Gordon Brown was Prime Minister and Leader of the Labour Party from 2007 to 2010. He served as Chancellor of the Exchequer from 1997 to 2007, the longest-serving holder of that office in modern history. He was Member of Parliament for Dunfermline East from 1983 to 2005, and later Kirkcaldy and Cowdenbeath from 2005 to 2015.
This interview was conducted on 10 May 2022
Q: What was your role in growth and regional policy over the past few decades and what have we learned over the time?
I was first involved in regional policy in the 1980s when Neil Kinnock and John Smith appointed me to be the regional policy spokesperson. I followed John Prescott, who had written documents about regional policy across the whole of the United Kingdom and had done tours and published plans for each area. I always saw the imbalance in the UK economy as the issue. This was not a Northern problem. It was a British problem. That you could have high levels of unemployment, forced emigration, deprivation growing in one part of the country; and you could have overheating, congestion, escalating house prices, inflationary pressures in another part of the country. Regional policy, if we were going to get the resources for it, had to be good for the whole of the United Kingdom and not just good for the poorer regions.
I am aware that over the last 40 years, the structural inequalities that existed then, partly because we’ve seen these years of deindustrialisation, continue to exist. It is shocking to think that some of the regions in England, and Scotland, and Wales are poorer than many of the regions even in the eastern part of Germany. Life expectancy is probably the most visible signal of how the richest regions are way ahead of the poorest regions in terms of conditions of living. You have crime, obesity, low pay obviously, you have levels of unemployment, youth unemployment, and so on. It really is a failure of British policy over the last fifty years that we haven’t managed to narrow this gap between regions.
It starts off as a productivity gap and therefore you’re not in a position to have the growth that some of the other parts of the United Kingdom and the rest of Europe have. Unless you intervene successfully, and are prepared to spend public money to do so, then the gaps increase. The purpose of our biggest initiative on regional policy, the creation of Regional Development Agencies, was not just to do the cosmetic: I think the levelling up agenda is very cosmetic, about making the town centres look better, having a bit more policing here and there, making some short-term industries look better. The Regional Development Agency policy was premised on the idea that we wanted to bridge the productivity gap between different parts of the country. We wanted to create clusters of economic growth. And that is still the issue, that we’ve got to do more to create clusters of economic growth.
What have we learned? We’ve learned that even with Regional Development Agencies there wasn’t enough local control. The cities, the areas around the cities, but also the towns, never became centres of economic initiative in their own right. It was partly the quality of the Regional Development Agencies. It may have been, in part, the strategy as well. That was our biggest initiative and it should have done a lot better.
There were successes: a lot of home improvement, for example, by neighbourhood community programmes. The New Deal helped lots of people get into jobs. I think tax credits narrowed the difference between incomes in the south and the north. The minimum wage was essential to having tax credits: without it you couldn’t have made tax credits effective. But we had to do more on the training side and the skills side, on the research and development side, and on the planning side if we were going to have more successful development in the regions.
We can have a debate about what we mean by regions: cities, towns, rural areas, are all part of the regions. Of course the focus has now switched to the cities.
Q: Thinking back to 1997, how would you characterise the previous Conservative government’s philosophical approach to places, regions and inequality?
Neoliberal. I wrote a book about the failure of Thatcher’s policies, which focused on the failure to create clusters of growth in the regions at a time when deindustrialisation was happening. Remember, after the 1987 election she said, ‘something must be done about the inner cities’. What she meant was the old industrial areas, more than the inner cities which makes us sometimes think of London. In practice, the measures that were taken like enterprise zones just redirected industry from one part of the country to another, depending on the tax incentives. I don’t think the Conservatives ever understood either the argument that you need a balanced policy so that you have balanced economic growth across the country; nor did they get to grips with the fundamental problems, that the loss of manufacturing jobs from seven million to three million during that period, the loss of these manufacturing jobs and the old industrial towns being hit very hard, I don’t think they ever came to terms with that.
Q: They thought that a national approach to foreign direct investment and privatisation was going to benefit everywhere?
Yes, and the enterprise zones were an attempt to have something akin to regional policy. Every year you had to report to the European Union on what you had done to deal with the structural policy of the European Union and how it affected the regions. They used to have to publish these reports, or send these reports to the European Union, exposing how bad things were. They never got a grip of it. They were getting structural funds. There were a few initiatives.
So in 1997, by creating job opportunities through the New Deal, that was the start of doing something about areas that had been left behind. I also think tax credits made a difference to the income imbalances between different parts of the country because there were no special privileges given to London or the South East. How you create growth in areas where there is little industrial activity and what you build on, that was an important question. I’m not sure that Regional Development Agencies got to the heart of it. I think they probably concentrated on infrastructure more than innovation.
Q: Was there a change post-Thatcher during the Major-Heseltine period? Were they more serious about places and cities outside the South East?
Heseltine definitely was. He was the Liverpool person. But remember, Liverpool arose from the churches and faith groups with the Faith in the Cities report about the state of the inner cities. Heseltine obviously was far more interventionist. I was the opposite number to Heseltine when he said he was going to intervene before breakfast, before lunch, and before dinner, and he would intervene on everything to try to bring prosperity to the regions. But I’m not sure, given the ERM [European Exchange Rate Mechanism] crisis, the public spending cuts, the tax rises, that much impact was made in that period 1992 to 1997. It was dominated by public expenditure cuts and tax rises.
Q: The Heseltine agenda was based on central levers, central pots for people to bid to. When you mention Bank independence, the New Deal, tax credits, the national minimum wage, weren’t there also national, central initiatives?
There were big national programmes but clearly the beneficiaries of the employment programmes were the poorest areas of the country. The problem was that you were creating relatively low-paid, low-skilled jobs rather than creating high-skilled jobs around which you could build a service sector. I think we did not focus on that sufficiently. We had big seminars with Michael Porter on clusters. We looked at a whole series of innovations in different parts of the world that were trying to bring new life to regions. We had a project with MIT because we thought that if you linked the universities to industrial policy, you could do a lot more. We commissioned a big productivity study by McKinsey – the reason I remember it is that it said that British hotels had to be rebuilt because they were inefficient in their use of space, not realising that British hotels traded on heritage rather than on concrete. I think we didn’t come to a clear view of what was going to generate growth in the regions quickly enough. And I think that the Regional Development Agencies were too dominated by the provision of infrastructure.
Q: Did the RDAs represent a shift in philosophy to devolving power for local decision making?
The RDAs represented our desire to give a voice to the regions. Remember, it reflected the devolution that we were doing in Scotland and Wales as well and Northern Ireland for that matter. But I also think that we didn’t have a model of growth that was sufficiently robust about the local inputs into growth for us to be able to create centres of economic initiative in the regions in the way that we would liked to have done. When you think of the membership of the Regional Development Agencies, they were not geared to that either.
If you’re looking now at what might make for a cluster, McKinsey did a research programme on clusters in the United Kingdom and they found 31 clusters. I remember this because they were very conventional clusters, like financial services in Edinburgh. It wasn’t anything that was really new, in the sense that you thought that Britain was moving forward. In Manchester, there was no cluster. They found a cluster in Preston around aerospace. A cluster in the North West around chemicals. But there was nothing new coming out of Manchester. Now in Manchester, you’ve got graphene, you’ve got Media City, you’ve got IT, you’ve got medicine – actually a big potential cluster.
I think until recently we haven’t been as aware as we should have been, from the experience of everything from Korea to North Carolina to California, where science and technology has been at the centre of a breakthrough, where you’ve developed a cluster that is not in itself massively job creating, necessarily, but it does create the base for highquality, high paid jobs, creating a big service sector around them. I think we all have been a bit late in understanding the dynamics of a successful regional economy.
Q: When we talk about regions we’re implicitly talking about the English regions, when you were preparing for government pre-1997, how did you think about the links between the nations and the English regions?
There was no real pressure, as the referendum in the North East proved, for a regional devolution that was similar to Scotland, Wales and Northern Ireland. When I was undertaking regional policy, we wanted regions to have a say in their own affairs but we did not have a sophisticated model of how you would do that. It wasn’t like a Scottish Parliament or a Welsh Assembly. It’s only recently, I think, that people have come to think that there are other ways that you can actually devolve democratic power, that builds out of local authorities rather than just creating a new regional unit. I do think our thinking on this has advanced.
The thing about Scotland, Wales and Northern Ireland is that if you’re going to have successful regional policy, it depends on a balance between the autonomy that the region has to make its own decisions and the support it gets from the centre, and therefore the cooperation between the regions or nations and the centre. Making Manchester a centre of economic initiative will depend on a level of cooperation between Manchester and the UK government, because it’s getting resources from the UK government and its dependent on decisions that are made by the UK government.
Where Scotland falls down is that, since devolution in 1997 but particularly since the SNP got control in 2007, there’s been very little cooperation between Scotland and the rest of the UK. There’s more cooperation between Wales and the UK, but they’re equally resentful of London not cooperating with them over COVID-19 and over other issues. If you don’t have that level of cooperation, then your economic strategy does not work. You’re relying on the macroeconomic policy of the United Kingdom, but the Scottish National Party refuses to cooperate even when it’s in its interest to do so. You’ve got a Scottish National Investment Bank that’s been set up, and you might think that’s a great thing. It might be successful over time. But it needs resources that it doesn’t have because it won’t work with the rest of the UK. If the UK government and the Scottish government were joint investors in an investment bank, if you had a joint venture – even after leaving the European Union – with the European Investment Bank, then you’ve got a serious level of investment in your economy led by the public sector. At the moment, I think the Scottish initiatives are too small to be effective.
We’ve done a study recently on the video games industry in Scotland. The video games industry in Dundee has been very successful and it’s built around what you would expect in a cluster: good universities committed to the industry, companies that actually were in electronics and IT and local commitment to invest in training and skills. But it doesn’t have the capital so it will never expand beyond a certain level of investment which means that the companies will be taken over by Americans and others. There’s not much interest by the UK venture capital industry in the video games industry. Again, one of the lessons is that you’ve got to have cooperation between the region or the city or the town, and central government. There’s got to be an effective partnership for this to work. Clusters require that.
Q: As regional inequality has grown, the two parts of the country which have continued to prosper in the last 20 years, relatively, are London and Scotland – does it surprise you that Scotland has held its own better than other parts of England and Wales?
I don’t think you’ll find in terms of productivity that Scotland is doing as well. I think Glasgow has got the lowest productivity of any city in Britain. You’ll find that the Scottish economy is held up by a far higher degree of public spending.
And oil has obviously been important, although it’s becoming less important now. Oil was a massive boost to the Scottish economy.
Q: Some people we have spoken to about Scotland say that while post-devolution there has been variation in what Scotland did on public services, it’s not clear that the path of Scottish economic policy has particularly changed. The language changed to be more owned in Scotland, but there wasn’t a huge amount of change as a consequence of devolution in economic policy?
I don’t think you could look at Scottish economic policy under the Scottish government and say there’s much that’s original or new or innovative. You have City Deals from the UK coming to Scotland, you have growth points. You’ve got the Scottish Investment Bank, though it doesn’t seem to me to be very innovative. You’ve had an attempt to take public ownership into certain industries, like shipbuilding, that hasn’t been terribly successful. You’ve got the failure to develop the renewables industry in Scotland – renewables and hydrogen are obvious areas where Scotland should be doing very well. Medicine is another area where we should be doing well because we’ve got a very high proportion of medical research and good universities undertaking it. But there’s not much evidence that we made huge progress. Edinburgh, by the way, led the way in artificial intelligence 30 years ago, but it doesn’t seem to have managed to capitalise on that.
Q: Are you saying there is something about the SNP and their approach which has made it harder for Scotland to succeed?
They can’t cooperate. This is the problem. Even when it’s in the best interests of Scotland to cooperate with the rest of the UK, as it was on testing for COVID-19 for example, they refused to cooperate. When they did cooperate on the vaccine, it did work. I don’t think I’m making a political point, I’m just making a factual point that if you build in your own country institutions that mimic the institutions of the United Kingdom, that’s rather different from having an innovative economic policy. What you’re doing is just mimicking what’s happening elsewhere.
Q: Isn’t it odd that these Scottish City Deals emanate from Westminster?
That is the Conservative policy. We’ve got to understand that there’s a clash of interpretations about devolution. The SNP want devolution to mean: Westminster does nothing. For a long time, Conservative policy was ‘devolve and forget’, in the hope that people would just make a mess of things in Scotland and have to come back to Westminster to ask them to do things.
Then you’ve had this muscular unionism saying this should be a British project: let’s label the roads in Scotland British. They’re offering Scotland a number of things like free ports. There’s a deal now on free ports for Scotland in the same way there are free ports in England, a bit like enterprise zones. The UK government is trying to become a player in Scotland, even in areas which are traditionally associated with devolution. In recent weeks they’ve offered a road project to link Scotland to England through the constituency, incidentally, of the Scottish Secretary of State, so he gets a huge benefit from it.
The SNP don’t really want to be part of this because it’s a British government or an English project that they don’t have full control of. It’s very difficult because to have a road you need planning permission and the planning authority is Scotland. Cooperation is where Scotland has not got the benefits of devolution because it’s not been prepared to cooperate with the rest of the UK to get the benefits of being part of the UK.
Q: Some argue that the key to successful industrial policy is more decentralised governance, so you can get local leadership capable of collaborating at a local level. Is your view that, even if that is necessary, it’s not sufficient without wider coordination?
What we’re talking about when we talk about devolution, because it’s not independence and it’s not separation, is getting the right balance between the local autonomy that people desire and is to their benefit, and the cooperation that is needed in an interdependent economy. We shouldn’t think of devolution as being separating off and forgetting that you’ve got any relationship with the centre. One of the problems about devolution in Britain is that there is no relationship between the centre and the locality. There’s no forum that brings together the regions, or the cities and regions and the government. There’s no council of regions and nations. There’s no Council of England bringing together the different bodies.
Again using an example from COVID-19, when you needed to take into account local circumstances when declaring certain areas as more susceptible to the virus and needing close down, there wasn’t the local connectedness, the contact, the interrelationships that were necessary to make that work. The First Minister of Wales complained that his letters weren’t even answered. Devolution did not really work in bringing about greater cooperation between the centre and the regions.
Q: Looking back to the late 1990s or early 2000s, was there something different that Labour should have done?
We talked about creating mayors in the period up to 2010. We had a discussion with Manchester about having a local mayor. But there was huge resistance in local areas themselves to doing so, not from the public but the politicians.
Clearly having a visible figure representing a local area has been very important in the last two years: to the perception in the regions that they’re being properly represented, and the perception in the country that you’ve got voices that are not simply Whitehall and Westminster voices. John Major told me that he had turned down Michael Heseltine’s proposal that there be mayors. We didn’t go ahead with it, but that was partly because of local Labour opposition. I do think it’s right to have these visible figures. Scotland suffers in my view, because it’s got only one centre of authority that’s recognised democratically in the way that the mayors are in England. We could have what would be called Provosts in Scotland – in Glasgow, Edinburgh, Aberdeen and so on, Fife too – and that would probably be to our benefit.
Q: Was it an existential blow to lose the referendum in the North East? Could regionalism ever have worked without an underpinning accountability tier? The RDA chair could not be a voice of the region in a way that an elected mayor can?
Exactly. We lost the North East referendum not because people didn’t want the North East to be recognised with visible voices on behalf of the North East but because it was looked as if we were creating an extra tier of government. That was what I think lost it. There’s no doubt in my mind that people in the North East feel passionately about their own region, maybe more Newcastle around the Tyne, but there’s no doubt there’s a strong sense of local feeling. We did polling and found that people felt as strongly about being Geordies as they did about being English and British. In London, people feel more London than they feel English and British according to our surveys.
There’s no shortage of strength of local feeling, but we didn’t have the right model for developing a system of government around either mayors or around regions. If you go to Germany, then the head of the North Rhine Westphalia region or Hamburg, these are all important figures. But we haven’t managed to create that in the United Kingdom until very recently. I mean, the Conservatives will not like the fact that Andy Burnham and Steve Rotherham are very strong voices for the regions now. I think this cannot be undone and it’s a good development.
In the early 2000s local authorities were powerful and listened to. But we didn’t have a structure within which the voices of local authorities and the central government were meeting together. For devolution to work, you’ve got to have a relationship between the devolved area and the centre.
Q: What the RDAs did manage to do was force local authorities to work with each other because that was necessary to get the money?
That may be the key to the next stage. When money is available and you’re wanting centres of economic initiative that are bigger than local authority areas, you can persuade local authorities to come together and in areas where you don’t have mayors, you might have economic partnerships.
Q: The government says the evolution of combined authorities, with or without mayors, can be voluntary. Can that succeed or does it need to be comprehensive?
You need a framework that is comprehensive but you need local support for it to be implemented. You probably need money incentives for people to be persuaded to work together. When you talk about housing, planning, land use, transport, training and skills, most of these issues go beyond individual local authorities. You do need people to come together. I’ve attempted to support a Council for the North, as well as mayors and economic partnerships across local authority areas. I believe there is a case for the North coming together, to press central government on its needs. There was a transport authority for the north and the ex-head of the CBI [Confederation of British Industry] was chairing it.
If I’m right, we were spending about twice as much on the regions as the Conservatives. While the economic partnerships called the Northern Powerhouse gets a lot of publicity, it was actually a very good PR exercise to disguise the fact that they were halving the expenditure in the regions. If you’re going to make regional government work, or if you’re going to create regional clusters of economic initiative, you’re going to have to invest far more. What’s really interesting about the Levelling Up White Paper is that there’s lots of targets but there’s not much money. The one target that should have been there is a child poverty target and it’s not even there. This is on the cheap, I’m afraid.
Q: What was your experience as Chancellor and as Prime Minister of the variation across Whitehall in terms of the willingness to engage with devolution?
You’re dealing with two questions here. One is the quality of the departments, and the other is what is the right and appropriate method of engagement. It does not make sense for ten different departments to be liaising with one local authority, or one mayor or one Regional Development Agency. The Treasury did try to be a coordinating agency, but the real coordinating agency was in practice the Department of Local Government and the Environment. I can’t really say how well that worked. I think it is important that each department understands the regional dimension, and that’s certainly not the case at the moment. But it’s also important that you have one department that takes the lead in coordinating.
Q: Every locality or region which has tried to have a business-informed, post-16 skills policy has found it very hard to engage with the Education department?
Even now, the new training legislation, which is a bit controversial, requires the Chambers of Commerce to be involved in the formulation of training policy but not the local authorities. It’s just anti-democratic, in my view. It’s anti-local authority. But a lot of people in the Labour government wanted to centralise everything.
Q: Usually if you can get the Treasury and Number 10 aligned, that can provide a focus. But Number 10 in your time at the Treasury didn’t think devolving was a good idea?
No. Once you set up targets and make that your defining criterion for success, inevitably it will push you towards a greater degree of centralisation. I think probably that was the reason why everything went through the centre.
We didn’t have a good enough model for local initiative. That’s really what we’re struggling to find even now. I now understand that you’ve got to build from something that’s real, a sector, probably a few companies, that are creating something that is innovative and it’s got to be competitive internationally. Then you can build on something there. If you have nothing to build from, it’s very difficult.
The successful examples of clusters show that where you have an innovation, and you have industries and companies that develop that with the support of universities and local authorities and Mayors, you can actually do very well.
The National Health Service is such a big spender, you could say that future vaccines will be made in X place. There would be nothing wrong with that. You could direct industry, there’s no doubt about it, and you could build from that. I’m not saying that you’re relying on some sort of inventor in his garage, that’s not the only way that you can create a strong local economy. But it’s pretty clear to me that vaccines are going to be far more important in the future and the manufacturing of vaccines a provide the chance for Britain to do pretty well, we’ve got a huge amount of medical expertise. Even if the vaccine for COVID-19 was developed in Oxford with AstraZeneca, there’s no reason why the manufacturer of the vaccine shouldn’t be in Scotland or Wales or Northern Ireland or another part of England. You are creating a local cluster and I think that could still work.
Q: The Lyons report proposed moving civil service jobs out of London but public investment in R&D spending over the last 40 years has been heavily centred on Oxford, Cambridge and London. Was that a mistake?
Yes, and it didn’t need to happen. We should have made more decisions about civil service dispersal. Even now there’s very little happening.
You can’t just plant a car industry somewhere and expect it to succeed – Chrysler came to Scotland and it didn’t work. But there are circumstances in which you can build around successful inventions and develop the production of these in other parts of the country. David Sainsbury talks about this current fund called Strength in Places. He thinks that could allow local mayors or local leaders to be in a position to develop big research and development facilities in their own areas. We’ve got to get away from the idea that the only places capable of inventing anything are Oxford or Cambridge or London.
Britain does not spend enough on R&D in the first place, so it’s not just a London or a South East problem. It’s a national problem about how much we spend. I think the average is about 1.7 per cent of GDP in Britain and it’s about 2.5 percent for the OECD. It’s not that London and Cambridge and the South East are getting so much more investment; it’s that we’re not investing enough in the other parts of the UK.
Q: Do you think politics has been too deferential to the success of London?
We have not been innovative enough in looking at the devolution of power. Once you’ve got a capital city that is your financial centre, your government centre, your administrative centre, your legal centre, your commercial centre, it’s quite difficult to imagine that everything does not revolve around it. Whereas New York has got Washington and Frankfurt has got Berlin and so on. You’ve got an over-concentration in the South here. But if you’re thinking of devolution, you’ve got to be bolder I think than even what we’ve been talking about. You’ve got to think of fiscal devolution as well.
I’m really struck by the fact that only 3 percent of taxation is collected locally in Britain, compared with 33 percent on average in the OECD. Only 35 percent of government expenditure is government expenditure by local government in Britain, where it’s 60 percent in the OECD. These are quite shocking disparities between our experience and the experience of the rest, mainly Europe and America. If you’re thinking of devolution, you’ve got to think about the fiscal side as well as the economic powers.
The structure of local government is not susceptible to a sensible form of fiscal devolution. You wouldn’t think of having 150 sales taxes in England alone. If you have a mayor or an economic partnership or a Regional Development Agency, that does not have the power to spend or the power to raise money – and remember, the mayors have very little money – then the capacity to do the things that might make a difference are very limited.
Q: So you either have to redraw the local government map or you have to make viable the bigger authorities? If you give tax-raising powers to the Mayor of Manchester, where is the accountability? Do you need a GLA [Greater London Authority]-style Greater Manchester authority?
He’s working with a combined authority.
Q: But the combined authority is simply the amalgamation of ten individual local authorities. There’s no elected tier.
But you could give them a decision-making power. They are elected.
Q: We talked about places like Burnley or Blackpool who are currently outside combined authorities. Wakefield always worried it would lose from being outside of Leeds, even if it’s inside the combined authority?
My county of Fife fought for its freedom: it was going to be split in two, and part of it was going to be with Lothian and Edinburgh and part of it was going to be with Dundee. It fought in the 1970s, just before I became an MP, to stay as a separate county. But it’s paid a heavy penalty for that. Because all the economic development powers and resources have gone to an Edinburgh Authority or a Dundee Authority. Wakefield may have thought it was still free, it’s able to make its own decisions. But was it getting the resources that Leeds are getting? It realised it’s got to be part of a partnership.
Q: And Burnley and Blackburn, who fall outside the metro mayoral boundaries?
The problem in my area is similar to this because one part of Fife is a suburb of Edinburgh, and the other part is on the periphery. I don’t know what you can do about that. One part of Fife has got high wages, one part has got low wages. One part is dominated by Edinburgh wages and the other part is dominated by what we used to call Amazon wages. I don’t call it that anymore, because Amazon has put up the wages. To be outside carries a penalty, as well as giving you freedom. Economic planning has got to take into account that if you just take the narrow definition of urban, of your city, then you’re locking out a lot of people.
Q: Getting a comprehensive map of devolution, institutions and relationships, which fits for England but also Scotland and Wales, is that something which can just be done Queen’s speech to Queen’s Speech, manifesto to manifesto? Or do we need some bigger way to imagine or invent a settlement which can last.
I don’t think that you can have a devolution of economic powers that is not going to be accused of being a Balkanisation of Britain without having a clear view of what Britain can achieve. Therefore you can’t just have a map of devolution. It’s got to be about the future of Britain, not about the future of regions. You’ve got to be able to sell it as: Britain is economically progressive, socially egalitarian, but with a very strong sense of local identity that’s got to be reflected in getting the right powers to the right places.
Q: When you look back on the last 40 years, about this debate about regional local economic policy, what do you think is the biggest thing which has succeeded, and what is your biggest frustration?
The frustration is that we haven’t made enough progress. Given the deindustrialisation of Britain, we haven’t managed to find a way to generate the kind of growth and wealth in the areas of the country that were at the heart of the first Industrial Revolution. I think the success story in recent years is that people do have a stronger sense of their local identities without wanting to break up the United Kingdom. Scotland may be different, but Wales is obviously an example.
ENDS