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What does the Budget mean for levelling up?

Four takeaways for the regions from the Chancellor’s announcement: more powers, but little reprieve from austerity pressures.

By Jonny Ball

Jeremy Hunt and his Prime Minister have staked their claim to the political territory of stability and caution, as today’s Budget shows. After half a chaotic decade of Brexit, Boris Johnson, and the ill-fated duo of Kwasi Kwarteng and Liz Truss, the unspoken aim is to make politics boring again. There will be no unfunded tax cuts, and the commitment to “sound money” is firmer than ever, but good news from the Office for Budget Responsibility of unexpected fiscal headroom has allowed Hunt to try to ameliorate some of the worst pressures on households through an extension of energy subsidies here, an expansion of free childcare there.

Hunt’s super-deduction on capital investment for corporations will incentivise spending on industrial machinery, and tax relief on research and development spending should also boost private sector investment. These measures will apply across the country, so what does the Budget mean for the levelling-up agenda and Britain’s “left behind” regions? The Conservatives won their majority in 2019 on grand promises to narrow the geographical divides that split the nation between powerhouses like London and the rest. Fulfilling that mission would be expensive, and with living standards increasingly squeezed and the Treasury’s finances buckling under inflation, what has Hunt’s Budget contributed? Here are four takeaways from today’s announcements.

1. More powers for the West Midlands and Greater Manchester Combined Authorities

When the latest round levelling-up funding was announced in January, the Conservative metro mayor of the West Midlands, Andy Street, derided the process for creating a “begging bowl culture”. In local government, the proliferation of disjointed, centralised funding pots, open to bids from councils across the country but ultimately doled out through Whitehall, is a constant annoyance. Huge amounts of limited local authority resources are taken up applying for funds distributed in SW1. The Centre for Cities identified 117 such competitive grant processes between 2015 and 2018.

In recognition of these complaints, Hunt has announced that Street, along with Andy Burnham, the mayor of Greater Manchester, will be given far more powers over their own spending, with dozens of funding pots effectively consolidated into one much larger multi-year package of around £1bn, over which the mayors and combined authorities will have discretion. With greater control over finances, transport, housing and skills, the mayors will also be subject to greater scrutiny, questioned quarterly by a panel attended by local MPs in the manner of the Commons Public Accounts Committee.

The government has also committed itself to giving local authorities full retention of business rates in the long term. These multi-year funding arrangements, giving local authorities more flexibility and increased powers, will eventually be extended to all mayoral authorities in a massive expansion of English devolution. Zoë Billingham, director of the IPPR North think tank, described the deal as “a huge step forward in empowering local leaders and communities”.

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[See also: How Labour and the Tories are converging]

2. Twelve new investment zones in “areas that have underperformed economically”

It was Truss who first proposed hundreds of low-tax “enterprise zones”, meant to start a free-trade, private-sector-led growth revolution across the country. Alas, her premiership was short-lived. Instead, today the Chancellor has announced the establishment of twelve “refocused”, low-tax “Investment Zones”, eight of which will correspond with eight English mayoral combined authorities: Liverpool City Region, Greater Manchester, Tees Valley, South Yorkshire, West Yorkshire, the West Midlands, the proposed North East Combined Authority and the proposed East Midlands Combined Authority. The remaining four are in Scotland, Wales and Northern Ireland, and many are congruent with newly established or upcoming free ports (a pet policy of Rishi Sunak), which have been criticised as havens for tax avoidance and deregulation that depress standards and workers’ rights.

Each of these “knowledge-intensive clusters”, in Treasury parlance, will have access to £80m over five years and will attempt to attract private investment. Some Tories have criticised the plan as spending money in constituencies the party is “going to lose anyway” – the vast majority of mayoral authorities are safely held by Labour.

3. Local Enterprise Partnerships will probably be abolished

After scrapping Regional Development Agencies, David Cameron’s government replaced them with Local Enterprise Partnerships (LEPs), intended to bring together councils and businesses to work together on growth strategies. However, in the latest example of rapid policy churn in this area, the government will now consult on abolishing them, with their functions being taken over entirely by local authorities. Only five years ago the government announced an expansion of the role of LEPs, but there were questions raised over their accountability, and some criticised the fact that they were driven by the private sector rather than democratically elected bodies.

4. No reprieve from the pressures of inflation and austerity for local government

In its most recent report the Local Government Information Unit said that only 14 per cent of senior council figures had confidence in the sustainability of their finances. More than half said their authorities would be making cuts, spending their reserves, or trying to recoup losses through commercial investment strategies. Nowhere has austerity been more keenly felt than in town halls, many of which have lost over two-thirds of their central government grants. Library and leisure centre closures, multiplying potholes, disastrous cuts to social care, staff redundancies and slimmed down street cleaning services are the results.

With no new wholesale funding settlement for councils in the budget, the strain on finances is set to continue, particularly as the price of goods and services continues to rise. Some £200m has been allocated to road improvements and a smattering of regeneration projects have been given the go-ahead, but these piecemeal offerings are poor compensation for most.

Read more:

A boring Budget is a dangerous Budget

Why free childcare isn’t as good as it sounds

Michael Gove and the levelling up agenda have been hamstrung

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