together and were part of the same company… the more and less educated are now more segregated in where they live”. This posits therefore that limiting the brain drain to the South-East should help build a more cohesive society. Most Brits choose to live close to where they grew up; if we open up the right opportunities many students would no doubt prefer to return to their communities after graduation.

The government is already addressing these issues with a series of landmark measures including the lifetime skills guarantee which will help an estimated 11 million adults gain qualifications for free. However, there is more that could be done. The UK is particularly lacking in workers with digital skills; the sector testified to the House of Commons Science and Technology Committee that Britain will need an additional 745,000  to meet rising demand from employers. Almost 90% of new jobs require these skills to some degree so further effort in this field could be of tremendous value. Equally, too many of Britain’s schools are still underperforming; 22% and 17% of people leave school without the numerical and literacy skills to function effectively in society. While this particular problem will not be solved quickly it is certainly no less critical.

Another means of reviving ‘left-behind’ areas would be to provide a bespoke deal for overseas investors who put money into these regions. Although the government has introduced a series of ‘freeports’, a report by Onward has suggested that far more extensive efforts could be beneficial. The report found that FDI into London tripled from 1997 to 2016 but fell by 15% in the rest of the UK over the same period. Londons total share of such investment grew from 20% to 50% over the same period.

Most foreign economies offer some combination of direct grants, tax incentives (both for the company and for executives), investment promotion agencies and diminished regulations in order to attract investment. The report noted that Israel for example offers considerable funding for businesses to set up in certain areas, Japan grants personal tax breaks to international investors while the United States has over 2000 federal and local incentive schemes. Now without European Union regulation, Britain has far more freedom to create a new investment program offering considerable advantages to poorer, more deprived regions.

Britain’s regional inequalities are longstanding and deeply ingrained. They represent far more than crumbling transport infrastructure, poor working conditions, house prices, and income. Their most chilling effects can be seen in the greater mortality rates, poorer public services and low life expectancies that too many deprived communities face. While the government can lay the foundations for ‘levelling up’ – critically by improving education and training along with incentivising investment – ultimately it will be the private sector that brings the necessary dynamism to revive these areas.

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