Following the Government's Levelling Up White Paper being published, we sat down with our founder, John Mills, to discuss the paper's strengths, weaknesses, and possible alternative policies that the Institute for Prosperity recommends instead.
What are your thoughts on the Levelling Up White Paper?
John Mills: While it is good to see that the Government is taking the issue of Levelling Up seriously, and this is certainly a move in the right direction, this paper is only the first step. The White Paper sets out 12 worthy and admirable goals, recognising the huge gaps in productivity between London and the Southeast and the rest of the UK. However, it does not go far enough.
In order to spread productivity, prosperity, and growth across the UK the paper suggests, what we really need is a revival of the British manufacturing sector. Decades of deindustrialisation are the root cause of many of the issues faced by deprived communities, and the Levelling Up White Paper simply does not contain a clear blueprint of how to fix them.
What do you think are the successful points?
JM: The most successful point in the paper is the acknowledgement that the Government needs to reverse the long-term historic decline in UK manufacturing. Our industrial heartlands have been decimated by successive governments on both sides of the political divide, which has left these areas with few jobs, prospects, or opportunities.
The Institute for Prosperity welcomes the paper’s commitment to increase investment in R&D outside the Greater Southeast by 40% by 2030, but the redistribution of resources will only go so far. We are still far below the world average of investment in R&D, and further still from the average for comparable OECD countries.
Similarly, the nine new Institutes of Technology announced in the paper are also welcomed, as we need to improve technical training in the UK if we are to grow our manufacturing sector to its full potential, but we need to go even further to ensure the demand for manufacturing and engineering skills are met in the future.
What do you think the White Paper has missed?
JM: The problem with the Levelling Up White Paper is that the Government has not set out a clear plan to make UK manufacturing competitive again. We need to create an environment where firms want to site their operations in Britain, or else the deprived, left-behind areas of the country will never enjoy the kind of good, well-paying jobs that the sector provides.
Pledges to regenerate towns and cities will be hollow if there are no new jobs and no one wants to live there. Only investment in projects with a high social rate of return – namely mechanisation, technology, and power – will actually regenerate these deprived areas of the UK.
Why is manufacturing so important?
JM: The core problem with left-behind areas of the UK is that they don’t make enough to sell to the rest of the world. If we are going to make places like Bradford, Stoke, and Sunderland globally competitive cities once again, then we need to revive the UK manufacturing sector.
The Government rightly acknowledges in this paper that 84% of manufacturing jobs are located outside of London and the Southeast, and they have a wage premium of over £1 per hour on the UK as a whole (with the exception of London). It is clear to see that manufacturing has the potential to transform our country, make it fit for purpose in the 21st century, and ultimately, get our economy growing again.
How do we revive manufacturing?
JM: In the simplest terms, we must make it pay to site new industry here, ensure we are competitive in world markets, and invest in skills for the future. While the Levelling Up White Paper is a good start, there are steps we need to take that will actually Level Up the country.
We must address both demand and supply-side reforms, which entails a radical reassessment of macroeconomic and fiscal policy. These reforms were laid out last year when the Institute for Prosperity published Manufacturing Unlocked, our 10-point plan for reversing deindustrialisation in the UK.
The exchange rate is also a key issue that must be addressed. Currently, it is far too expensive for manufacturers to be based in the UK. If we had the pound at or near parity with the dollar, this would be a key driver in ensuring our manufactured goods were competitive again on the world stage.
If the Government is to create the kinds of productivity increases they are talking about, then they need to make a concerted effort to get manufacturing back up to 15% of GDP, up from less than 10% where it is now. That is the real key to Levelling Up our economy.
How do I find more about JMI and its policies?
The Institute for Prosperity is a cross-party think tank that seeks to increase the rate of manufacturing and economic growth in the UK.
By working with policy stakeholders, legislators, business and industry leaders, trade union representatives, economists, commentators, regional leaders and the public, we aim to bring policymakers together to affect change and find new solutions to Britain’s economic problems.
The Institute for Prosperity frequently publishes proprietary research, which you can find on our website.
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