Three pathways to reducing regional disparities

By Professor Sir Tim Besley CBE | 06 November 2020

Some form of regional inequality has been a persistent feature of the UK.  Not only are there profound differences between regions (i.e. North and South), there are also inequalities within regions. Pockets of low productivity and heightened levels of deprivation exist in both successful and unsuccessful places.  But these are not set in stone; changing patterns of industrial specialisation are natural feature of economic change.  And the policy climate can play a key role too.

That said, understanding left behind regions via a search for a ‘silver bullet’ is not going to be fruitful.  There is a range of mutually reinforcing factors involving skills, housing, and market access, many of which are long-standing.

Recent structural changes in the UK’s economy mean that cities have tended to benefit disproportionately from economic success, with some smaller towns and rural areas fairing less well.  A prime example is the declining fortune of many seaside towns.

Despite successive governments recognising the challenges, the reality is that efforts to turn around lagging regions have achieved mixed success.  Moreover, frequent policy rebranding and changing institutional arrangements has had scant tangible impact on the broad contours of regional inequality.

The current government’s ‘levelling up’ agenda focuses on promoting ‘economic opportunity’ by investing in ‘infrastructure, innovation and people’, with an ambition to bring about real change. But doing so, requires a raft of complementary interventions at an appropriate scale to tackle all aspects of the problems. 

Infrastructure constitutes an important policy pillar for addressing regional inequalities. However, the National Infrastructure Commission recognises that infrastructure investment is necessary but not sufficient for creating sustainable change in the economic geography of a place: investment must be combined with complementary policies such as improving skills and innovation.

The Commission has published a discussion paper that seeks to clarify the role of infrastructure and economic outcomes in two ways. Firstly, we acknowledge that addressing disparities between regional areas is part of our objective to ‘support sustainable economic growth across all regions of the UK’.

This means that, in our own analysis and recommendations to government, we can help to promote faster growth in low productivity regions while maintaining the strength of high productivity regions and closing the gap between regions over time.

Secondly, we have set out a framework that identifies three pathways through which infrastructure investment can support this aim. These are:

  • addressing constraints on growth: enabling future growth in congested places by investing in capacity upgrades, with the expectation that this will also benefit surrounding areas
  • contributing to transformation: prioritising infrastructure investment alongside wider polices to increase growth in low productivity places (e.g. skills, land-use planning, research and development and business support)
  • universal provision: setting common/minimum standards for infrastructure services, and working to reduce differences in access and opportunity across the UK

The Commission believes that a ‘balanced portfolio’ of interventions across the three pathways is required to reduce regional disparities and achieve wider benefits.

In general terms, initiatives linked to addressing constraints to growth or securing universal provision have a higher chance of success as well building resilience.  For example, well-targeted capacity upgrades can alleviate congestion on public transport while introducing national standards for flood resilience play an important role.

Creating transformative change is a high risk endeavour, given the number of pre-conditions for success. But longer-term ‘bets’ with potentially higher returns if they succeed are an important part of the portfolio of interventions: think of Salford Quays in Manchester or Canary Wharf in London.  Learning from both success and failure is also a key element of effective policy.

The most appropriate pathways and type of infrastructure measures will vary according to the characteristics and strategic needs of different places. This means making the best use of knowledge of local conditions. Our Cities Programme emphasises the need for cities to develop local strategies informed by the experience of their peers, shaped by local priorities and held accountable by local communities.

This ‘three pathways’ framework, alongside this new interpretation of our objective, will shape the Commission’s approach to current and future work, most notably the Rail Needs Assessment and policy recommendations in the second National Infrastructure Assessment.

Our approach should also assist government, local authorities and other interested parties to develop a shared understanding of what is meant by ‘levelling up’ – and how infrastructure might play its distinct part in achieving this aim.

Reducing regional disparities in productivity is unlikely to happen quickly given the persistence of inequality – it is a long-term goal but one that requires immediate change to get the ball rolling. Adopting the right balance of investment in different pathways, in the appropriate areas, will offer the highest potential to make a nationally significant difference over time.  And ensuring that infrastructure investment is properly coordinated with a range of policies is a key means of shifting the dial towards a new approach. 

Professor Sir Tim Besley CBE is a commissioner at the National Infrastructure Commission.

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