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How the cost-of-living crisis is threatening levelling up

Rising prices are making it harder to rebalance the economy.

By Zoë Grünewald

The UK has one of the most centralised and imbalanced economies in the OECD. Few would argue that the stated aims of Boris Johnson’s government – to rebalance the country’s London-skewed economy – are something the country needs. What there is greater disagreement about is how to get there. 

Last Thursday, parliamentarians, local government representatives and industry figures met in Birmingham for Spotlight’s annual Regional Development Conference to discuss this very issue. Leaders discussed levelling up in a range of contexts, from sustainability and devolution to housing and productivity. Though the panellists and speakers varied in their political affiliations and occupations, there was consensus on one key issue: the importance of tackling the cost-of-living crisis.

During a panel that focused on protecting the vulnerable and levelling up, the chair of the Labour Party, Anneliese Dodds MP, stressed the importance of tackling rising costs, emphasising that people “are in a difficult situation across the country”.

She outlined a number of policies that Labour would adopt to tackle the crisis, including a windfall tax, scrapping National Insurance hikes, raising minimum wages and withdrawing Universal Credit cuts. She told the conference that the money individual families would save from these measures would also help to reinvigorate the economy: “We think those measures are important because people spend that money on their high streets, and they spend that money in local businesses.”

Zoë Billingham, director of think tank IPPR (Institute for Public Policy Research) North, concurred, and linked the fall-out from the cost-of-living crisis to already worsening regional health inequalities. “If we see an increase of poverty, life expectancy will go down,” she said.

The issue also dominated conversations around the energy crisis and sustainability measures. Steve Rotheram, Metro Mayor of the Liverpool City Region, said the government was “getting it wrong” when designing cost-of-living policy. 

He explained that, when considering how to level up sustainably, the government was turning a blind eye to housing. Retrofitting homes so that they are more energy efficient could play a key part in reaching net zero and tackling soaring energy prices. Homes, he said, were “losing heat through the fabric of the building”, adding that having discussions with energy companies at a local level is vital.

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Wera Hobhouse, Liberal Democrat spokesperson for the climate emergency and energy, seconded the importance of retrofitting, which she deemed as something “the government has just entirely failed to get right”. 

“It’s an absolute no-brainer that if we use less energy that helps everybody,” she said.

Meanwhile, Gillian Cooper, head of energy policy at Citizens Advice, told the conference that the cost-of-living crisis was one of the main challenges to address “if you want to make progress on both levelling up and the net zero transition”. 

She said: “We’ve got a growing number of callers who are simply struggling to afford the essentials. And when you can’t afford the basics, you’re not thinking longer term” and, for example, making individual decisions to help the collective drive toward net zero.

She explained that Citizens Advice would like to see more emergency measures to support people. “We need the government to come forward with a bigger, better and more targeted package of support for people, and that needs to focus on the people… worst affected by the current price choices and energy,” she said.  

Giving the keynote address that opened the conference, Andy Street, Mayor of the West Midlands, a strategic partner for the event, also admitted concern about the lack of “short-term measures” for the “energy element” of the cost-of-living crisis. “I’m hoping, nay, expecting, that that will happen as we go into summer,” he said.

There was a clear consensus that ensuring affordable housing would be key to the levelling-up agenda, but this has been offset by the cost-of-living crisis. Clare Miller, group chief executive at Clarion Housing Group, one of the sponsors of the event, spoke about the current unaffordability crisis, and the lack of new homes: “The consequence [of that] is soaring local authority waiting lists and frustrated younger households who are often living in insecure accommodation. It feels as if their lives are on hold.” 

Councillor Brigid Jones, deputy leader at Birmingham City Council, also pointed to rising costs as an impediment to home ownership. “The biggest barrier to young people getting on the housing ladder is having the deposit. And as house prices are rising and the deposit required is such an enormous number, it becomes a barrier that cannot be overcome,” she said. 

When discussing the role of local government and devolution, Judith Blake, the Labour peer and shadow spokesperson for housing, communities and local government, lamented the lack of commitment to fiscal devolution, without which, she said, levelling up would be a “struggle”. She referenced a Bloomberg report, which illustrated that the levelling-up agenda was not going the way the government had hoped. 

The report states that “the salary gap is widening in nine out of ten constituencies, home affordability is getting worse nearly everywhere, and public spending per head has fallen behind the capital in every region of England”. Blake explained that, in order to move forward, the government has to offer more in terms of local powers and resources, so local governments and partnerships could “deliver on their priorities on behalf of people in their areas”. 

Billingham also highlighted the important role of local government, calling it the “unsung hero” of the cost-of-living crisis, and said councils have a valuable role to play in providing hardship funds, council tax relief and other “levers that local government has” to alleviate the worst of the crisis.

The conference will run again in Birmingham next year.

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