• CPP finds government support for London to be £7bn higher than the North East and North West combined, despite having similar population sizes.
  
• CPP’s latest levelling up outlook finds the super deduction scheme is likely to offer largest tax breaks to London, tracking at 60% higher than in the North East and over 80% higher than Yorkshire and the Humber.
• 6.5 million people living in deprived local authorities unlikely to be helped by the Levelling Up Fund, Towns Fund or Community Renewal Fund.
• CPP calls on the government to prioritise future funding distribution by deprivation and need.

Centre for Progressive Policy’s latest levelling up outlook reveals the government’s key policies for economic recovery will benefit London over the rest of the UK, which is bad news for levelling up.

CPP has analysed the impact of the new super deduction scheme, which was proposed to deliver levelling up through construction and manufacturing. The analysis suggests the scheme offers little in the way of levelling up; based on pre-crisis rates of business investment in machinery and equipment by sector, London is likely to receive the biggest tax break per head (see notes to the editor for exact figures.)

CPP’s Levelling up outlook also examined the Levelling up Fund, Towns Fund and Community Renewal Fund. This analysis revealed that 6.5 million people living in deprived local authorities will be excluded from these policies.

These poorly targeted recovery policies come after big spending to avoid London’s levelling down during the pandemic. CPP analysis of spending per head on key emergency economic measures suggests spending has been much higher in the capital than in other regions:

• Furlough: £1,300 per resident spent in London by comparison to £620 per resident in the North East.
• Self-Employment Support: £440 per resident in London by comparison to £190 per resident in the North East.
• Business Loans: £360 per resident in London by comparison to £150 per resident in Scotland.
• Universal credit: more evenly distributed with London, the North East and North West topping the spending at around £80 per resident.

CPP’s findings conclude that London has had £7bn more spent in emergency economic measures than the North East and North West combined.

To get levelling up back on track, CPP calls on central government to:

• Ensure local government is properly funded, making deprivation and need the default criteria for the distribution of any further funds. This includes upcoming schemes such as the UK Shared Prosperity Fund.
• Reboot locally led industrial policies which target investment at high value-add growth sectors in left behind places.
• Invest heavily in social infrastructure including public health, adult education, childcare and youth services.
• Measure what it cares about – if the government is serious about levelling up it should construct a baseline from which to measure progress and evaluate policy decisions.

Ben Franklin, Head of Research, Centre for Progressive Policy, says:

“The scale of inequalities between and within places requires a generational effort to level up with greater investment in public health, adult skills, childcare and youth services directed at the poorest parts of our society.

Instead, our analysis reveals the bulk of recovery efforts will be on a tax break for London driven by financial services and business services. The government then reverts to spending cuts and tax rises by 2023. Given this outlook, we can only assume that the government has either failed to grasp the nature, scale and urgency of inclusive recovery or has given up on its own levelling up agenda.

The government must urgently change tack to ensure that local communities with the greatest need are sufficiently funded to deliver vital services. Focusing on rebooting locally led industrial policies which can create good, well paid jobs in traditionally left behind places would deliver the government’s levelling up agenda more effectively than these ill thought through tax break schemes.”

Notes to the editor

1. The report can be found here. Please contact Thomas Hauschildt for any enquiries, THauschildt@progressive-policy.net
2. Implied tax breaks per head by super-deduction

3. Recommendations

• Ensure local government is properly funded, through making deprivation and need the default criteria for the distribution of any further funds. This includes upcoming schemes such as the UK Shared Prosperity Fund See CPP’s Why the government needs to pay up before levelling up.
• Reboot locally led industrial policies which target investment at high value-add growth sectors in left behind places as argued in CPP’s A Gear change for growth.
• Invest heavily in social infrastructure including public health, adult education, childcare and youth services as argued in CPP’s Let’s get social.
• Measure what you care about – if the government is serious about levelling up it should construct a baseline from which to measure progress and evaluate policy decisions. CPP developed a framework for this in Back from the Brink.

4. About CPP: The Centre for Progressive Policy is a think tank committed to making inclusive economic growth a reality. By working with national and local partners, our aim is to devise effective, pragmatic policy solutions to drive productivity and shared prosperity in the UK. Inclusive growth is one of the most urgent questions facing advanced economies where stagnant real wages are squeezing living standards and wealth is increasingly concentrated. CPP believes that a new approach to growth is needed, harnessing the best of central and local government to shape the national economic environment and build on the assets and opportunities of place. The Centre for Progressive Policy is funded by Lord Sainsbury and hosts the Inclusive Growth Network.

5. For more information on the Centre for Progressive Policy, please see here or follow @CentreProPolicy