Dan Rosenfield is a British Civil Servant. He worked at HM Treasury from 2000 to 2011, in roles including Principal Private Secretary to Chancellors Alistair Darling and George Osborne. He spent the subsequent decade in the private sector, before returning to government as Downing Street Chief of Staff in 2020.
This interview was conducted on 22 June 2022.
Q: Could you tell us about your role in growth and region policy in the past few decades?
I joined the Treasury as a Civil Servant in 2000, and I was there until 2011. I worked on various parts of Treasury policy: public spending; tax policy; and international finance. In 2004/5, I took over running the policy and spending team which was then called Devolved Countries and Regions (DCR). I also had responsibility in the Treasury for the Olympics. I was responsible for Scotland, Wales and Northern Ireland and English regional policy. I did that for maybe three years, through to November 2007, and then became Principal Private Secretary to the Chancellor, Alistair Darling. I worked for Alistair and for George Osborne for a year as well, getting us to the beginning of the Northern Powerhouse.
Q: Could you summarise the key successes and frustrations over that period in regional growth?
Let me break it down into two parts: I will address devolved countries and England separately because of the political landscape of the United Kingdom.
In the time I did that role, Northern Ireland was going through another iteration of the peace process. There’s the 2006 St Andrews Agreement, which led to devolved power being restored. My very simplistic observation around Northern Ireland is that the political constraints were overriding and totally pervasive. When it came to significant reform, public sector pay far outstrips private sector pay in Northern Ireland. You don’t pay for your water in Northern Ireland. There are parts of the economy that are totally unreconstructed. You didn’t get the privilege of the rational economic lens. It was all seen through the lens of: how do you restore power? How do you continue the peace process? How do you satisfy all parts of the Northern Ireland communities?
To give you an example, one of the projects I did was working with the Republic, the Northern Ireland Devolved Assembly and Westminster to look at regeneration across Northern Ireland. I remember literally sitting there looking at a road programme and working out how many went to Protestant communities and how many went to Catholic communities, and it had to be totally equal. The opportunity in Northern Ireland is huge. You have real political focus and that allows you to do things and generate political will. The constraints are almost equally and opposite that when it comes to something that carries any sort of controversy, like imposing water charges, at the end of the day, you run a mile.
Q: Before we move on to the other countries, do you have a sense of whether that constraint was easing over time?
I think there were periods of relative calm which led to greater economic progress. I actually think the Republic was a net positive because you went through that phase where the Republic had very low corporation tax rates and became a real competitor. I think Northern Ireland did up its game and you started to see natural forces of competition working across across the border. The public sector needs a huge amount of work. The distorting effect is really significant. I remember sitting there when I was doing the job that a graduate could earn twice in the public sector than what he or she could earn in the private sector. It turns the pay debate on its head. I imagine there’s still a huge amount to do.
Scotland was fascinating because, when I was there, we moved from a Labour administration to an SNP minority administration. I might further the thesis that the then Labour government broadened devolution in a way that they thought would guarantee Labour administrations in Scotland and Wales. I think the minority SNP government, and then moving forward the majority SNP government, hugely tested the devolution framework. You get to a point where the allocation of resource was driven more by party political debate and competition rather than rational economic theory.
It’d be slightly unreconstructed, in that I think, if you run a pure economic needs-based assessment of public spending, it’s hard not to argue that Scotland isn’t over-funded. Therefore, I think public service outcomes are somewhat constrained as well because you’re just not getting the same value for money. That said, what I found interesting in doing the work in Scotland is you do have some fantastic cities: Edinburgh, Glasgow and Dundee. Dundee is an incredible case study, especially from the video game concentration. You had a highly functioning economy and it was fairly diverse, I’d say. The role of policymakers in regeneration and economic theory was so driven by the politics of the SNP versus the then Labour government. Whitehall energy got dragged more and more into what I’d consider slightly distracting arguments, like ‘Should Scotland in principle have the right to put up income tax by certain amount?’ They’ve never done it. We ended up arguing over totemic constitutional issues and as a simple Treasury boy I always thought the majority of the British public really didn’t care about the constitution. They just care about the economy, living standards and public services – the things you can influence.
Certainly, in the public sector, my sense was that Wales had a real capacity issue. There were pockets of good capability in the quality of leadership, but in terms of institutions it was not generally speaking strong. You ended up in quite parochial discourse and rows. In Wales, you do have this quite interesting dynamic where you have real swathes of quite appalling poverty, and areas of the country that have never quite broken out of old industries. You have pockets of exciting, more dynamic economies – Cardiff and the regeneration around Tiger Bay, for example. But, again, it felt heavily constrained. It felt like you were dealing with the local authority who was holding back decisions in a narrow way. The bit that lacks in Wales is that no government I worked for ever had a very clear vision of where Wales was headed – of what you were solving for. You ended up in a fight for additional incremental resource here or there rather than fundamental reform.
Q: Do you think, from this, that the politics of devolution will always win out over the drive for public service reform?
I think you’ve still got a trade-off: devolved administrations are not necessarily incentivised to take tough, longer-term decisions, as the political cycles in England and the devolved administrations don’t always match. In my experience of the Treasury, for example, the first budget of the Parliament is used to nail it and get all the difficult stuff done and you’ve effectively set the course. Gordon was a master of that. George Osborne was very good at it as well. You never quite had those moments in devolved administrations. I never felt that sense of the new administration coming in thinking, ‘Okay, we’ve got a 5-year blast here, what are the really difficult things we’ve got to grasp?’ They weren’t incentivised to do that. It’s like a local authority where it’s easier to blame central government for putting up council tax than [to blame] yourself.
Q: How much of that is a Catch 22 situation: if they don’t have sufficient powers then the accountability won’t operate?
There is a Catch 22. Scotland has income tax raising powers and they never used them, right? It’s not clear to me that devolving more power necessarily devolves more accountability. I don’t see that happening necessarily. In Wales, to make the point, I don’t think I ever heard a thought-through, considered rational argument as to why Welsh economic development or the Welsh model of public services should be markedly different to any other part of the United Kingdom. I think it just boiled down to, at the margin, there was less reform, there was less efficiency and there was more funding. I’m being slightly unkind and flippant but I think that would be my basic guiding principle.
Q: So where does England fit into that then?
England’s like, ‘Try everything and see what sticks.’ When I was there, we’d gone through the whole period of Regional Development Agencies (RDAs), which Ed Balls championed. We were bureaucratically dividing up the country into regions. Occasionally – as in Yorkshire, for example – that makes rational sense. Yorkshire has a sense of identity that is unique to Yorkshire. In other parts it didn’t, such as in the East of England. It didn’t make sense. People didn’t look at it and go, ‘I’m from the East of England, I recognise that.’ I don’t think it matched identity and culture. With the failed projects of political representation – especially the North East referendum – you end up with the RDAs being a governance construct that didn’t reflect democratic accountability. It wasn’t elected. There was no democratic accountability. By exception, it reflected a sense of identity, but in the majority of cases, it did not. It was just an administrative construct. Even worse, it didn’t reflect any economic reality. There isn’t an economy called Yorkshire, right? There isn’t an economy called the North West of England. We started moving into the debate around city regions, where there is an economy called Greater Manchester; there is an economy called Greater Leeds.
It’s hard for the Labour government because they set up RDAs and were effectively reversing out of a policy that they created. I think as we started to chip away at that structure, you ended up with much stronger city regions. Looking at it from the economic lens is a much more rational way of thinking about it.
I remember, when I was doing the DCR job, going to Burnley: I spent a couple of days there – meeting local folks, meeting businesses – and I found it very instructive because there were people queuing up to tell the man from the Treasury that what Burnley needed was a local economic employment partnership; it needed a local Chambers of Commerce; it needed the Burnley Investment Fund. I’m sitting there thinking, what Burnley needs is a good trainline to Manchester.
You have this difficult conundrum: do you say to the good citizens of Burnley, ‘Sorry, but your economic raison d’être is to be a feeder town for Manchester,’ – which is offensive to their sense of place, pride, and identity – or do you go down the route of, ‘We’ll build lots of micro interventions’ – which won’t have demonstrable economic impact? I don’t think any government has really answered that question. Boris has taken that and turned into a narrative about left-behind towns. He literally had a list of 500 left-behind towns.
I think that ‘falling behind’ is what I was seeing at the time: you saw that property prices falling, not rising. There were whole empty streets, public transport was poor. You couldn’t get a taxi, you couldn’t get a bus. That has changed: you see a triumph in city regions – Manchester is probably the best example, now they’ve got the mayor and so forth – but we’re not necessarily seeing the spillover effects that policymakers at Parliament have anticipated.
Q: What is your theory of change around how you can help those places outside of the Greater London economy?
We should talk about the private sector. I think governance is an important part of that, having more credible governance. As Mayor of London, it was quite impressive how Boris beat the drum for London. He got investors coming in. It’s easier to do that in London. There’s a very strong investment thesis. But then you look at Andy Burnham in Manchester, for example. I’m not sure I’d credit Andy with getting in a lot of private sector investment. But I would credit Howard Bernstein and Richard Leese. Almost despite the governance, they were able to crack heads together. You ended up with a cornerstone investor in our friends from the UAE. They’re putting in residential investment by the regeneration of Manchester City. I think that’s interesting that there is a synergy somewhere around governance, leadership, risk appetite and private-sector investment.
The experiment you’re seeing in real time is the North East. You’ve got a Saudi buying Newcastle. You’ve got lots of clusters around hydrogen and new forms of energy and so forth. You’ve got Ben Houchen of the Mayor up in Teesside. It will be very interesting to see. There is something that’s quite hard to define around creating a buzz. It’s definitely leadership capability. You need one or two iconic leaders. It’s definitely operational capability and the parochial stuff I referenced in Wales. In somewhere like Manchester, it is about the ability to crack heads together and dial out the parochial stuff. It’s about opportunity: you’ve got a workforce on your doorstep. I put it to you that the people in Manchester are no more or less clever than people in London, right? It’s an equally capable workforce. There you get into what motivates pride in place, what motivates people to stay and look for job opportunities in that region. Higher education is important in that context: if you do it right then there are spillover benefits. There’s something about graphene being invented in Manchester, and it puts Manchester on the map, alongside Harvard and MIT as a cluster. There is something there which does spill over.
Q: Have you ever seen anything that’s effective in supporting the emergence of good leadership?
It’s serendipity. Most people in most careers are rational. They may not think in this way, but they assess by looking at the incentives in front of them and thinking, ‘How do I get rewarded? How do I progress? What do I need to do?’ They follow that path. The reality is, if you’re a politician, you’re thinking, ‘What’s the most interesting job to do in the country?’ Let’s say it’s Prime Minister, for argument’s sake. How do I map a course to the British Cabinet or to be Prime Minister? Pre-Boris, being a local government leader or being mayor was not a credible path to some sort of central government, national career. I think you can make an exception for London, not just because the mayor of London actually became Prime Minister, but also I think because London is of a size and scale. I think the bit I could never quite work out is how do you create the sort of incentives where if you’re Rishi Sunak, let’s say – I’m choosing somebody who’s young and is seen by his party or was seen by his party as really smart, top of the game, somebody you have on your shortlist to be the future leader of the party and the country – I don’t think it ever crossed Rishi Sunak’s mind that he might go and work in local authority politics or he might go and be the mayor of Teesside. I think he identified the quickest route up the ladder, which was to become an MP and work it that way.
Q: Does Whitehall have the capacity to think spatially? Which the departments were effective at thinking about regional variation in policy?
None of them. It amazes me. What I find fascinating is that when you look at the big departments of the state, the big delivery departments – health, and education being the two main ones – I don’t think that the political or official leadership of those organisations,– under successive governments, has ever really had a proper handle on variations of performance and why outcomes differ in different geographies.
It was my contention – when we were trying to do some of the NHS reforms, I remember having this row – that if you got every local authority area up to the national average you would be changing the landscape of the UK in the most profound way. That’s how businesses generally think. If your margin is half what it is in Manchester to London, you go rattle the cage of management and work out what is going wrong and how to fix it. That’s what you’re doing. The public sector is not interventionist in dealing with variations in performance. There are blocks and inhibitors to doing that. It doesn’t grapple with it. I’ve made the mistake I made at the beginning: I’ve just looked at that through the lens of public services rather than the private sector, but they are the most fundamental levers that the public sector has: keeping people healthy and educating kids.
I think you naturally think spatially around higher education because there’s not much between central government and a higher education institution. The latter is by definition in a place, so you’re forced to think that way. Beyond that, my sense is that the business department basically just drank the Kool Aid of positive spillover effects and concentrations and went down that route without really understanding what the larger consequence was. The Treasury is brilliant at strategy but terrible at operations. It could work out what needed to be done. It could work out the city regions were the right economic constructs. But the next step from there – what are one or two or three big levers that we could pull that would make a real difference? I find it interesting, again talking to Andy Burnham in Manchester, he obsesses about the bus strategy, for example, and the connectivity of buses, and he’s right. TfL in London made a huge difference. We should be a bit more pragmatic and a lot more interventionist in those areas.
Q: Is bold, experimental devolution necessary for this, or could we just ‘Do central government more effectively’?
The missing piece in this is in understanding whether other countries have done this with more success. The macro theory about the public sector and why it’s relevant here. I was out of the public sector for 10 years and I don’t think the civil service and the public sector changed much in the 10 years I was out. The private sector changed itself massively in that decade: the decade of data, tech – now artificial intelligence – and the ability to crunch mass data in in a rapid way and exploit it for profit or not for profit, in impactful ways. If you want to deal with the issues that I keep touching on, and you can sense my frustrations, the parochialism that I experienced in Wales, the lack of capability in some local authority areas. There are the random effects of having a great leader who happens to associate with this part of the country and not another part of the country. If you could have a conversation that was factual and based on some sort of evidential data, you could arguably change the course of policymaking.
In my experience of policymaking, be it at a local, city, regional, national level is that you spend a lot of time arguing about what the truth is. Let’s stick with Burnley. Burnley will tell you, ‘No, you got it wrong, I don’t care what the data says, I don’t care what you clever people in the Treasury think, Burnley is the place to be and it’s going to be the innovation hub of the North West or of Europe.’ Pride of place and ambition are important but it needs grounding in data. Why is it that families in Bradford versus Tower Hamlets have very different educational outcomes, families who are related to each other? As soon as you show people that data, it changes the conversation. When we’re doing ‘Levelling Up’, one of the obsessions should be that we try to get a data room going. It is tough. A room full of data with, what are the 20 metrics that we really care about? I want those metrics for every left behind town every area and so forth. You could really look at it and use that as your evidence.
Q: What helped Manchester pivot away from the old model into a new one, and to take people with them?
You need a narrative and you do need a story. There are other examples. Birmingham is a good example as well, where folk think, ‘Hang on, property prices in London are bloody expensive, I can go and work for Rothschild Bank in Manchester, I can go and work for PWC in Birmingham.’ Suddenly jobs outside of London and the South East start to be interesting. We can never work out where the tipping point comes, how expensive do you have to make housing? How long do you have to make a commute until more people vote with their feet and decided to leave the Greater London area?
Q: How did you think about London’s role in the regional inequalities in the UK?
Unless you believe in levelling down, it is quite hard to mount an argument that the crown jewel [London] of the British economy is somehow a hindrance. The concentration effect is tough but on any metric it’s hard to argue that London is not smashing the ball out of the park. There are lots of public service issues and poverty issues within London. There is a soft underbelly to that, where it’s not to say the whole thing’s motoring and everything is rosy. I would argue robustly it’s a positive, it’s a benefit undoubtedly. That doesn’t mean necessarily, therefore, every marginal pound should go towards London and the South East. You’ve got to pause and say, ‘Well, hang on, what are you solving for here?’ If you’re a mayor of London, a marginal pound is going to carry greater value. But equally if you put it in naked political terms, think about the wasted potential of other parts of the country. If they are being left behind, if they’re being held back,if there are ways to unlock that potential – then by definition, the ability to catch up, you always catch up more quickly. There’s a perfectly rational thing to build a massive high speed railway line up the middle of England, for example.
Q: Was there a downgrading of regional policy under the Coalition government?
It may have been earlier. The devolved administration issues were still large, even when you had a Scottish Prime Minister and a Scottish Chancellor. The Royal Bank of Scotland had created some profound challenges. I remember Gordon was doing a lot of constitutional work that I found tedious but I’m sure it made a huge difference. Those issues were very much alive and kicking, and the financial crisis shone a light on it. The English side of that debate lacked a champion at the time because Ed Balls was a champion in the Treasury when he was there before entering Parliament. I don’t think Alistair would. I don’t think he would say that he was championing that cause. He championed infrastructure and transport and he was strong on that. He was strong on Crossrail. I didn’t see much of a regional angle and, politically, it wasn’t priority of the day. At the risk of stretching it too far, I think the financial crisis shone a light on the risk of concentrations.
One of the first projects I ever did in the Treasury was looking at who pays corporation tax. The punch line at the end was that a small percentage of companies actually pay any corporation tax. Of those who do pay, 25% of the entire corporation tax take comes from banks or financial services. That sparked a bit of a debate in the Treasury. Is that okay? What are the concentration risks? I remember Alistair when he came in in June 2007, he asked a variation of that question – ‘Is it okay to have this financial services concentration?’ I think that did make people pause and think. Especially, what does this mean for the resilience of the British economy? The concentration of financial services in London and Edinburgh led to a debate and question around the concentration risk there. But nothing came of it. The primary policy focus was to sort out the financial crisis and then worry about fiscal policy and where we’re headed. If I’m brutally honest, I don’t think we had the bandwidth at the time to follow through those observations around concentration to policy solutions.
Q: Was the Coalition’s role, then, to cut back on capital projects?
I think that is fair. The top of the Treasury were very consistent in the advice they gave to Alistair and to George. I did that transition. I remember Nick Macpherson, who was the Permanent Under-Secretary, was very consistent in his advice. I wouldn’t critique them for telling people what they wanted to hear. You’d never accuse the Treasury of doing that, quite the opposite. They love an argument. I think they’ve gotten used to a dynamic where the Treasury would say, ‘The public finances are screwed, we need to do something about it, we need to tighten by X’, knowing that Alistair would say, ‘We could try and do 80% of X.’ And then when it goes to Gordon, he’d say, ‘We’ll do 50% of X.’
Treasury officials were baking in a negotiating margin, not in a devious way, but that’s what policymakers do going through a rational thought process. Those who were more fiscally prudent saw their day incoming. They felt – in the constructs of a Coalition government with a minor Lib Dem party who were more squeamish about fiscal policy – that the Treasury would be bid down. The problem is we missed that George and David Cameron felt that they had won the politics of fiscal consolidation. At that point you could make a political virtue of it, where you turn cuts into economic competence. You really hammer the Labour Party on the traditional dividing line, which is exactly what they went about doing. The Lib Dems weren’t strong on economic policy. I don’t think they had a really considered view. They just didn’t want to get tainted with the nasty party brush that the Conservatives have been tainted with in the past.
I think George is right to regret some of the Capex cuts because they were cuts done, I wouldn’t say for political purpose, but they were recommended by the Treasury in a world where they expected more pushback. It fitted the political narrative of the time to go ahead with them. I bet if you asked George, he will tell you he really regretted cutting Sure Start, which was the first policy I worked on in the Treasury in 2000. There were examples where Sure Start is a brilliantly local policy because you’re basically targeting small pockets of deprivation. It could be in the streets of Islington, or wherever. It was a very impactful programme. I think there were a couple of things there where George regrets. But then there were wider things that they were right to cut back.
Q: Do you think the moves towards area-based devolution, especially the creation of Combined Authorities, has been a step forward? Has that addressed some of concerns you raised for the 2000s?
I do think it is a step forward. I think it’s created an industry around itself, which is interesting. If I relay an example to you from my days in the private sector. I didn’t think I’d ever get asked about local policy or regional policy, but someone would pay us good money to do it from a commercial perspective as you had plenty of companies wanted to understand how to do business in Birmingham. They said ‘Help me understand the West Midlands combined authority’. Or ‘Help me understand how they relate to Birmingham City Council and the local MPs and how it works.’
We found ourselves doing a project there. We did a project in Cambridge. We did a project in Manchester. They’re not public policy projects. These are projects where you have an incumbent operator or you have somebody looking to invest and they want to understand the governance of the area. I saw that as a massive success. It’s a sort of slightly odd way to answer your question. I saw it as a massive success that a global company – these were top of the FTSE or equivalent companies – cared about what was happening in Birmingham. It was a profit driver for them to get it right. On that basis, I do think it’s moved the needle. I think Teesside is a great example, West Midlands is a good example again. I don’t want to make a party-political point, but in the narrative around the Red Wall you have to Conservative mayors there and that is interesting. It arguably changes the dialogue with the private sector as well.
Q: What do you think are the key lessons for us to take away?
Two observations that stuck with me. One is about public sector pay, which is clearly very topical at the moment. I remember in 2010, sitting around the Cabinet room with David Cameron and George and Nick Clegg and Danny Alexander. We went around the table and Prime Minister of the day Dave Cameron said, ‘Okay, I want each of you to put on the table one thing that would make a substantive difference to economic growth and discount any political constraint whatsoever. That’s my risk, my judgement, I don’t want any second guessing.’ We went around and quite a lot of them were ‘more transport’ or ‘more infrastructure’. I went for my pet project of public sector pay. I had an ah-ha moment when I was doing regional policy: most policy is made in London, so we think that the private sector far outstrips the public sector in pay. That is not true – or it wasn’t true – in Northern Ireland, nor in the North East, or the majority of regions of the United Kingdom.
When you start to think about that, you think the public sector and public services has enormous buying power, and enormous power in shaping or distorting the local labour market. I said to David at the time: regional pay bargaining, you’ve got to break national pay deals and you’ve got to deal with public sector pay. You’re not earning 150% of what you were doing as a starter salary in the private sector in the North East by going to work in a job centre. I think there’s an interesting debate to be had about the distorting effects of the public sector in that regard.
The second one is an insight from my time in Number 10. The vaccine rollout programme was a fascinating case study in the relationship between public authority and different communities around the country. It was a life-or-death moment. We did have unbelievable data. It was one of the few examples where the data was tip-top. We could cut it in different ways. We could cut it regionally. We could cut it by ethnicity. We could cut it by age. You saw some very clear patterns. What it said to you, was, number one, ‘Don’t always cut things geographically because you might get it wrong.’ You might get it wrong as a policymaker if you just look at it geographically – it’s a factor but it’s not the only factor. Then if you’re trying to work out the impact of policy, start by asking: ‘Is anybody listening?’ Does government in the broader sense, not just central government, carry any authority? It’s no surprise that we struggle most with black Afro-Caribbean communities, for example, more so than black Africans. We were in that sort of granular detail. Where are the leaders of those communities? How do we tap into that leadership? How do we make ourselves relevant? Thereason I raise that is as we went through RDAs, city regions, I don’t think we really thought what is the relationship between public authority and citizen? The vaccine programme just gives you an unbelievably rich case study of that.
If I took away one lesson from regional economic policymaking in a spatial setting, over all the different seats I’ve had, it is: don’t obsess about a particular framework or a particular model. The wonderful thing about countries is that they’re not uniform, and things can happen by chance. Things will grow in areas where they ought to. No government set out to have a video games conglomerate concentration in Dundee. It just happened, and it’s amazing that it happened. We should spend more time thinking about how the public sector gets out the way at the right time and what the real enablers are: it’s infrastructure, higher education, transport. But don’t go beyond the brief. Don’t worry if governance varies and this changes because really good leaders will test the boundaries of any governance you put in place. That’s exactly what they should do.
ENDS