Rebalancing the circumstances of the richest and poorest is not in Boris Johnson’s DNA, says TJ Coles

The Government’s much-anticipated ‘levelling up’ white paper has finally arrived. The programme promises to invest billions of pounds in neglected and deprived areas across the UK, supposedly taking advantage of post-Brexit deregulation in the process.

The seriousness of the proposals can perhaps be assessed from the fact that parts of the paper appear to have been lifted from Wikipedia.

Putting this aside, the document calls for a new era of infrastructure and investment, but heavy emphasis is placed on attracting new equity market investment outside London. For instance, one passage reads: “Equity gaps are largest in the East Midlands, Yorkshire and the Humber, and the West Midlands, where demand is more than six times the flow of equity finance”.

In 2019, Bloomberg ran the headline: ‘Everything Is Private Equity Now’. The article explains that “the heart of their craft is using debt to acquire companies and sell them later”. Last August, the New York Times ran with: ‘Private Equity Firms All Want the Same Thing: British Companies’. ASDA, the AA, Bourne Leisure (owner of Butlin’s), and Debenhams are just some of the big UK brands bought out recently by private equity and asset managers.

Will this new dominant economic force help Britain to “level up”? An article by the US Securities and Exchange Commission praises private equity while unwittingly admitting these firms’ contributions to lowering worker standards. They have “changed the infrastructure of the nation’s [labour] force, ushering in the so-called ‘gig’ worker”, the article reads.

Private equity companies see investment opportunities in the real estate, transport modernisation, and construction plans promised in the Government’s white paper.

Standard Life Aberdeen is owned by the Phoenix Group, which has over £300 billion-worth of assets under management. In September 2020, the company submitted evidence to Parliament on the supposed benefits of “levelling up” in relation to productivity.

Legal and General (L&G) has over £1 trillion-worth of assets under management in the UK. It too has kept a close eye on the “levelling up” agenda, even creating a ‘Rebuilding Britain Index’. Last year’s report, for example, said: “Investment is required across the whole of the UK, but how that investment is made requires a local lens working on local priorities”.

Sumit Mehta, head of investment solutions at L&G, cheers on the “very nice fit between what these [infrastructure] assets offer and what they require in terms of the capital backing them”.

More recently, Roger Pim, a senior investment manager at the multi-billion-pound abrdn, said of infrastructure: “We’re looking to find very stable businesses with predictable, long-term cash flows that generate an attractive, sensible return”.

Lower, steady returns from building projects, he said, are “perfect for pension funds”.

The Inequality Agenda

The business agenda of dominant financial institutions is implemented politically via an ideology that runs deep in the Conservative Party: inequality. Another reason for the likely failure of the levelling up agenda is that over the last decade, as hedge funds and private equity firms became major financial players and Conservative donors, the belief in the inherent merits of inequality became engrained in the party.

In 2012, Baronet Sir Humphry Wakefield, father-in-law of Dominic Cummings, said: “to be elitist, I think [that] quality climbs up the tree of life”. He added that, “in general, high things in the tree of life have quality, have skills, they get wonderful degrees at university, and if they marry each other that gets even better”. Wakefield concluded: “There are very few first-generation geniuses [among the poor]”.

A year later, Cummings, then a Department for Education advisor in the Conservative-Liberal Democrat coalition, wrote: “Most of those who now dominate discussions of issues such as ‘social mobility’ entirely ignore genetics and therefore their arguments are at best misleading and often worthless”.

During his 2013 Centre for Policy Studies Thatcher speech, Boris Johnson himself said: “I stress: I don’t believe that economic equality is possible; indeed, some measure of inequality is essential for the spirit of envy and keeping up with the Joneses that is, like greed, a valuable spur to economic activity”.

He carried on: “Whatever you may think of the value of IQ tests, it is surely relevant to a conversation about equality that as many as 16% of our species have an IQ below 85, while about 2% have an IQ above 130. The harder you shake the pack, the easier it will be for some cornflakes to get to the top”.

Wholesale privatisation is one way of “shaking the pack”, as working class people are forced to compete with their richer peers and as institutions – from schools and hospitals to councils and transport services – are flogged to private entities.

Reducing structural inequality would require taking a little of the elite’s privilege and sharing it with the disadvantaged. It is therefore convenient for the financially well-endowed to argue that their superior cultural capital is the product of good genes rather than good fortune.

Thus, in their worldview, public assets should not be deployed to level the scales – but rather should endeavour to let the brightest succeed, regardless of their background.

Levelling up, if it is delivered by private equity companies and their asset managers, will therefore fail on its own terms. It will be another way that Johnson has attempted to shake the pack – allowing the wealthiest to flourish, along with a few fortunate interlopers from the lower classes, while the vast majority are tied to the circumstances in which they were born.

There is of course an alternative. For the last decade, Preston Council has offered public contracts to local firms rather than outsourcing giants or hedge fund capitalists. This localist approach – the ‘Preston Model’ – has been widely praised, delivering good services for people in the area and boosting the local economy.

Practical solutions are out there. The equity ownership model is not desirable or inevitable – and nor is rampant inequality.


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