Rhetoric and Reality on ‘Levelling Up’ Don’t MatchFinds New Research
Thomas Perrett reports on findings by the New Economics Foundation which expose a significant problem with the Prime Minister’s vague flagship policy
In the aftermath of the Conservatives’ victory in the 2019 General Election, Boris Johnson claimed that his Government would reduce regional inequalities, reversing the laissez-faire, Thatcherite dogma that the party had previously been associated with by delivering “higher wages, a higher living wage, and higher productivity”.
In a speech last July, he argued that “the towns and cities that people say have been left behind have not lacked for human ingenuity” and that “there is no intrinsic reason why one part of this country should be fated to decline or indeed fated to succeed”.
However, new research from think tank, the New Economics Foundation (NEF), has revealed the galling inadequacies of the ‘levelling up’ agenda, exposing the Government’s failures in alleviating the effects of the Coronavirus pandemic, and demonstrating that inequalities have in fact become further entrenched since Johnson assumed office.
According to the NEF, the poorest 50% of the population have seen their incomes decline by an average of £110 in real terms, in contrast to disposable income gains of £3,300 for the top 5% of families.
The research – which examined forecasted household incomes for December 2021 using data from the Department for Work and Pensions and adjusting for mitigating factors such as inflation, earnings and interest rates using data from the Bank of England and the Office for Budget Responsibility – elucidated the stark contrast between household incomes in December 2019 and the consequences of ‘levelling up’ two years later.
It found that the lowest income groups have experienced a 0.5% reduction in disposable income, while the wealthiest have gained by 2%.
Regional Inequalities Grow
The NEF’s research has shown that disposable incomes across the north-east have barely risen since December 2019, having increased by less than 0.1% (£20) on average.
The north-west and Merseyside saw a 0.2% (£80) increase in disposable household income, compared with 0.3% (£90) in Yorkshire and the Humber, which contrasted sharply with a 1.3% rise (£600) in London and a 1.1% rise (£550) in the south-east.
The income gap has widened within regions. Single parents and the unemployed were hardest hit, as workless families experienced income reductions of £200 a year on average across Merseyside, the Midlands and Yorkshire and the Humber.
The incomes of single parents, the only demographic to experience declining incomes across all parts of the country, were nonetheless strikingly varied across different regions. Single parents in the Midlands and the north saw their incomes fall by around 15 times as much as their counterparts in London.
Dominic Caddick, assistant researcher at the NEF who co-authored the report, told Byline Times: “Our research shows that families in the north of England have gained the least since 2019 and those living in the north with incomes in the bottom 50% nationally have seen their incomes fall in real terms.”
He condemned the failures of Johnson’s Government to address regional inequities, describing the report’s findings as “an indictment on any government, especially one that puts levelling up at the heart of their agenda”.
The NEF also found that the Government’s inadequate handling of the Coronavirus pandemic was responsible for the exacerbation of inequalities. The UK economy, which contracted more rapidly than the majority of other developed economies during the crisis, experienced faster growth in 2021. But the UK remained one of only two countries in the G7 with economic activity that lagged behind 2019 levels by 2%.
The data also demonstrates the meagre protections in place for those in precarious work. The UK already had a relatively low proportion of in-work income recovered through unemployment support, and the decision taken in October 2021 to scrap the £20 universal credit uplift has, according to the NEF, left many of the most vulnerable families exposed to rising prices.
An Imperfect Storm
The New Economics Foundation’s findings appear to present a significant problem for the Conservatives. For the areas which have largely experienced a considerable contraction in income, particularly since the Coronavirus pandemic, are the same areas which swept Boris Johnson into Downing Street in 2019.
After a series of scandals engulfing the Government over allegations of corruption and Downing Street Christmas parties at the end of last year, new polling suggests that the Conservatives now trail Labour by 16 points in crucial ‘Red Wall’ seats. In 58 key constituencies which Johnson won in 2019, 49% of those surveyed say they would vote for Labour if a general election was held now, as opposed to just 33% who would vote Conservative.
Indeed, many people living in these regions regard the levelling up agenda as a failure. According to an Opinium poll carried out for the NEF, 58% of people across the country, and 63% of Northerners, have seen no evidence of it. Only 20% of people responded that they felt better off than they did two years ago, and only 4% said that they felt significantly better off in the two-year period following Johnson’s premiership. A mere 18% of Northerners said that their situation had improved, in comparison with 25% of Londoners – indicating that the exacerbation of regional inequalities may yet prove devastating for Johnson’s unstable electoral coalition.
Dominic Caddick told Byline Times that the failure of Boris Johnson’s levelling up policy is particularly damning when viewed within the context of rising interest rates and soaring energy prices, as the Red Wall may be squeezed further in the months ahead.
These issues would “further expose the decision to remove the £20 uplift for universal credit in October”, he said, which “was the biggest overnight real-terms cut to benefits in UK history and rising costs mean families will be struggling even more to get by”.
“Weaker economic activity due to new COVID variants will also put people in precarious work at risk of losing their jobs,” he added. “With no indication of the furlough scheme returning, this could mean further significant drops in income for workers in affected industries.”
Many economic factors threaten to further entrench in-work poverty. Back in November, citing concern over rising inflation, Bank of England director Andrew Bailey hinted at increasing interest rates, a policy aimed at protecting creditors’ investments by preventing aggregate demand from pushing up prices, which will likely involve diminishing workers’ wages and limiting bargaining power.
The stark regional inequalities the NEF’s research has highlighted have also brought to light other Government policy failures, such as the failure to expand renewable energy sources, or to create a comprehensive programme delivering full employment and infrastructural initiatives. The combination of job insecurity and stagnating wages could yet signal a crisis for Johnson’s Government.