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The Devolution Catch-22

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This video video discusses the increasing inequality and economic polarization in advanced economies, particularly focusing on the UK and the USA. The speaker highlights a significant economic divide between wealthy regions, specifically London and the Southeast, and those lagging behind, such as regions outside London. This video video disparity has worsened due to recent economic shocks, including Brexit, COVID-19, and the Ukraine crisis.

The speaker criticizes the UK's efforts to "level up" economically, noting that regions outside London struggle with low productivity and skills, leading to social deprivation. A project called LIPSIT (Local Institutions, Productivity, Sustainability, and Inclusivity Trade-offs) was undertaken to analyze these challenges and suggest improvements in regional productivity, sustainability, and inclusivity.

Key findings include:
1. A lack of devolved powers and resources at the local level exacerbates economic inequalities and underinvestment in regions outside London.
2. Regional agencies are not sufficiently empowered to address local challenges effectively.
3. Public investment is heavily concentrated in London, resulting in disparities in transport infrastructure, education funding, and research and development spending.

The speaker calls for more systematic governance that integrates skills, housing, and transport policies to promote balanced growth across regions. They advocate for a shift in focus towards improving the capacity and capability of lagging regions while creating better partnerships between local authorities and the central government for more tailored growth strategies.

The overall message emphasizes the need for a joined-up approach to policy, longer-term strategic planning, and an equitable distribution of resources to address longstanding structural inequalities.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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There's a, a really significant increase in inequality in

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actually a lot of advanced economies around the world,

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particularly the UK and USA USA is growing economically,

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and the UK isn't,

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but there is a massive increase in polarization

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between people who have wealth

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and assets and people who don't.

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Uh, and that's even worse in the US than it is in the uk.

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So this is a long-term trend.

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It's, it's getting a lot worse since these three economic

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shocks we've had, Brexit, covid, and Ukraine.

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Um, so, so when I say it's not working, I mean leveling up

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as a UK term in the uk this means two things,

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and these are really important.

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One is the regions outside of London

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and the Southeast are really weak in terms

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of their ability to create wealth.

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So productivity we measure,

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GVA gross value added per head is really low.

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And we've had low productivity in these regions for,

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you know, the 14, last 14, 15 years.

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So they're really struggling.

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Um, these are laggards, they're, they're sort

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of stuck in development traps.

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So the most productive region, which is West inner London,

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is 70% higher in terms

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of its productivity than Northumberland in terms of

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what we call income per hour.

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Uh, and, the least productive is Cornwall,

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which is 25% lower than Northumberland.

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So there's a hierarchy of productivity.

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Cornwall's actually the worst. West London is the best.

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Um, so the first thing is the places vary in terms

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of their ability to produce

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wealth, and this is productivity.

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Second thing, people in these regions that are left

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behind have much lower levels of skills, fewer opportunities

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for social mobility,

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and they're much more deprived, in terms

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of the housing stock, public services, health and welfare.

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Um, and that's a direct consequences

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of this uneven distribution of wealth,

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across the whole country.

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And I've got some data I can,

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give you on that in a second.

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So Lipsit tried to adjust this problem

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and, LIPSIT stands for, local institutions,

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productivity, sustainability and inclusivity, trade-offs.

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So, real mouthful, I'm afraid.

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Um, it's a project that we did at City Ready,

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at the University of Birmingham, as part

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of a whole suite of projects that try

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and look at how places vary in terms of their ability

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to grow and how they have different challenges,

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facing them in growing, sustainably.

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You know, so you've gotta increase productivity,

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but you also gotta do it trying to meet net zero goals,

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but also inclusivity,

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which means you've gotta do it without

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increasing inequalities.

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And at the moment, we're failing on a lot

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of those counts in regions outside London, the southeast.

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So you need growth, plans to handle these trade-offs

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between better productivity, better sustainability,

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and better inclusivity.

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And sometimes they play against each other.

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So we had a three year program of research,

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at City Ready, working with colleagues at Surrey Warwick,

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Cardiff Universities and demos, the Think tank in London.

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And, we looked at a lot of data.

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We did a lot of surveys,

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and we looked at how regional agencies, so that means,

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city councils, local authorities, combined authorities.

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We have a combined authority led

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by Mayor Andy Street in the West Midlands,

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and how they're working currently with universities

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and businesses to invest in growth programs.

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And that can mean anything from transport infrastructure

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to skills, to how do you support businesses,

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how do you support r and d

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and innovation to promote growth

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that is inclusive and sustainable.

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Um, and, and one

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of the key findings we found in the lip sit project at City

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Ready was this lack of devolution, this lack of power

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and resources at the local level,

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which made this uneven growth even worse.

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It means that, places outside London, the Southeast,

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are, are, are not being invested in,

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and they don't have the power

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or resources, to lead their own futures

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and customize policies to their own challenges locally.

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And that's worsening both the wealth creation, unevenness

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and also the inequality problem that we're talking about.

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A number of the outputs we've got from this,

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you know, it's got blogs and

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briefings and some academic papers.

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We, we use the, the Catch 22 as a sort of, you know,

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term, term for the, the impossible sort

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of unsolvable problem.

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This no-win situation that regions find themselves in.

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Now, if you remember, I, you may or not know this,

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but there was a, a, a book

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by Joseph Heller in a film called TA Catch 22 that sort

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of popularized the term and it focused on a mental

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hospital during the war.

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Um, and pilots were faced with this paradox.

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Any pilot during the war who asked

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for a mental evaluation on their capacity to fly

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was deemed sane enough to fly by default.

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That's the catch 22.

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So as soon as you ask for an evaluation,

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it means you can fly and you don't get an evaluation

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to see if you are insane.

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Um, and,

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and in a sense it's a catchall situation for, a no win

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where you cannot find it out.

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And our work looked at the barriers to devolution.

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And the problem that regions have, this is the catch 22, is

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that the lack of devolved resources

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and powers means that they don't have enough capacity

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and capability that is enough people, enough resources

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and investment power over.

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Um, you know, the growth problem

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that actually they cannot illustrate to government

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that if they were given devolve resources

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and powers, they would use them in really sensible positive

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future growth ways.

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So they've been denied the capacity

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and capability over, you know, 20

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or 30 years, in fact, it's got worse in the last 15 years.

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So without those resources, they cannot develop

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that required capacity

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and capability to demonstrate the

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ability and win the resources. Again, we've got the wealth

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Creation problem, which is really uneven,

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and we've got the problem

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that the government currently is not investing enough in the

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right places that not, not just about devolving resources,

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and power to,

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to make decisions at the local level.

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It's about actually where public money goes.

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So we are the most central

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of the advanced economies in terms

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of our governance structures and our institutions.

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That means tax raising powers.

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This is fiscal policy tax raising powers

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and tax spending powers are highly concentrated in

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London, in central government.

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And actually most civil servants

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and more civil servants over the last 10 years are in London

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and not around the country.

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Um, so in a sense that that means that that's part

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of the bias whereby there is,

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an investment in public money

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that is focused on the places that can grow better.

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And there are a number of,

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slightly more technical policy

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hurdles that I'll come onto later.

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But effectively, let's take a number of what we call,

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endowment factors.

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These are factors that you need economically to grow well,

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they include transport, they include skills and education.

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They include, research and development for innovation.

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For example, just three examples.

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Now, transport, if you take transport infrastructure,

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incredibly important for moving people around

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and for lubricating the economy

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and helping businesses since 2010,

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1,500 pounds per person has been spent in Northern England

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compared to 3000 per pounds per person in the southeast

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of England on transport, and 6,000 per person in London.

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So those places that are productive are getting more public

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money to improve their transport,

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in fact bring their transport prices down.

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Whereas in a normal market situation,

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those prices would go up

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because we're spending more public money on alleviating the

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costs of transport in London.

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Now you could say, well, that makes London more productive,

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and that's the engine of the economy,

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but that's not helping regions.

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If you take skills in education,

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there are more skilled people concentrated in London,

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and there's more spending in London in terms

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of he higher education spending per young person.

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It's the highest in London, it's

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15,800 per person in London.

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And that compares to the lowest in, Northampton Shore,

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which is 5,800 per person.

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So there's a massive sort of,

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dividend yield from public money and education

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and skills in, you know, primary through to he,

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he in the London area,

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and again, best in the brightest there,

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great engine for the economy.

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You don't want to make London less productive.

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We've gotta start moving some of this money elsewhere.

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And then finally r and d because research

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and development, which is sort of pump prime

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by public money, into r and d.

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And it really crowds in private investments in r

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and d, direct government r and d expenditure in 2016

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and onwards, actually 60 pounds per person in London,

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and almost the same in the southeast east of England.

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And it's 21 pounds in the north of England,

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14 pounds per person in the Midlands,

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and just seven pounds, in Northern Ireland.

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Um, and I'm really focusing,

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our research was really on England,

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the evolved regions in England,

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but in, in a sense, again, massive differences in sort

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of pushing the innovation system in London

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and the Southeast where you need

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to improve innovation in these other regions.

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UK is the most centralized, economy in the OECD

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and particularly England.

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Uh, you've got devolve nations,

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that do have devolved powers and resources.

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But in fiscal terms, England has a massive concentration.

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And, this is, this has been happening since probably

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what we used to call the RDAs, the regional development

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authorities, were put in place in 1999,

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and they were abolished in 2012.

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So since 2012, you've been a declining

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capacity institutionally

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and less civil service, you know, facilities in regions.

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And those used to do two things,

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which they don't do anymore.

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The first is to actually help analyze

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what is different about local economies

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that's different from London or the

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Southeast or the, the country.

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'cause you've gotta have a national policy,

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but you've gotta customize it to those

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real challenges in different places.

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So the first thing is you need capacity

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and capability to analyze and understand,

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and that's what my Institute City ready at the

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University of Birmingham does.

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But the second thing is you need to have resources

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to intervene quickly

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and precisely by building a local coalition of public

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and private, you know, combined authority,

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a city council working with local businesses, small firms,

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large firms and universities to push

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through changes in skills or to set up science parks

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and develop new areas of innovation.

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Now, without that devolved sort of institutional quality,

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London again dominates.

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And that's a massive problem for us.

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The thing that characterizes, unfortunately, the,

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the increasingly the national policy regime in the UK

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for economic growth is what we call transactional.

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It's, it's almost adversarial between London

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and the central government and the regions.

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And you see it in the media all the time.

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You know, the mayors or the city councils almost getting

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punished and pushing back on national policy.

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You need a partnership, you need much better relationships.

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Uh, and you, you know, this is really getting in the way.

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And there are specific technical transactional bidding

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processes, including what we call gateway assessments.

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Uh, no, some of these are run by treasury.

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Treasury runs a green book assessment process whereby

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investment in places, you, you put in a bid

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and it has to get through a number of hurdles.

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And Green book investments are awarded investments,

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historically and up to the present on the basis

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of their ability to use that investment

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to improve GDA per head.

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So this is back to productivity.

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So as an almost single measure, if you can't prove

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that you would improve productivity locally,

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you don't get the investment, which means, again,

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that the south or southeast

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and London are winning investment

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and getting more funding, whereas the regions aren't.

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And these hurdles, these GVA per capital hurdles,

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and the slightly competitive nature

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where regions played off against each other

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for government funding, is the first problem.

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And those gateway assessments, the Treasury Green Book,

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and another others, you know, are wasting a lot

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of public money, but they're also

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disadvantaging the regions.

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Second thing is that there's a lack of consistency

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and clarity around those rules of the game.

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So funding priorities shift,

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but the rules of the game in terms of the hurdles

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and the bidding processes changed quite a lot.

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These rules of engagement, there's a lot

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of international comparisons with Europe,

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but other emerging market economies.

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And there is better clarity out there,

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particularly in emerging markets about, you know,

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what the priorities are, what you need

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to invest in, and how you win the money.

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Secondly, we are incredibly, short term

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in the uk there's a churn of policy

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and we've seen it in central government,

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but it's affecting the ability of regions to win money

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because the policy regime is shifting the

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goalposts all the time.

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Um, we've had nine sets of fiscal rules.

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That's the overarching rule set over fiscal

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allocation since 2009.

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And that's much more change and much more ambiguity

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and much more short-termism than other advanced economies.

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And that's a major problem. It is a real challenge for us

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'cause we are now, we're now trying

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to tackle a legacy problem.

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There's a long-term underinvestment infrastructure across

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the UK generally,

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and there's an underinvestment in the right kinds of skills.

13:37.115 --> 13:39.875
Actually the education system is, is creaking a bit.

13:40.015 --> 13:41.715
Um, and, and on top of that health service,

13:41.895 --> 13:43.115
all the things we hear about in the press.

13:43.175 --> 13:47.475
So, I I I mean skills are critical and people say that,

13:47.695 --> 13:51.555
but skills are, are really important, in terms

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of getting skills in the right places.

13:53.135 --> 13:54.835
And this is part of the devolution question.

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'cause everyone says we need more digital skills

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or we need more skills for X, Y, Z.

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But actually different places have different skills

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challenges in, in connecting the supply

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and demand of the right kinds of skills.

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Skills are key because better skills improve

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productivity at the firm level.

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They improve the ability of firms to innovate.

14:15.215 --> 14:17.435
But secondly, higher level skills

14:18.215 --> 14:22.915
enable individuals in low skills, low income communities

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to improve their income levels.

14:24.895 --> 14:27.955
So it reduces their burden on, you know,

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pub public benefits effectively.

14:30.415 --> 14:33.835
So low income, low skill communities where the low health is

14:33.835 --> 14:36.715
and the high crime is by upskilling can improve their

14:36.715 --> 14:38.955
ability to reduce dependence on the public sector.

14:39.015 --> 14:40.235
So if we hit skills

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and we get the right skills in the right places

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by devolving a lot more of the skills budget

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and the power of the skills to local players,

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that's a big part of the issue.

14:50.215 --> 14:53.005
The second thing is to be more systematic or systemic.

14:53.225 --> 14:55.845
Um, you can't fix housing on the one hand

14:55.905 --> 14:58.845
and skills on the other and then look at transport with a,

14:59.065 --> 15:00.285
another group of people.

15:00.545 --> 15:02.805
And at the moment, our ministerial structure,

15:03.585 --> 15:06.645
and to be honest, the local, institutional

15:06.645 --> 15:07.565
and governance decision

15:07.565 --> 15:09.045
making structures are very fragmented.

15:09.235 --> 15:10.445
They're mixed bag.

15:11.145 --> 15:12.925
We need them to work together

15:13.865 --> 15:17.045
to do skills alongside housing, alongside transport,

15:17.045 --> 15:19.725
alongside your innovation policies.

15:20.195 --> 15:24.165
They all need to be in sync to customize as one

15:24.225 --> 15:26.005
for the challenges of particular places.

15:27.175 --> 15:29.995
So, joined up thinking more on the skills

15:30.615 --> 15:33.915
and again, this institutional devolution to enable places

15:34.455 --> 15:36.995
not just to get more public money and be invested in,

15:37.015 --> 15:39.075
but enable them to be more productive

15:39.415 --> 15:41.195
and put more into treasury.

15:41.945 --> 15:45.515
What comes clear in these three shocks we've had, Brexit,

15:45.515 --> 15:48.715
COVID, Ukraine, is that the places

15:49.365 --> 15:52.155
these disadvantaged places, northeast,

15:52.155 --> 15:54.315
Manchester City region, the Birmingham city region,

15:54.365 --> 15:56.875
these should be, if you compare them

15:56.875 --> 15:58.435
with their European counterparts

15:58.775 --> 16:00.235
and actually counterparts globally,

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they should be much more productive,

16:02.075 --> 16:03.995
much more better at wealth creation

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and their disadvantaged, partly by the political

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and the governance and the institutional centralization,

16:11.815 --> 16:15.835
but partly from this lack of public funding, this investment

16:15.865 --> 16:17.995
that is focused on the few very

16:17.995 --> 16:19.515
productive places and needs to be.

16:19.935 --> 16:23.075
So, so we need to improve the innovation capacity

16:23.075 --> 16:25.835
of those places that also would improve their agility,

16:25.885 --> 16:28.715
their responsiveness, their resilience in the face

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of more shocks which are coming.

16:30.815 --> 16:34.515
It would improve their ability to get on, to new areas

16:34.575 --> 16:36.355
of growth instead of, you know,

16:36.355 --> 16:39.315
being stuck in legacy industries that are slightly dying

16:39.775 --> 16:42.755
and be much more sort of fleet of foot in terms

16:42.755 --> 16:44.755
of transitioning to growth sectors.

16:45.255 --> 16:46.875
Um, but this needs to be joined up.

16:46.955 --> 16:49.595
I mean, this is the challenge for us. Um, at the moment.

16:49.615 --> 16:52.955
The fragmentation partly political, partly institutional,

16:52.955 --> 16:54.835
partly because the pace of change is changing,

16:55.495 --> 16:57.395
is making it quite challenging to, for us

16:57.395 --> 16:58.595
to think across the whole piece.

16:59.415 --> 17:02.355
And I think that, you know, that that needs more work.

17:02.375 --> 17:04.995
And in some ways our next phase of research is trying

17:04.995 --> 17:06.435
to understand how you knit together

17:07.325 --> 17:10.275
local innovations in policy,

17:10.905 --> 17:12.675
with these kinds of big challenges.

17:12.695 --> 17:16.355
So we have a l pip hub at City Ready at the University

17:16.355 --> 17:18.915
of Birmingham that's working on that policy innovation piece

17:18.915 --> 17:20.355
to help the rest of our work.

00:00 - There's a, a really significant increase in inequality in actually a lot of advanced economies around the world, particularly the UK and USA USA is growing economically, and the UK isn't, but there is a massive increase in polarization between people who have wealth

00:16 - and assets and people who don't. and that's even worse in the US than it is in the uk. So this is a long-term trend. It's, it's getting a lot worse since these three economic shocks we've had, Brexit, covid, and Ukraine. so, so when I say it's not working, I mean leveling up as a UK term in the uk this means two things, and these are really important. One is the regions outside of London and the Southeast are really weak in terms

00:43 - of their ability to create wealth. So productivity we measure, GVA gross value added per head is really low. And we've had low productivity in these regions for, you know, the 14, last 14, 15 years. So they're really struggling. these are laggards, they're, they're sort of stuck in development traps. So the most productive region, which is West inner London, is 70% higher in terms

01:09 - of its productivity than Northumberland in terms of what we call income per hour. and, the least productive is Cornwall, which is 25% lower than Northumberland. So there's a hierarchy of productivity. Cornwall's actually the worst. West London is the best. so the first thing is the places vary in terms of their ability to produce wealth, and this is productivity. Second thing, people in these regions that are left

01:35 - behind have much lower levels of skills, fewer opportunities for social mobility, and they're much more deprived, in terms of the housing stock, public services, health and welfare. and that's a direct consequences of this uneven distribution of wealth, across the whole country. And I've got some data I can, give you on that in a second. So Lipsit tried to adjust this problem

01:59 - and, LIPSIT stands for, local institutions, productivity, sustainability and inclusivity, trade-offs. So, real mouthful, I'm afraid. it's a project that we did at City Ready, at the University of Birmingham, as part of a whole suite of projects that try and look at how places vary in terms of their ability to grow and how they have different challenges, facing them in growing, sustainably. You know, so you've gotta increase productivity,

02:28 - but you also gotta do it trying to meet net zero goals, but also inclusivity, which means you've gotta do it without increasing inequalities. And at the moment, we're failing on a lot of those counts in regions outside London, the southeast. So you need growth, plans to handle these trade-offs between better productivity, better sustainability, and better inclusivity. And sometimes they play against each other.

02:55 - So we had a three year program of research, at City Ready, working with colleagues at Surrey Warwick, Cardiff Universities and demos, the Think tank in London. And, we looked at a lot of data. We did a lot of surveys, and we looked at how regional agencies, so that means, city councils, local authorities, combined authorities. We have a combined authority led by Mayor Andy Street in the West Midlands, and how they're working currently with universities

03:22 - and businesses to invest in growth programs. And that can mean anything from transport infrastructure to skills, to how do you support businesses, how do you support r and d and innovation to promote growth that is inclusive and sustainable. and, and one of the key findings we found in the lip sit project at City Ready was this lack of devolution, this lack of power and resources at the local level,

03:47 - which made this uneven growth even worse. It means that, places outside London, the Southeast, are, are, are not being invested in, and they don't have the power or resources, to lead their own futures and customize policies to their own challenges locally. And that's worsening both the wealth creation, unevenness and also the inequality problem that we're talking about. A number of the outputs we've got from this, you know, it's got blogs and

04:17 - briefings and some academic papers. We, we use the, the Catch 22 as a sort of, you know, term, term for the, the impossible sort of unsolvable problem. This no-win situation that regions find themselves in. Now, if you remember, I, you may or not know this, but there was a, a, a book by Joseph Heller in a film called TA Catch 22 that sort of popularized the term and it focused on a mental hospital during the war.

04:40 - and pilots were faced with this paradox. Any pilot during the war who asked for a mental evaluation on their capacity to fly was deemed sane enough to fly by default. That's the catch 22. So as soon as you ask for an evaluation, it means you can fly and you don't get an evaluation to see if you are insane. and, and in a sense it's a catchall situation for, a no win

05:06 - where you cannot find it out. And our work looked at the barriers to devolution. And the problem that regions have, this is the catch 22, is that the lack of devolved resources and powers means that they don't have enough capacity and capability that is enough people, enough resources and investment power over. you know, the growth problem that actually they cannot illustrate to government that if they were given devolve resources

05:36 - and powers, they would use them in really sensible positive future growth ways. So they've been denied the capacity and capability over, you know, 20 or 30 years, in fact, it's got worse in the last 15 years. So without those resources, they cannot develop that required capacity and capability to demonstrate the ability and win the resources. Again, we've got the wealth Creation problem, which is really uneven,

05:58 - and we've got the problem that the government currently is not investing enough in the right places that not, not just about devolving resources, and power to, to make decisions at the local level. It's about actually where public money goes. So we are the most central of the advanced economies in terms of our governance structures and our institutions. That means tax raising powers.

06:20 - This is fiscal policy tax raising powers and tax spending powers are highly concentrated in London, in central government. And actually most civil servants and more civil servants over the last 10 years are in London and not around the country. so in a sense that that means that that's part of the bias whereby there is, an investment in public money that is focused on the places that can grow better.

06:48 - And there are a number of, slightly more technical policy hurdles that I'll come onto later. But effectively, let's take a number of what we call, endowment factors. These are factors that you need economically to grow well, they include transport, they include skills and education. They include, research and development for innovation. For example, just three examples. Now, transport, if you take transport infrastructure,

07:13 - incredibly important for moving people around and for lubricating the economy and helping businesses since 2010, 1,500 pounds per person has been spent in Northern England compared to 3000 per pounds per person in the southeast of England on transport, and 6,000 per person in London. So those places that are productive are getting more public money to improve their transport, in fact bring their transport prices down. Whereas in a normal market situation,

07:42 - those prices would go up because we're spending more public money on alleviating the costs of transport in London. Now you could say, well, that makes London more productive, and that's the engine of the economy, but that's not helping regions. If you take skills in education, there are more skilled people concentrated in London, and there's more spending in London in terms of he higher education spending per young person.

08:03 - It's the highest in London, it's 15,800 per person in London. And that compares to the lowest in, Northampton Shore, which is 5,800 per person. So there's a massive sort of, dividend yield from public money and education and skills in, you know, primary through to he, he in the London area, and again, best in the brightest there, great engine for the economy.

08:25 - You don't want to make London less productive. We've gotta start moving some of this money elsewhere. And then finally r and d because research and development, which is sort of pump prime by public money, into r and d. And it really crowds in private investments in r and d, direct government r and d expenditure in 2016 and onwards, actually 60 pounds per person in London, and almost the same in the southeast east of England. And it's 21 pounds in the north of England,

08:56 - 14 pounds per person in the Midlands, and just seven pounds, in Northern Ireland. and I'm really focusing, our research was really on England, the evolved regions in England, but in, in a sense, again, massive differences in sort of pushing the innovation system in London and the Southeast where you need to improve innovation in these other regions. UK is the most centralized, economy in the OECD

09:18 - and particularly England. you've got devolve nations, that do have devolved powers and resources. But in fiscal terms, England has a massive concentration. And, this is, this has been happening since probably what we used to call the RDAs, the regional development authorities, were put in place in 1999, and they were abolished in 2012. So since 2012, you've been a declining capacity institutionally

09:48 - and less civil service, you know, facilities in regions. And those used to do two things, which they don't do anymore. The first is to actually help analyze what is different about local economies that's different from London or the Southeast or the, the country. 'cause you've gotta have a national policy, but you've gotta customize it to those real challenges in different places.

10:10 - So the first thing is you need capacity and capability to analyze and understand, and that's what my Institute City ready at the University of Birmingham does. But the second thing is you need to have resources to intervene quickly and precisely by building a local coalition of public and private, you know, combined authority, a city council working with local businesses, small firms, large firms and universities to push

10:32 - through changes in skills or to set up science parks and develop new areas of innovation. Now, without that devolved sort of institutional quality, London again dominates. And that's a massive problem for us. The thing that characterizes, unfortunately, the, the increasingly the national policy regime in the UK for economic growth is what we call transactional. It's, it's almost adversarial between London and the central government and the regions.

11:00 - And you see it in the media all the time. You know, the mayors or the city councils almost getting punished and pushing back on national policy. You need a partnership, you need much better relationships. and you, you know, this is really getting in the way. And there are specific technical transactional bidding processes, including what we call gateway assessments. no, some of these are run by treasury. Treasury runs a green book assessment process whereby investment in places, you, you put in a bid

11:33 - and it has to get through a number of hurdles. And Green book investments are awarded investments, historically and up to the present on the basis of their ability to use that investment to improve GDA per head. So this is back to productivity. So as an almost single measure, if you can't prove that you would improve productivity locally, you don't get the investment, which means, again, that the south or southeast

11:58 - and London are winning investment and getting more funding, whereas the regions aren't. And these hurdles, these GVA per capital hurdles, and the slightly competitive nature where regions played off against each other for government funding, is the first problem. And those gateway assessments, the Treasury Green Book, and another others, you know, are wasting a lot of public money, but they're also disadvantaging the regions.

12:24 - Second thing is that there's a lack of consistency and clarity around those rules of the game. So funding priorities shift, but the rules of the game in terms of the hurdles and the bidding processes changed quite a lot. These rules of engagement, there's a lot of international comparisons with Europe, but other emerging market economies. And there is better clarity out there, particularly in emerging markets about, you know,

12:48 - what the priorities are, what you need to invest in, and how you win the money. Secondly, we are incredibly, short term in the uk there's a churn of policy and we've seen it in central government, but it's affecting the ability of regions to win money because the policy regime is shifting the goalposts all the time. we've had nine sets of fiscal rules. That's the overarching rule set over fiscal

13:14 - allocation since 2009. And that's much more change and much more ambiguity and much more short-termism than other advanced economies. And that's a major problem. It is a real challenge for us 'cause we are now, we're now trying to tackle a legacy problem. There's a long-term underinvestment infrastructure across the UK generally, and there's an underinvestment in the right kinds of skills. Actually the education system is, is creaking a bit.

13:40 - and, and on top of that health service, all the things we hear about in the press. So, I I I mean skills are critical and people say that, but skills are, are really important, in terms of getting skills in the right places. And this is part of the devolution question. 'cause everyone says we need more digital skills or we need more skills for X, Y, Z. But actually different places have different skills challenges in, in connecting the supply

14:05 - and demand of the right kinds of skills. Skills are key because better skills improve productivity at the firm level. They improve the ability of firms to innovate. But secondly, higher level skills enable individuals in low skills, low income communities to improve their income levels. So it reduces their burden on, you know, pub public benefits effectively. So low income, low skill communities where the low health is

14:33 - and the high crime is by upskilling can improve their ability to reduce dependence on the public sector. So if we hit skills and we get the right skills in the right places by devolving a lot more of the skills budget and the power of the skills to local players, that's a big part of the issue. The second thing is to be more systematic or systemic. you can't fix housing on the one hand and skills on the other and then look at transport with a,

14:59 - another group of people. And at the moment, our ministerial structure, and to be honest, the local, institutional and governance decision making structures are very fragmented. They're mixed bag. We need them to work together to do skills alongside housing, alongside transport, alongside your innovation policies. They all need to be in sync to customize as one

15:24 - for the challenges of particular places. So, joined up thinking more on the skills and again, this institutional devolution to enable places not just to get more public money and be invested in, but enable them to be more productive and put more into treasury. What comes clear in these three shocks we've had, Brexit, COVID, Ukraine, is that the places these disadvantaged places, northeast, Manchester City region, the Birmingham city region,

15:54 - these should be, if you compare them with their European counterparts and actually counterparts globally, they should be much more productive, much more better at wealth creation and their disadvantaged, partly by the political and the governance and the institutional centralization, but partly from this lack of public funding, this investment that is focused on the few very productive places and needs to be.

16:19 - So, so we need to improve the innovation capacity of those places that also would improve their agility, their responsiveness, their resilience in the face of more shocks which are coming. It would improve their ability to get on, to new areas of growth instead of, you know, being stuck in legacy industries that are slightly dying and be much more sort of fleet of foot in terms of transitioning to growth sectors. but this needs to be joined up.

16:46 - I mean, this is the challenge for us. at the moment. The fragmentation partly political, partly institutional, partly because the pace of change is changing, is making it quite challenging to, for us to think across the whole piece. And I think that, you know, that that needs more work. And in some ways our next phase of research is trying to understand how you knit together local innovations in policy, with these kinds of big challenges.

17:12 - So we have a l pip hub at City Ready at the University of Birmingham that's working on that policy innovation piece to help the rest of our work.

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