Governing for the whole country: Labour’s regional policy

Labour’s five missions are national in scope, but success hinges on what happens locally. Britain’s challenges cannot be understood without the deep inequalities in prosperity and opportunity facing different parts of the country. Recent analysis from the Financial Times found that without London, the UK would be poorer per head than the poorest US state, Mississippi. The Conservatives have sought to own this issue through the Levelling Up agenda, but it has not met the scale of the challenge.

Our uniquely centralised governing system is not equipped to tackle this. If a Labour government decides to deliver its missions in a way that is blind to the needs of different places and reliant on an overburdened Whitehall, it will be sorely disappointed. National government working with empowered local leaders must be the progressive approach to place. 

Fortunately, Labour is taking this seriously. Keir Starmer promises a Take Back Control Bill that will give local leaders a right to request new powers and put the burden of proof on Westminster as to why they shouldn’t be handed away. But what else should be done?


Local services, local money

Firstly, a Labour government should be bold in devolving public services. English devolution has been more focused on growth than social policy, but Britain’s stubborn labour shortages from long-term illness show there is no neat boundary between the two. Greater local control over social policies, such as health devolution in Greater Manchester, has led to improved outcomes. Labour has made promising steps like a commitment to a radical localisation of Jobcentre Plus. But it should go further in giving local leaders the power to help citizens lead healthy and happier lives. Labour’s NHS reform agenda is an excellent place to start.

Secondly, give local leaders more freedom over raising and investing funds. Local government has been cut, devalued and micromanaged over the past 13 years. Reverse the Conservatives’ deepest reductions to council budgets, especially in the most deprived areas. Whatever the fiscal picture, local leaders should be given much more flexibility and security in their funding powers. Provide three-year settlements and “single pots” with maximum local discretion. Move away from a culture of pilots and trailblazers towards system-wide reform.

Labour should also make a serious offer on local taxation. The UK is an outlier among its more decentralised and prosperous peers, with only 5% of revenues collected locally and 20% of government expenditure decided at a subnational level in England. The party is cautious about giving local governments the power to increase taxes when the overall burden is so high. But communities will never have control over their own destiny while so reliant on the whims of Westminster. 

A Labour government should start by giving Mayors like Steve Rotherham and Tracy Brabin a share of existing taxes raised in their area, such as income tax or VAT, to spend as they like. Be comfortable giving new tax-raising powers where there is a clear base of support, such as the 2p business rates supplement used to fund the Elizabeth Line. If it’s good enough for London, it’s good enough for Manchester, Leeds, and Birmingham. 


Everywhere for everyone

Finally, this must be the mission of the entirety of a Labour government. Regional policy is all too often seen as an “optional extra”, with responsibility falling back on the local government department of the day. Success will rely on what happens in multiple Whitehall fiefdoms.

Tackling regional disparities must be integral to the targets, governance and policies behind Labour’s five missions. For example, set a goal under the growth mission to make our second-tier cities as productive as their European peers. Avoid relying on small flashy funding pots, instead hard-wiring spatial targets into science, infrastructure, culture funding, and more. Labour’s Industrial Strategy should take inspiration from the Biden Administration and revive poorer regions. For example, earmarking a share of the R&D budget to target the six most promising innovation clusters outside London, Oxford and Cambridge. 

Do not restrict regional policy to England. Many of the UK’s most deprived communities and opportunities for industrial revival are in Scotland, Wales and Northern Ireland. A genuinely UK-wide regional policy makes good economic and political sense as Labour seeks to win seats back from the SNP and defend its position in Wales. Make bold industrial investments in areas like Wales’ strengths in semiconductors, and use Great British Energy to attract more offshore wind manufacturing jobs to Scotland.

Structures that compel departments to devolve power and tilt investment will be needed, such as the PM-chaired Cabinet Committee proposed by the Fabians. A senior Minister with Michael Heseltine’s ability to influence their colleagues will be critical. To give them sufficient authority, Labour could take inspiration from John Prescott’s time and bring housing, transport, and local government into a weighty Department for Infrastructure and Regions. 

A bold agenda to push power down and invest in the places that need it most is electorally smart and the right thing to do. The next Labour government must be one for the whole United Kingdom. Get this right, and it would leave a transformative legacy.


For more on what Labour’s approach to regional policy should look like, see Levelling Up and Local Government.