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What would a Labour government do about HS2 and levelling up?

As the party’s conference nears, the opposition will have to set out its plans to bring economic growth to all corners of Britain.

By Harry Clarke-Ezzidio

In February, Labour leader Keir Starmer unveiled five “national missions” that would be central to the party’s election manifesto. Echoing Rishi Sunak’s pledge to “grow the economy”, the opposition promised to “secure the highest sustained growth in the G7”.

But more than that, Starmer’s first mission said this growth would come “with good jobs and productivity growth in every part of the country making everyone, not just a few, better off”.

It is a matter of some consensus that Britain’s highly unequal economy, with investment, jobs, and infrastructure concentrated in London and south-east England, is a drag on productivity and growth. The levelling up agenda was the Johnson government’s answer to this problem, and its message to former Labour voters in the Red Wall was that the 2019 Conservative election victory would ensure a more equal national economy. 

Those promises failed to materialise – despite the government introducing various “levelling up” levers, such as investment zones and enhanced (or “trailblazer”) devolution deals. To achieve sustained growth “in every part of the country”, Labour, with Angela Rayner now leading the charge as shadow levelling up secretary, will need to address the shortcomings of the policy agenda. The “big mistake” of levelling up, Justine Greening, the former Conservative education secretary-turned-social mobility campaigner, tells Spotlight, “was that its champion, [Johnson], didn’t actually have any plans on how to deliver it.” 

The agenda was vague and its tools overly centralised. The introduction of competitive bidding for ring-fenced funding pots (for limited use) angered many – including Conservatives. Andy Street, the Tory mayor of the West Midlands, said the main £4.8bn levelling up funding pot was enabling a “begging bowl culture” in local government. In January, Labour confirmed it would do away with “Hunger Games-style” bid-based funding “where ministers choose who gets a leisure centre, some picnic areas and traffic light improvements from behind a desk in Whitehall”. 

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Like the Conservative Party, Labour sees devolution as a potential driver of regional and national economic growth, in addition to investment in the green economy. Last December, a report the party commissioned on Britain’s future governance, led by former prime minister Gordon Brown, called for powers to be moved away from Westminster and Whitehall. Starmer pledged that a Labour government would introduce a Take Back Control Act (TBCA) within its first parliamentary term, which will grant local authorities greater powers – and recognise “the desire of communities to stand on their own feet”. 

How does devolution and the party’s pledge to commit £28bn of capital spending every year on its “Green Prosperity Plan” fit into this? Adopting a recommendation from the Brown report for every locale to have a tailor-made growth plan (created by local councils and leaders), Labour is calling on the regions to pitch for green investment. In a January speech outlining how the TBCA would intersect with the party’s willingness to invest in green capital, Lisa Nandy, then shadow levelling up secretary, told northern leaders: “Tell us what you need to create strong local economies and thriving inclusive communities and we will back you [financially].”

But local economic plans, coupled with successful green investment pitches, would almost certainly be undermined by councils’ uncertainty over their finances. 

At least 26 local authorities in some of the most deprived areas in England are at risk of bankruptcy in the next two years, according to the Special Interest Group of Municipal Authorities. Local authorities underwent a £15bn real-terms funding cut between 2010 and 2020. Labour is unable to commit to restoring funding to pre-austerity levels: “We have to see where the books are,” Alex Norris, the shadow levelling up minister, told Spotlight earlier this year. “There’s a job for Labour to do on that,” Zoë Billingham, the director of the IPPR North think tank, tells Spotlight. “Putting together the £28bn Prosperity plan, long-term funding and a wider regional policy [plan] is a triangulation job that needs to happen.”

[See also: In austerity Britain, councils have sold off billions in public assets]

Critics of devolution plans cite the recent council bankruptcies in Slough, Croydon, Thurrock, Woking and, most recently, Labour-led Birmingham City council – the largest local authority in Europe – as evidence against trusting local government with further powers. 

John Denham, the former Labour communities and local government secretary (what is now the levelling up department), agrees that the Woking and Thurrock bankruptcies were a “catastrophe”, but adds: “So was the purchase of PPE from the centralised state.” Denham tells Spotlight he believes that the 2015 abolition of the Audit Commission – the state body responsible for vetting various public bodies, whose functions were transferred to the voluntary, not-for-profit or private sector – has been a “disaster”. “Clearly, there are people [in local government] who are incompetent… but there are solutions to that problem; there is no reason for not allowing places to have the powers they need,” he adds, calling for a statutory replacement body.

There are concerns that Starmer’s government would follow the tendency that New Labour showed towards centralisation. While New Labour improved living standards for millions across the country, it was often a result of strengthening the state social safety net – not through the government creating a geographically balanced economy,  Denham says. He cites working tax credits which, while “socially revolutionary”, weren’t “actually improving people’s jobs, by definition; in the sense that people needed tax credits because their pay was poor – even [despite] Labour’s introduction of a minimum wage”.  

He also issues a warning to Starmer: “The centralised policies of New Labour weren’t adequate, then, to introduce an effective reshaping of the national economy. And the next Labour government needs to build into its understanding that actually, the centralised state isn’t able to deliver in the way that is necessary, now.”  

Now, with party conference season under way, decisions about central-government funded infrastructure projects in the regions have come to the fore.

The Prime Minister announced that the Manchester leg of HS2 would be scrapped, with the £36bn the line would have cost being redistributed to “hundreds” of new transport projects in the north and the Midlands. The redistribution of funds will bring “growth and opportunity” and deliver “quicker results” than building the line to Manchester would have, according to Sunak. Greening, who officially approved HS2 when she was transport secretary in 2012, disagrees with this justification; while the London to Birmingham leg was about adding capacity to the existing network, “the Manchester and Yorkshire [scrapped in 2021] legs represented the strategic part of the HS2 project. That was the economic game-changer.”

Will Labour commit to spending the £36bn required to bring HS2 to Manchester? “We’re going to have to look at the numbers,” said Pat McFadden, a party veteran and the shadow Cabinet Office minister, echoing the party’s earlier statements about funding for issues in the levelling up remit should Labour win the election. Starmer described the Tories’ handling of HS2 as a “fiasco”, but told ITV Meridian: “I can’t stand here and commit to reversing that decision – they have absolutely left a complete mess for an incoming government”.

Prior to the HS2 announcement, the government announced a £1.1bn investment for 55 “left-behind” towns. Plans include each locale receiving a ten-year £20m “endowment-style fund” to be spent on local projects; and, in an initiative strikingly reminiscent of Brown’s report on devolution, “Town Boards” – comprised of local leaders, employers and the area’s MP – will be tasked with creating a tailor made long-term economic plan for their region. “Under the new approach,” the government said, “local people, not Whitehall-based politicians, will be put in charge.”

All this puts Angela Rayner in a precarious position when she delivers her keynote speech at Labour conference on 8 October. The deputy party leader, who was born in Stockport in Greater Manchester, is tasked with providing a satisfactory answer to the HS2 question (particularly to aggrieved northern leaders like Andy Burnham, the Mayor of Greater Manchester), and differentiating Labour’s devolution plans from the government’s new policies – all while overseeing her propositions to reform workers’ rights.

“Conference will be her first major intervention,” says Billingham. “What I’ll be looking for from Rayner is how she draws the line between what the government’s already offered and what Labour is thinking – on funding, power structures, the relationship between the national and the local – and how she will bring her personal and professional interest in representation and social mobility to her brief.”

[See also: Could Angela Rayner’s TUC hero status backfire?]

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