Ed Balls was Shadow Chancellor, 2011-2015; Secretary of State for Children Schools and Families, 2007-10; Economic Secretary to the Treasury, 2006-07; Chief Economic Adviser to the Treasury, 1999-2004; and Economic Adviser to the Chancellor, 1997-99.
This interview was conducted on 8 August 2023.
Q: By way of an introduction, could you tell us about your role in regional growth policy over the past few decades?
Before I was involved in politics, I was a graduate student at Harvard University. The research that I did there, with Larry Summers and Larry Katz in the economics department, was on the UK’s North-South divide and the regional pattern of persistent unemployment differentials. We particularly focused on disparities in long-term unemployment for younger and older men, which is where the problem then was. That led to a paper I wrote with Paul Gregg for the Social Justice Commission in 1994 called “Why Don’t Men Work Anymore?”, which focused on what a Labour government needed to do to tackle persistent unemployment.
I worked with Shadow Chancellor Gordon Brown from 1994 to 1997 as his Economic Advisor and was Chief Economic Advisor to the Treasury up to 2004. I was involved in all aspects of budget, public spending, and economic policy – which included the New Deal jobs programme and the establishment of the Regional Development Agencies.
I was then a treasury minister and Cabinet Minister from 2007 to 2010, leading the Department for Children, Schools and Families. The decision made by Gordon Brown in 2007 to break education at 18 between two departments meant that many parts of the education brief which have a more spatial economic policy dimension – universities, students, adult skills – were in the department led by John Denham. I covered children and schools policy, from the age of 0 to 18: nursery, including Sure Start and all aspects of family policy; schools; colleges up to 18, which included the September Guarantee for school leavers and raising the education leaving age to 18; also youth justice jointly with Jack Straw and children’s health with the Health Department. The core parts of this Children’s Department were much less devolved or decentralised.
When I was Shadow Chancellor, there was a rolling debate between 2010 and 2015 about what the Labour response to the George Osborne ‘city deal’ reforms should be, following his scrapping of the RDAs. In different ways over the whole of my career, I’ve been involved in thinking about regional divides in the UK.
Over the last three years I have been heavily involved in this regional policy project and spoken at great length to many policymakers for the interviews that underpin it. But in this interview, I will ignore all that and draw on my previous government experience.
Q: What stands out as the real success of policy over the decades you were involved; and what stands out as the ongoing frustration?
I think you’d have to start by saying that if the goal was stronger regional growth and tackling regional inequalities, then we didn’t succeed.
Our focus in 1997 – and the focus of, not just my work in the previous 10 years before 1997, but much of Labour’s – was thinking about the scars from the early 1980s: deindustrialisation; the persistence of long-term unemployment; with a concentration of disadvantage in the northern regions and former industrial areas. Although the same scars were there in the Midlands, and parts of the South East as well.
If you are measuring that record in terms of the persistence of unemployment and employment divides, we made substantial progress – in particular, narrowing gaps in youth unemployment. But, if you focus on productivity, not only were there regional divides, these regional divides grew over that period. If you look at those outcomes, you’d have to say we didn’t succeed. In some ways, things in productivity got worse.
If you’re testing success in terms of whether we established an intellectual approach which became consensual, then in 1997, the Conservatives opposed the national minimum wage, but now it’s cross-party supported; in 1997, the Conservatives opposed Bank of England dependence, but it became cross-party; but at no point can you say that there has been a consistent cross-party intellectual consensus around what to do about growth and regional inequality, even whether it was something that was important to address.
You asked about successes and failures. I think the success, and I think this is a big success, is that in 1997, when Yvette [Cooper] had just become a member of Parliament in West Yorkshire, it was very hard to have a collective conversation about economic prospects for West Yorkshire. Leeds, Wakefield, Kirklees, Bradford, were all seen as separate places with a separate view of their strengths, their weaknesses, their future. I think also that there was a historic culture which accepted that while some places were succeeding, other places were managing decline. In Wakefield, we had [European] Objective Two status, and this was seen by local politicians as not fair because Sheffield had Objective One status: “If only we could persuade people that actually, things were bad here as well, maybe we’d get more money from the European Union.” I felt strongly that this was not the right kind of culture.
I think you saw that same lack of common identity and common focus in many other parts of England: there was very little of that kind of conversation in East Anglia, the East Midlands – places were similarly at loggerheads; and a common agenda was still nascent in Manchester, weaker across the Northwest.
So, the success was building a sense of mutual dependency, between places close to each other, about their long-term future. That has become much more understood, entrenched, and valued. There is now a collective conversation about, “what can we do for the West Yorkshire economy?” People in Leeds know that what’s happening in the towns around it really matter, and vice versa. It’s not only in Manchester, where you now have a sense of cooperation across local authorities for the greater good. You see it in Yorkshire. And in London and the wider South East. People in Stevenage or Reading know that London’s success is something that they are part of, and London knows it needs its satellite areas.
Although they didn’t last, the Regional Development Agencies played a very important role in forcing people around the table and making them come up with a plan together. I think that has laid the foundations for what we’ve seen in more recent years through the Combined Authorities. There’s much more sense in places, as I said, like West Yorkshire, in Wakefield, of ‘what are we good at and how can we build upon our strengths’, rather than that old dependency view that we should persuade people we’re doing less well and get more money. I think that is a strength which has endured over the last 20 years.
But the failure was not to build a collective, cross-party sense of what needs to be done. We haven’t succeeded in doing that across political parties. Even across Whitehall, many of the debates and divides which characterised the Whitehall I knew in the late 1990s are still being talked about 25 years on. Whether it’s within Whitehall, or across England, or across the UK, whether it’s in politics or administratively: have we managed to forge a common view of what needs to be done and to get everybody signed up to it? No.
Q: Are you an optimist for the regions and a pessimist for the centre?
I think that the Combined Authority model in some places, the Mayoralty in London, and devolution to Wales and Scotland, have all been successes. The scars caused by the 2016 referendum and the divide we saw between cities and towns across the UK has, I think, persuaded politicians that something’s got to be done – that we need to do it better than in the past.
I think there will be a competition at the next election between the Conservative manifesto and the Labour manifesto to show that they’re the ones who would be better at tackling persistent low productivity growth, while also reducing regional divides. That competition was not there in 2010, and it was not there in 1997. That makes me more optimistic about the role of the centre in future.
Q: When Labour entered office in 1997, to what extent did it feel like you were building on an existing architecture (European programmes; the Single Regeneration Budget), and to what degree was there a break in policy?
I think in retrospect, in the move from the 1980s to the 2000s you see a substantial shift from a very centralised approach to economic policy in the 1980s towards embracing decentralisation. This has continued post-2010.
The break wasn’t in 1997. I think, if anything, the conversation back then about regions and spatial policy was subsidiary. It was not a big part of the 1997 manifesto. It was not a big part of our preparations for government at the Treasury or the Blair agenda in Number 10. We were focused on the need to move forward on delivery, and delivery was very nationally focused. We wanted to tackle the North-South divide in unemployment. How were we going to do that? We had a national programme called the New Deal for Young People, driven across the UK by the Treasury and the Department of Work and Pensions and financed by a windfall tax. To tackle poverty and make work pay, we had the Working Families Tax Credit and a National Minimum Wage – all UK wide. In education policy, we were focusing on literacy and numeracy and strengthening, testing and assessment across all schools – from the centre. If you go through department by department, the early focus on delivery was about using national levers to deliver national outcomes for the benefit of all, but with a focus on delivering results in the places that needed it most.
The only real voice for spatial policy, pre-1997, was John Prescott, based on the work he had done with Bruce Millan, coming out of their shared European policy experience. His Department for Transport, Environment and the Regions was spatially focussed from the start. The establishment of the Regional Development Agencies, which flowed out of a paper John had written in Opposition, was something which went into the manifesto because that’s what John Prescott wanted. I don’t think it was hugely embraced by anybody else.
You then see an evolution occurring, particularly within the first parliament – and absolutely an evolution in Treasury thinking. From a Treasury point of view, we knew our task was not just about tackling unemployment divides, but also raising the trend rate of growth. We focused on identifying the barriers to growth: where is there underperformance and what can we do? That pushed us to look area by area, locality by locality, to try to understand those regional productivity divides; to wonder why, if London is succeeding, other regions can’t replicate or play to their strengths in the same way? That shifted the focus to places.
From the start, Gordon Brown and John Prescott were working closely together on environment and transport policy, particularly in the 1998 Comprehensive Spending Review. John wanted to focus on the RDAs, we responded to that. So regional policy – the RDAs – became not simply being something for Dick Caborn and John Prescott, or simply a re-badging of the Single Regeneration Budget, but something which we at the Treasury saw could become more ambitious. That is why, at the Treasury, we developed plans for the Single Pot: the idea that you would start to pool resources from a number of departments, and give RDAs the flexibility to drive policymaking in their localities and also to get local government working together. That is something which I think Gordon and John Prescott saw as an opportunity by 1998/99. I certainly did.
It was also something the new Treasury Growth Unit was keen to embrace. John Kingman’s work, leading that unit, was to look at productivity drivers. We’d had some work done by McKinseys which looked at the productivity barriers to UK economic performance and what we could learn from other countries. Their focus was very spatial: they looked at the barriers in the planning system barriers to development. It wasn’t just about competition, it was also about planning and whether places were making the most of their opportunities. To be fair, Peter Mandelson, when he moved to the Department of Trade and Industry, was also looking for levers and reach and I think he also saw the RDAs as an opportunity for him as well. And John Prescott continued to champion that spatial approach, first with the Thames Gateway and then with is Northern Way Taskforce, which he invited me to join, and which linked up the three northern RDAs, plus transport, business and, crucially, the big universities to draw up a shared growth plan. The prototype northern powerhouse plan, if you like.
So, for this range of different reasons, the RDAs and tackling regional divides went up the policy agenda from 1998 onwards. The fair thing to say is that Tony Blair and Number 10 didn’t oppose it, but they didn’t really embrace it either. It wasn’t really part of their thinking, it wasn’t a delivery priority for Tony. John Prescott was ambitious for local government. Gordon was cautious. Tony Blair was very sceptical.
There were times when Gordon Brown and Tony Blair opposed things that the other was doing – often, by the way, for very good reasons. Thank goodness they did. There were also times when they worked together very strongly. But there were times when they just let each other get on with it. The RDAs and this growing regional focus was one of those issues: something on which I didn’t find I had pushback from Number 10; but, at the same time, we didn’t get huge enthusiasm either. What that meant was that, as we moved forward with the Single Pot and tried to deepen engagement, to the extent that there were sceptical Cabinet Ministers resisting, especially at Education, we couldn’t really bring Number 10 in on our side. They weren’t going to row in and support. I think the same thing happened ten years later when George Osborne and Greg Clarke attempted to drive decentralisation through city deals. Number 10 wasn’t opposing it – but was it really central to how they were thinking? Probably not.
Q: Were RDAs part of the ‘national, central government delivery mindset’ you describe, or were they something different?
I don’t think there was a voice at the table in 1997, making the argument for decentralisation or devolution in England. In Scotland and Wales, there was absolutely a voice at the table – and there had been pre-1997. It was very central to the thinking of John Smith, Gordon Brown, Tony Blair. They were responding to a demand for a recognition of identity but also the need for economic levers. Historically, the Scottish and Welsh push for devolution had been economically focused. It led to the calls for referendums on devolved parliaments, to determine a way forward for the whole of Scotland and Wales.
I don’t think we felt under any pressure at all from a similar political desire for self-determination and for identity in any big region of England, with the notable exception of London. People were Londoners before they were from Islington or Bromley. But nobody was West Yorkshire before they were from Leeds, Wakefield or Bradford – perhaps Yorkshire, but not West Yorkshire. Nobody was a North Westerner before they were from Manchester or from Liverpool.
Also, the hangover from the fights in the 1980s with local government, which had been deep in Conservative thinking, was absolutely there in Labour thinking as well. This wasn’t in a destructive or anti-local government way. In the early period, it led to the Best Value regime with central government trying to monitor, support and encourage local government to do better at doing the things it did. People thought they were probably not doing things as well as they could have done. But we wanted them to improve and do more.
But to the extent that we were looking at new priorities, like in industrial policy or in housing, we were looking for national delivery arms. Education was not being delivered through local government primarily, nor was health policy, nor was tackling child poverty. To the extent that we needed a delivery capacity in an area where we were lacking it and which could drive productivity, the parallel with other departments and other priorities would have been to look to find a way to deliver that from the centre. That is what RDAs were.
There was a particular strand of thinking – which came out of the Treasury, actually, in 1998 – called the New Deal for Communities, which was about very local participation in place-based transformation. But that was a long way away from what we were talking about with the RDAs. The Single Regeneration Budget was a national budget which was being allocated; the innovation was to decentralise that to the RDAs. And as we were talking to other departments, we were pushing them to decentralise into the RDAs: but this would still be money raised through parliament, allocated by departments to be spent area by area, in which Secretaries of State wanted to know where the money was being spent because they felt they were accountable to parliament for the results.
At that stage, regeneration or regional policy was a long way from being locally led. Part of the challenge with the RDAs was that they were an instrument of central government. But they were decentralising and active in the regions. They were active in bringing people together locally. There was local government leader on the board of each RDA; local government had to engage because RDAs had the money. But I think that local government would have felt they had any control.
In the end, that was too big a weakness for the RDAs to overcome. But in my view, we had to go through that phase: the establishment of the RDAs; then the focus on sub-regions as we called them; the idea that there had to be an economic plan which was about functioning economic areas, bigger than local authority boundaries; that the RDAs could say, ‘we’ll put the money in if you guys engage’. We had to do all that, to build the case for local economic leadership, before you could then think that you were going to have local government based leadership. At the time, that was a very distant prospect.
Q: After that first wave of the New Deal and RDA creation, how did your thinking evolve?
The RDAs became a very powerful lobbying focus for decentralisation. They were listened to more than individual local government leaders: in part because they’d been tasked by central government with a central government objective to close regional divides or to raise growth rates in the regions. Therefore, if they turned around and said – and there were very regular meetings with John Prescott, Gordon Brown and other Cabinet ministers with the RDAs – ‘This is what we need you to do’, then the centre was thinking: can we do something about that?
The shift in their sponsorship from the Prescott department [of the Deputy Prime Minister] to the Department of Trade and Industry was a problem. On one level, some of the things that the RDAs wanted to be more engaged in – the delivery of business and innovation policy – were DTI responsibilities. The DTI had…not necessarily more resources, but certainly more locus in those areas.
But the DTI always felt to me to be a department divided. There was one part of it which absolutely thought about places. There was another part which was much more about sectors and thinking about national industrial policy. The big things the RDAs really wanted – to have more influence over planning, more influence over transport decisions, and more influence over adult skills – none of those were in the gift of the DTI.
In the end, under Gordon Brown, then later with George Osborne, it was the Treasury which had the leverage to deliver what the RDAs wanted. Increasingly, I think local government saw this as an opportunity for them too, hence the pressure for area-based agreements and then the city deals and combined authorities. Those were things that they were asking the Treasury for. But there was a lot of resistance internally, in the Cabinet and in Whitehall.
Q: What was your view on what levers were needed in order to drive growth in the regions? And how far do you think the institutional setup supported those goals?
We knew that improving skills needed to be a bigger lever. We had an objective to raise university participation, but we were also very focused on non-university adult skills. But we failed to deliver a greater, demand-led view of what skills were needed. One of our biggest arguments in the early 2000s was our attempt to hand adult skills policy over to so-called Regional Skills Partnerships (local government and RDAs together shaping the way in which, with FE colleges, money should be spent). We produced a paper from the Treasury in 2002 called Meeting the Productivity Challenge: the regional dimension. That paper also focused on the importance of stability, making work pay, employment policy. But skills was one area where we really wanted to decentralise, and we didn’t succeed. The resistance from Education and DTI Secretaries was too strong and Number 10 didn’t engage.
We did talked about the importance of transport infrastructure outside the South East. But I don’t think that was ever translated into tangible policy outcomes. I was talking to somebody recently about how the Elizabeth Line has transformed the journey from Stratford to Central London, the same is true of the journey from Reading to Central London. If you think of living in Stevenage now or in Slough: you have an ability to connect living and working across this huge, integrated, housing travel-to-work area. But from the Transport Department, or in the Spending Reviews, or from the Treasury: there was never a focus on trying to replicate that approach to transport in the other big conurbations or in the subregions outside the South East. I can remember back to the regional transport issues we talked about. I can list them. But did we do enough to then translate that into real policy action? No.
Q: When you spoke about London as an exceptional case within England, you stressed political identity and a campaign behind local government reform in London. But was London exceptional economically? Why did it receive a different treatment to other regions of the UK from the Treasury?
Of course it was exceptional. It was the place that was delivering productivity, growth and tax revenues, massive value-added. That was generally accepted in the conversations we had across England. The idea that London doing well was good for everybody was a common mantra. The talking down of London, or the holding back of London to help other places, was just not part of anybody’s conversation. The institutional governance reforms [establishing the mayorality, setting up the Greater London Authority] comes not just from history or identity, but us wanting to make sure the London economy kept succeeding. It came out of national self-interest and the self-interest of all places.
I remember going to meet the East of England RDA to talk about the way in which Cambridge University was linking up with the research park and opportunities across the Eastern region. In South Yorkshire, too, the Boeing advanced manufacturing site came out of the RDA championing it. Engaging universities locally was a very important step forward in terms of industrial policy, which came from the Northern Way taskforce. Leeds was engaging with its universities around medical technologies. You were seeing that in Manchester in science and advanced manufacturing as well.
But I don’t remember looking at a distributional map of transport or innovation spend and asking whether or not that spending was medium-term optimal. The reality was that, area by area, case by case, department by department, people were spending and prioritising in order to deliver. Quite decentralised actually, within Whitehall. That delivery was, in retrospect, quite short-term and quite Southern-biased.
Q: How did the role of the RDAs evolve?
The RDAs played a very important role in making areas think about their common strengths, but also their common weaknesses and incentivising local government to work together. De facto, the RDAs had become much more sub-regional in their focus by the mid-2000s. There was much more of a conversation about the West Yorkshire Plan and the South Yorkshire Plan, even though there was one RDA for Yorkshire.
I think that the RDAs could have evolved and made themselves more decentralised within each region. It wasn’t clear to me that, for most aspects of policymaking, you needed a Yorkshire-wide or North West-wide RDA. There were some functions, like tourism, maybe big transport questions, where you did, where you had to think across regions. But the direction was to decentralise within the regions.
The result of all this, compared to 1997, was a huge change not just in the economic success of the cities but also their self-confidence and the capability of leadership. In the latter part of the Labour government, pre-2010, we were seeing a new generation of local government leaders emerge. The RDAs helped make that happen. which is why I thought the abolition of the RDAs was the wrong thing to do, ridiculous, vandalistic. The RDAs should instead have been allowed to evolve – by that time, we already had the idea of more cross-boundary local authority leadership, which happened with the Combined Authorities. I think that was the direction in which we were moving pre-2010.
Many of us were quite sceptical about elected mayors, because we had seen what had happened in some places where they’d been tried, like in Hartlepool. We worried that the election of a cross-border mayor might take us backwards, back to those old divisions and animosities: a Leeds-based mayor who wasn’t really thinking about the other localities. I think that was a real worry in Greater Manchester as well. I know that would have been Richard Leese’s concern. The worry in West Yorkshire was that we would elect Dickie Bird, the famous cricket umpire and character: that he’d be the only sufficiently popular person across the region.
In fact, with a new sense of confidence, people instead came to think: who’s the right person to lead Greater Manchester, or Liverpool, or the West Midlands, or West Yorkshire, into the future? I think my scepticism about elected mayors was the right place to be in the early 2000s. I think things have changed in a positive way.
My deep worry in the early 2010s was that when the RDAs were being abolished, they were replaced with Local Enterprise Partnerships which were weak and underfunded massively compared to the RDAs. Overall capital spending was being cut drastically across the whole of the UK and undermining local government capacity along the way. The pattern of local government spending restraint was disadvantaging the places which had a greater economic growth need as well as social need because of the way in which the cuts fell. The danger was that rhetoric about decentralisation and devolution was a second-class palliative compared to what was really going on. That would have been my worry at the time. I think there’s a lot of truth in that.
Q: Some of the people we’ve interviewed have suggested that, in times of national crisis, central government can squeeze out space for local and regional initiative. Was that your experience, during and after the Financial Crisis?
I have the opposite view. We’ve had two once-in-a-century crises in the last 15 years: a global financial crisis and then a pandemic. Both of them risked pushing the economy into recession or depression. In both, first under a Labour government and then under a Conservative government, huge fiscal resources were mobilised at a time when monetary policy was ineffective in order to stave off depression. The question then becomes: how do you make sure that you deliver effectively? In both periods, we saw the importance of local delivery.
I was a member of the Economic Cabinet subcommittee, which Gordon Brown chaired, during the global financial crisis. Alistair Darling was there with him as Chancellor. All of us were under huge pressure to deliver real action to keep the economy growing. Is the Building Schools Programme happening? Is house building happening as we wanted? What are we doing about the Car Scrappage Scheme? How do we make sure that resources are being mobilised to the RDAs to keep the economy growing. All about local delivery. It was the same when it came to the pandemic. During the pandemic, there was an early period when things were very national with Test and Trace. The vaccine was very national. But in terms of actually making lockdown work, that only worked because of local leadership.
Peter Mandelson was obviously a champion of this partnership working during the financial crisis, which he championed with a continental European intellectual veneer. The reality was that this was a period where we had to actively spend money to keep the economy growing. We were looking for delivery partners to make sure that actually happened. When you look for delivery partners, you were looking to local authorities; to groups of local authorities who were already working together because of the RDAs; or the RDAs themselves. This impetus, which came out of the last two years of the Labour government, paved the way for what then happened subsequently with Combined Authorities.
Q: So your view is that the legacy of RDAs is that they created the conditions for local agency. Is that not overly rose-tinted, as everyone was just trying to survive those early years of 2010?
I think the RDAs were patchy in the quality of their analysis and the quality of their leadership. There were parts of the country where you didn’t really see their rationale or their purpose. It was always hard in the South East, spatially diverse with London missing from the centre. It was hard in the South West because of its scale. But there was some great leadership and some great strengths. The further north and west you went, the more the RDAs were valued partners.
Yes, there would have been some Local Enterprise Partnerships (LEPs) who were better than others. In general, they were powerless and resourceless and leverless. De facto, that gave an impetus to a new era of local authority-led policymaking. The Combined Authorities had to take over.
I spoke at a number of conferences with LEPs in that period. I think the LEPs, in isolation, were a massive step backwards from what happened before. That was the vandalism. You could absolutely have evolved the RDAs into a new subregional, Combined Authority-aligned model, very sensibly. You didn’t need to scrap them and start again; that was really just a way to cut budgets.
Q: How did your thinking change in the run-up to the 2015 General Election?
I worked with Andrew Adonis in that period – he was doing a piece of work for Ed Miliband. We were not inclined to impose one model of what the RDA successor body should be. We certainly weren’t saying, ‘let’s go back to the RDAs’. Nor were we saying, ‘You have to go for the Manchester model’. On the other hand, I think we were worried that while there was a lot of attention and focus on what was happening in Manchester, huge parts of the country were not even at the beginning of engaging in the new combined authority agenda. That was a big problem from our point of view. We were looking for comprehensiveness, if not around a particular model.
In Opposition, you are always constrained by fiscal reality. We thought the Combined Authorities were underpowered in resource terms. Let’s be honest, for all George Osborne’s championing of the Northern Powerhouse agenda in that period, there wasn’t a lot of power in the engine room. In recent years, we’ve gone through a rollercoaster: at times it’s looked like levelling up policy was actually a return to 1980s/early 1990s allocation of small pots from the centre, small amounts of money to lots of areas to do tiddly things. In recent months it looks like we’re back on track, certainly evidenced by the conversations we saw in the last Budget with Greater Manchester and the West Midlands. More serious engagement with genuinely empowering economic leadership – markedly beyond what George Osborne achieved.
Q: You mentioned earlier the 2016 Brexit referendum and that sense of some places being “left behind”. What was your thinking on how the different parts of a regional economy relate to one another? And is there a risk of Combined Authorities being biased towards city centres?
In 1997, I was worried by the ‘Core Cities’ agenda because the core cities were narrowly boundaried, big cities. It excluded the towns, and in some cases other cities in the core city’s wider locality. Saying they wanted to be like London, without realising that London is an amalgamation of subregional towns, was a misunderstanding of London’s agglomerating success. That worry persisted in some of the debates which were happening in the late 2000s, there was a danger that towns were feeling excluded from this narrowly big city-led agenda.
I think to be fair, since the 2010 reforms, that isn’t how it’s turned out.The Combined Authority model has shown that you can have effective leadership which stretches outside narrow city boundaries. You can include both the cities and the towns in a locality in a common agenda, but you have to work at it. As I said, it worries me there are large parts of the country which are excluded from that. I don’t think you can have areas which are simply left out. I worry about Blackburn and Burnley.
If you look at the 2016 referendum result in the West Midlands or in Greater Manchester or in West Yorkshire – areas with cities and towns, part of effective Combined Authorities which were moving forward together – they had very different patterns in terms of voting, with cities voting more for remain and the towns voting more for leave. It’s quite hard to blame that on the Combined Authority model or to say that Leave voters were all in places that have been left out or left behind. I don’t think the economics suggests that the Leave vote was simply economically left behind areas. I think it’s more complicated. I do think that showing people that your response to globalisation is sharing prosperity is an important as, persuading people that change is not always alienating and excluding. That is about the way in which we invest in infrastructure and opportunity and the quality of place. I think the Combined Authority (or the subregional model) is part of the solution rather than part of the problem.
Q: Then was it austerity, or a failure to create a sense of share prosperity, that drove the 2016 result and the politics of “left behind places”?
I think that there is truth in that, particularly amongst older voters for whom change was fast and rapid and destabilising. But if you look across Greater Manchester or West Yorkshire, I don’t think the pattern of economic difference is enough to explain the pattern of voting difference. So, there’s something else happening, which is not simply about economic outcomes.
Q: Was there a common Whitehall view on devolution? The most frequent candidate we hear for a “centralising” department is what is now the Department for Education or, in your time, Children, Schools and Families. Was that your experience? Did you feel that there was a centralising tendency within the department?
I think there is some homogeneity across Whitehall, some truth in the idea that there is a “Whitehall/Westminster” view – some of it is good and some of it’s bad.
Whitehall departments work well when they have a Secretary of State who really wants to deliver and makes things happen. That is less risky for departments than handing over power and hoping somebody else will do it instead. Secretaries of State and Accounting Officers are always worried about scrutiny from parliament, and the vast majority of the revenue is being raised through national taxes through the Treasury for which ministers are accountable to parliament. Therefore, if you hand over power, you are still accountable for the outcomes. That does not stop decentralisation. But if you’re going to genuinely decentralise and drive innovation, that has to be matched by inspection and public information and the ability of the centre to step in when things go wrong. If not, as a Secretary of State, you just can’t let that decentralisation happen. That is true whether it’s health, education, transport, anywhere.
Similarly, if Number 10 and the Treasury are saying, “This is really important”, then a that’s very powerful impetus. If the Treasury is saying something is really important and they’ve got the money, then you have to engage with that. Although once you’ve got the money, as a Secretary of State, there’s a bit less pressure to do what the Treasury wants. But if the Treasury and Number 10 are both saying it, and you know it’s not just about the money but it’s also about your job – because your job depends on the Prime Minister – that is very powerful. Those two pressures are, I think, common across all Whitehall departments. You could add to those a residual scepticism about whether or not local government will actually have the capacity and the understanding and the ability to really make difficult decisions like Whitehall can. There’s commonality in that too.
So, if the Treasury is not engaged, nobody has to engage in decentralisation. If Number 10 is not that bothered, it takes the pressure off every department. If local government is, in a particular area, failing then Whitehall is going to step in because you’re accountable to parliament and decentralisation is too risky. Those things are all common.
Having said all that, there are undoubtedly differences between departments. Part of those differences, department by department, reflect the attitudes of particular ministers at the time. Partly they reflect history. And partly they reflect the nature of delivery.
Take education as a good example. Education policy was taken from local authorities in the 1980s. But it wasn’t simply centralised. It’s true on one level that there’s centralisation, but there’s also great devolution in the sense that, as a Secretary of State, it’s very hard to make anybody do anything: you’ve got 22,000 different head teachers, who are in charge of their budget, with their own governing body; they work within the law and the curriculum; but unless you persuade them it’s the right thing to do, they’re quite good at just not doing what you want. There isn’t an intermediary between the Secretary of State and the individual school, and that is, I think, a weakness in our system. In my time I only had responsibility up to 18, and there was no effective governance tier or local authority role between me and schools (other than in terms underperformance and failure). That was a problem. It was too centralised and too decentralised.
As Secretary of State, we had a drive called National Challenge, which was about making sure every school was succeeding. I was very clear that it should be the local authority’s job to make sure that they had a plan for every school. I pushed them very hard to do so and ended up having big rows with Kent and Gloucestershire, Derby and, I think, Northamptonshire, all of whom were not gripping school improvement. At that time, the local government view was, ‘Why are you having a go at us about this? Is that really our job? I know the law says we’ve got these intervention powers, but frankly, we’ve not really been engaged in this area for so long’. I was trying to revive the improvement function of local government. But that was a bit of an aberration compared to the wider philosophy of the previous 30 years.
What frustrated me in my Treasury time was that we were never asking the Education Department to hand over pre-18 schools money to the RDAs, only post-18 adult skills money. We were pushing hard for that to be something which was at least dual key, determined between the centre and RDA local authority leadership. The Education Department at the time did not want to engage in that at all. The Department of Work and Pensions: they had 126 different employment localities, who were all implementing nationally set policies, supercharged by the New Deal. There wasn’t an intermediary tier between them at the local authority or subregional level. But over time, there has been a greater willingness at DWP, depending upon the character of the Secretary of State, to allow for innovation, flexibility, and local input in employment support. Less so in adult skills.
Q: As Education Secretary, were local authorities or RDAs ever coming to you and actively lobbying for more power over schools?
No. For schooling up to 18, it was not on the agenda at all. I think if you sat down and had a conversation with local authority leaders, on pre-18 policy, they would all say that battle had been long fought and lost. If anything, I was the ones saying, ‘I would like local authorities to play a greater intervention role in terms of school improvement. I don’t mind whether this school, which is underperforming, becomes an academy or cooperative trust, or gets into some other kind of partnership. You just need a plan’. Some places really embraced that. Other places just said, ‘really, is that our job anymore’?
Q: Was that scepticism about local leadership stronger from local authorities or was it stronger from within the department?
When I went to the Local Government Association, or the conference of the Leaders of Children’s Services, or the Local Government Chief Executives conference and said, ‘This is your job’, I think both the department and the local leaders were a bit surprised. When it came to children’s policy around teenage pregnancies, or early years, or Sure Start, or early intervention around criminal justice, absolutely local governemnt saw that as part of their job. Putting together the idea of the Children’s Trust with all local public services cooperating to improve the outcomes for children…that was something that local authorities wanted to lead and thought it was absolutely part of their job. But they were a bit surprised when I said we would have schools as part of those local Children’s Trusts. Some schools were very enthusiastic. All were surprised they were going to be invited. Because the culture of schools and local children’s services had become quite separate. I think detrimentally so.
Some civil servants were sympathetic. But there were undoubtedly people who had spent a lot of their careers working on academies who didn’t want local authorities anywhere near their schools. One of the early changes I made was to abolish the entry fee for new sponsors of academies. I said that if local authorities or further education colleges or universities wanted to sponsor academies, that was fine by me. There would have been some parts of the department which would have thought that was a terrible thing; and other parts of the department who thought that was a completely and sensible thing for us to do. If you cared about every child in every area, of course you’d do that.
But the bigger point is, if you think of the conversations we had in the 2000s, or if you look at the negotiations which have happened around the Combined Authorities since 2010, to the extent there’s been a row, it has been about why adult skills policy has not been devolved. It wasn’t really about schools policy up to 18. What I was trying to do was make local authorities do what they were already supposed to be doing better. The idea of a new step forward in decentralised schools leadership at the combined authority level? I think there’s a case for it, but that wasn’t part of what we were offering, and nobody was asking for it.
Q: Were there challenges with other particular departments, say Transport?
The Eddington Review, a spatial transport review which the Treasury was very keen on in the mid-2000s, was focused on solving local transport issues which could have a big impact upon productivity and growth. Funding was always the issue. When it came to the broader strategic question about spatial planning and bigger transport projects, I didn’t get the feeling that there was a huge amount of transport enthusiasm for that to be decentralised. That was my impression.
Q: What stands out as the innovation that we should be taking forward as we think about addressing regional growth policy in the future, and what do you identify as the biggest barrier today?
The biggest innovation was the Single Pot, allowing – region by region – for there to be a local debate about priorities and how to spend resources. That gave the RDA leverage to require other players – basically local authorities – to put old rivalries aside and come to the table and work out a common plan, while putting their own cash on the table. That was the only way to unblock the RDA money. I think that changed culture and built collaboration in a profound way. I think it laid the basis for the post-RDA combined authority world. You didn’t need that to be done region by region, it worked well subregionally, but it had to be done locally, outside of Whitehall.
The Combined Authority model has become a way for local authorities cooperating to make decisions where they all have skin in the game, using money over which they have power to make choices; there’s real fungibility. I think that was the big innovation. It forced not just local authorities to work together, but also to focus on asking, ‘What is our strategy and where can we do things which will deal with barrier and make us better off? What are the things we’ve got to address to tackle weaknesses?’ It broke away from the dependency regional policy mindset of the previous 70 years, which was passive and receiving. Regional policy used to be ‘We get grants and if we can persuade people that we’re doing badly enough, we’ll get bigger grants’. The change was to get genuine economic leadership and strategy. I think the Single Pot was the thing which made that happen.
That is the thing which you’ve got to keep in the future: the idea that across a big-enough economic area, you make choices and spend money or make planning decisions to play to your strengths rather than being sort of continually blocked by the most local area objecting, or by people simply wanting money as compensation for failure.
I think the biggest obstacle is the nature of England, although this is true within Scotland and Wales as well. There are such big differences in income and need at such close proximity but which cross local authority boundaries and also Combined Authority boundaries. That makes it very hard for decentralisation to become genuine devolution by which I mean where there is local revenue raising and the accountability that flows from that. It’s very hard to have meaningful local raising of tax revenue area by area, it would lead to big inequalities and big disputes. It means that there is always a check on how far you can go down the road of devolution. And that means that the Westminster parliament – where most of the money is being raised and therefore where the ministers are located who are responsible for spending that money – will always be a check on devolution, an obstacle.
A second obstacle is that while fairness demands that the decentralisation or combined authority must be comprehensive, it’s hard – even in the easy areas where is great local history and common identity – to get people to work together. In some parts of the country, it’s very hard indeed. But if they don’t join in, that delivers a big unfairness issue for the people who live in excluded areas.
My biggest frustration is that to really make a difference, you have to have stability in the institutional regime for long enough. We just haven’t managed to do that. Consensus is often seen as a dirty word in British politics, but consensus is the only way in which change becomes entrenched. Back in 1999- 2000, the Conservative party thought the National Health Service was a failed model and that we had to move to insurance-based funding. By 2010, David Cameron said, ‘I’ll cut the deficit, not the NHS’, because the National Insurance rise and the subsequent reforms entrenched the NHS as the consensual model. The same is true of central bank independence, despite the best efforts of Liz Truss. The same is true with the national minimum wage and tax credits, now consensual. But we have not managed to entrench a consensus around how we empower localities to lead in their areas and how to decentralise resources and decision making. That’s a failure.
ENDS