‘I want to rewire Whitehall’: Andy Haldane in conversation with Andrew Neil

Andy Haldane is the Permanent Secretary for Levelling Up and was previously the chief economist at the Bank of England. He spoke to Spectator chairman Andrew Neil about his hopes for the job during a joint Spectator and BAE event earlier this year.

Andrew Neil: The government has written this ambitious White Paper on levelling up. But is there the political bandwidth to deliver it, given all that’s currently happening?

Andy Haldane: The government has lots to contend with. But what levelling up has in its favour is it’s a rare example of something that aligns politically, economically and socially. Take the money side of things. If we can achieve what we’ve set out in the Levelling Up White Paper it should boost our economy by up to £100 billion per year. Then there’s the social justice arguments. Britain’s spatial disparities are bigger than they have been since the late Victorian times. It helps that those disparities are most keenly felt in those places which will remain important political battlegrounds – the Red Wall, for example.

AN: There’s another big question: where will the money come from?

AH: Absolutely. But commentators focus too much on looking for extra spending. In fact, re-tilting just 1 per cent of our existing budgets in favour of the poorest areas would deliver a fiscal transfer twice the size of the government’s Levelling Up Fund. Also levelling up doesn’t just involve public money. It also means bringing in private investment. We need to utilise the vast pool of private capital that we have in the UK.

AN: Britain hasn’t exactly lacked regional policies in recent history. Why will levelling up succeed where so many others have failed?

AH: The crucial thing about the White Paper is it proposes a new, improved model both of government and governance. We want to rewire the Whitehall machine so that policy decisions are made through an explicitly spatial lens. We also want to empower those local leaders who are crucial to building strong regional economies. That doesn’t mean bucket-loads of public money. It means empowering and enabling already existing actors.

AN: You’ve been clear that levelling up is a long-term project, yet the White Paper also talks about 2030 as an important date. What will happen by then?

AH: The main thing you’d expect by then is signs that economic inequalities are starting to reverse. We’d want to see those places previously ‘left behind’ beginning to attract those things – business, people, culture – that they’ve been struggling to bring in. We’d also want to see progress on things like health outcomes, infrastructure, and skills and education: all of those important policy dimensions where a turning of the tide is realistic and desirable.

AN: Britain is hardly the only country with regional disparities. Some countries – Germany, for example – have spent billions trying to close regional gaps and have failed. Are there any places that provide a useful model for us to follow?

AH: Yes, we looked in quite some detail at that – trying to find that secret sauce. It’s a sobering conclusion in that there are many examples of failure. That said, France and Germany have seen regional inequalities shrinking in recent years. One of the defining things about the UK, though, is that we see wider disparities within regions than between them. Look at the number of people living in poverty in London, for example. That’s why levelling up isn’t about pitting regions against each other. It’s about being hyper-local and addressing those disparities.

AN: Is there a problem that one place’s success can come at the expense of its wider region? Take Manchester, whose economic success has meant surrounding towns losing jobs and people to it.

AH: You’re right – for every successful city there is often a smaller destination that’s struggling. That’s why we need to get beyond thinking of just city clusters and towards regional superclusters. Take the north-east. What if we could build a single supercluster focusing on green energy and bringing in all the cities and towns in the region? We’ve already got Nissan electric cars in Sunderland, British volt in Blyth, offshore wind in Hull. That’s the lesson from places like Silicon Valley or the Boston MIT supercluster. Right now, we only have one supercluster in the UK, which is London. It’s also worth saying that, while we have lots of cities doing well in an absolute sense, they’re often underperforming compared with their international competitors.

AN: What distinguishes London is scale: it’s a single labour market of 15 million people. If you could create a single labour market in the north-west, you might achieve something similar. But we seem more interested in building high-speed rail.

AH: Your analysis is right that you get that supercluster effect once you have a population of five million or so. That’s why we want to group together cities and towns, as it’s scale that really brings benefits. On your point about infrastructure, it’s true that people are more likely to say they want decent local buses and cycle lanes rather than high-speed rail to London. We mustn’t forget about digital connectivity either. As well as physical connections, we also need to invest in things like gigabit broadband.

AN: You’ve used the word ‘cluster’ several times. Clusters have been part of regional policy theory for a while, but their problem is that, by definition, they result in places being left out. And then you need additional development programmes to lift those other areas up.

AH: Not everywhere can be a cluster. But in fairness, I don’t think every place wants to be one. The White Paper is clear that city clusters aren’t the solution for everything. We also need a strong offering for stranded towns and rural retreats. That’s where social rather than physical infrastructure comes into play – health outcomes and green spaces, for instance.

AN: I’m struggling to see good examples internationally. When you look at the US states that are booming – Florida, Texas, Colorado – it’s not because of regional policy, but because they’ve made themselves such attractive places.

AH: That’s the model we should be aspiring to. And we do have success stories – Birmingham and the West Midlands, for example. Even Sunderland – where I was born – is showing signs of ending the long pattern of decline. The big thing driving that success has been Nissan: a policy decision of Mrs Thatcher’s government. But rebuilding places doesn’t necessarily mean a heavy-handed government approach. It’s about empowering local leaders and businesses who can really do this stuff.

AN: Where does levelling up leave London and the south-east? The government has shelved its plans to invest in turning the Oxford-Cambridge arc into a world-class science cluster. Is that because it doesn’t want to be seen pouring money into the south-east?

AH: It would be an act of self-sabotage not to continue investing in our real assets, including Oxford and Cambridge. Supporting those areas isn’t inconsistent with levelling up. Even our globally competitive cities have spatial disparities. Take London: despite topping the table for pay and productivity, it’s still near the bottom for wellbeing.

AN: You mentioned the stars are aligned for levelling up, politically, economically and socially. But there is one that isn’t – and that’s persistent inflation. Just how big a problem is that?

AH: It will be a setback. I gave an interview to The Spectator last year when I forewarned of some of the difficulties we’re seeing now. They will be more persistent than some are hoping. It isn’t just energy. The price of almost everything is going up, including the cost of labour. It will be felt most by those on the tightest budgets. My hope is it won’t set us too far back and that it might even give politicians extra encouragement to make good on the promises in the White Paper. Time will tell but hope springs eternal.

AN: Thanks for your time. I haven’t read all 329 pages of the White Paper but perhaps I will now. Until then, I wish you more power to your elbow.