Written Evidence submitted by UCL Public Policy (LRS0001)

Introduction

1. The ‘levelling up’ agenda is increasingly a part of the political discourse. As the UK looks to the post-COVID-19 recovery, attention is likely to focus on how to address regional inequalities and create renewed economic opportunities as part of the recovery plan. However, there is little clarity around the policy response to date although recent announcements on the Strength in Places fund and the Prime Minister’s ‘New Deal’ speech offer some insight.

Evidence base: what evidence exists to measure the performance of the various tiers of regional and local government in the delivery of growth? What evidence have regional and local leaders based their local or regional industrial strategies on, and what forms of stakeholder engagement were included in the drafting of priorities? Considering the cost of institutions, what cost benefit analysis exists to show the value for taxpayers’ money when compared to the delivery of wealth and job creation?

2. The COVID-19 crisis has highlighted persistent and structural inequalities amongst particular communities in the UK as well as those between regions. Levelling up across the UK will mean addressing the structural inequalities that affect specific groups within the population as well as tackling regional inequalities. It will also mean recognising the importance of people as well as geography – and of individuals feeling the benefit of economic and social development. This is an argument that is supported by the evidence and recommendations in a UCL Grand Challenges report Structurally Unsound.1

3. Whilst the actual meaning of ‘levelling up’ is to some extent unclear and undefined, as it can affect different social, environmental and economic dimensions, it is generally interpreted to mean growth-focussed investments and policies in areas of the UK outside London and the “Golden Triangle” of Cambridge and Oxford. To date, the levelling up agenda has been presented as a discussion around infrastructure and R&D spending decisions. The levelling up agenda is seeking smart, inclusive and sustainable growth – in other words it recognises that economic growth has not just a rate but also a direction, an approach pioneered at the UCL Institute for Innovation and Public Purpose (IIPP). IIPP considers that to direct this economic growth – either physically, in a certain region, or conceptually, such as towards a sustainable economy – requires the creation and shaping of new markets, not just correcting existing market failures. Markets do not operate in a vacuum; indeed, the creation of new markets presupposes an innovative transformation of the existing ecosystem of productive organisations and institutions. This innovative transformation requires an alignment at different levels of institutions and policy. As well as the adoption of

1 https://www.ucl.ac.uk/grand-challenges/ucls-six-grand-challenges/justice-and-equality/exploring- inequalities/structurally-unsound effective tools to assess the strategic fit of new business propositions. Specifically, metrics to assess ways in which policies result in intended and unintended value creation and distribution dynamics.

4. UCL can also highlight the importance of addressing intra-regional inequalities. Even wealthy regions, such as London, include significant levels of deprivation – for example, Tower Hamlets is one of the most deprived communities in the UK. Further consideration is needed of how regions with high levels of productivity, but equally high levels of deprivation, can support the entire population, not just pockets of prosperity. UCL is responding through a basket of measures to our responsibility to our local neighbours and communities, as well as maximising our positive impact on the rest of the UK.

5. UCL’s expertise across education, law, health, the built environment, technology, human behaviour and sustainability can contribute to many of the key aspects of regional inequalities as identified by the UK2070 Commission. The 2070 Commission into regional and city inequalities was established as a partnership between the Lincoln Institute of Land Policy, the University of Manchester, the University of Sheffield and UCL, with UCL’s Professor John Tomaney as a Commissioner2. As part of its work, the Commission has developed an action plan to address regional inequalities.

6. The UCL Space Syntax Laboratory and the UCL Centre for Advanced Spatial Analysis, both within the Bartlett Faculty, have developed new frameworks for spatial analysis, information and evidence analysis, planning and governance in cities and urban environments3 4. For example, the work of Francesca Froy of the Space Syntax Laboratory contributed to the Greater Manchester Independent Prosperity review, bringing together big data, web scraping, and novel analysis to analyse industrial and supply chain clusters and strengths in the Greater Manchester Combined Authority5.

7. The UCL Institute for Global Prosperity (IGP), led by Professor Dame Henrietta Moore, has pioneered a new approach to measuring local prosperity called a Prosperity Index. The complexity of contemporary cities often makes changing certain processes and the "state of things" seem impossible. In recent years, there has been a proliferation of indices, indicators and statistics that get indiscriminately used in decision-making about cities and communities. However, these measures, the data collection methods used to create them, and the policies made out of them often imply a previously determined set of values about people's needs, and risk overlooking their wellbeing and ideal living standards. The work of IGP, through the London Prosperity Board, in contrast, puts public engagement at the heart of qualitative data in their own communities. As a result, people's needs, and concerns are included in research that is about them6.

2 http://uk2070.org.uk/ 3 https://www.ucl.ac.uk/bartlett/casa/ 4 https://www.ucl.ac.uk/bartlett/architecture/research/space-syntax-laboratory 5 https://www.greatermanchester-ca.gov.uk/media/1915/gmipr_tr_industryrelatednessanalysis.pdf 6 8. The inquiry terms of reference raised the topic of cost-benefit analysis and how it is used for decision making in government, a topic that has been researched in depth by IIPP. Within the Treasury policy options are appraised through a cost-benefit analysis (CBA) process set out in the “Green Book”. Whilst this is broadly recognised as being world leading, IIPP consider the framing of policy appraisal and evaluation through CBA itself a barrier to levelling up and achieving a sustainable transformation. Public policy processes tend to start from existing fiscal constraints (how can we pay for it?) rather than from policy goals and associated outcomes. Influenced by a “market failure” framework, constraint-driven budgetary processes are complemented by policy appraisal techniques based upon a static form of ex- ante cost-benefit analysis (CBA). Market-shaping policies of the type required for levelling up aim to accelerate innovation, create new markets, transform ecosystems, drive increases in productivity, and radically change the prices, availability and existence of goods and services. A dynamic framework is required then to level up the UK7.

Local structures: what structures exists across the country and how does this compare across different regions? How do these different tiers work together to deliver local growth? What good case studies exist, and can lessons be learnt from poor collaboration or leadership? How should local structures support delivery of regional growth across England? Do regional or local structures act in the best interests of local priorities and stakeholders or act more as a delivery arm of central Government? What should local authorities do more or less of to achieve these aims? Where should government focus its post-Covid-19 levelling up policy to best support regional growth: English regions, core-cities, towns, Growth Hubs and LEPs?

9. Universities enhance the life of the city culturally, economically and socially. They provide careers and prosperity for Universities’ staff and skills and opportunities for students through their online, built and natural environment, their culture and their hospitality. 10. UCL researchers engage with policymakers across every level of regional and local government, from city councils and local enterprise partnerships (LEPs) to combined authorities (CAs). Yet the multitude of different levels of local structures, with overlapping responsibilities and physical areas, creates an often confusing and contradictory environment for productive engagement. As recognised by a recent inquiry by the House of Commons Public Accounts Committee, LEPs can be unrepresentative of their local area, overlapping in boundaries, and ill-equipped to distribute significant quantities of public funding8. Furthermore, CAs often overlap with LEPs, with CAs typically holding greater analytical and policymaking capabilities

https://static1.squarespace.com/static/5a0c05169f07f51c64a336a2/t/5d03c62b56b1ce0001bf6266/15605284 40423/LPI_Report_single_140619_update.pdf 7 https://www.ucl.ac.uk/bartlett/public-purpose/sites/public-purpose/files/iipp-wp-2018-06_1.pdf; https://www.ucl.ac.uk/bartlett/public-purpose/publications/2018/aug/economics-change-policy-appraisal- missions-market-shaping-and-public-purpose 8 https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/1754/1754.pdf than local enterprise partnerships9. This analytical capacity and policymaking capability will be critical to achieving the Government’s levelling up agenda, especially if their role will involve distribution of significant amounts of devolved public funding in replacement of European Union structural and regional development funds. Clarity is needed from the government on who will be primarily responsible and accountable for levelling up policies at a regional level. Efforts are needed to ensure that every region and local area has a governance body with the required capabilities and capacities to achieve the government’s aims.

11. Work to empower the UK regions must be locally led. But it should not happen in isolation. There is a wealth of knowledge and networks in existing research and innovation clusters that can be harnessed by regions across the UK. Further collaboration between such clusters, key regional actors and local communities can help to reduce inequalities. Universities can leverage and build partnerships to support region-led activity to create opportunities, tackle inequality and address local challenges. UCL is committed to ensuring that our research and expertise benefits the whole of the UK, from our local communities to those which are most geographically distant. UCL has recently appointed its first Pro-Vice-Provost for the UK responsible for connecting with priority audiences and engaging partners across the country.10 The government should look to universities as “anchor institutions” in every region who can convene expertise and catalyse innovation.

Sustainable local economies: how could a green economic recovery stimulate local economies and embed upskilling at a regional level? Which tiers are best placed to provide the leadership of local net zero and skills-based priorities? Should leadership responsibilities be separate from delivery responsibilities?

12. Decarbonisation and achieving net zero will require a systems approach to what is an interlinked system, covering a full spectrum from resources (fossil fuel extraction, imports and renewable potentials), through to key conversion processes (refining of oil and bio-products, hydrogen production), through to infrastructures (electricity, gas and heat), through to major end use sectors (industry, transport, buildings, agriculture), through to the determinants of energy demands (demographics, wealth, comfort, status, convenience, safety etc.). These efforts will require investments in a range of sectors that should be spread across the country to act as stimulus spending in all regions.

13. Achieving net zero will require action across all government policy areas when it comes to consideration of all GHG-emitting sectors. At present, government is not institutionally aligned on this legally binding commitment, which will lead to it being missed unless this is changed. This is true both across Whitehall but also between central and regional government. One solution to address this issue is to set up a cross-departmental Delivery Body (analogously to the bodies set up for the Olympic

9 https://www.nesta.org.uk/report/the-missing-4-billion/ 10 https://www.ucl.ac.uk/news/2020/jul/professor-stephen-caddick-appointed-ucls-pro-vice-provost-uk Games in 2012), with suitable stakeholder and expert advisory bodies to feed into it and to set out a route map to net zero carbon emissions in 2050. This approach has been advocated by Professor Paul Ekins of the UCL Institute for Sustainable Resources.

14. The UCL Institute for Innovation and Public Purpose (IIPP), and its Director Professor Mariana Mazzucato, have developed a ground-breaking “mission-oriented policy” framework bringing together top-down direction from government and policymakers (for example, towards sustainability) with bottom-up cross-sectoral innovation. They have worked with the Greater Manchester Combined Authority (GMCA) to use this framework for the region’s decarbonisation targets. Using a mission-oriented approach has helped the GMCA implement a radical approach to making Greater Manchester carbon neutral by 203711. This work featured prominently in the GMCA local industrial strategy12.

15. Addressing the question on up-skilling, a collaboration between UCL Public Policy, UCL Grand Challenges and the British Academy made a submission the House of Commons Work and Pensions Select Committee inquiry on “changes in the world of work” looking at the effects of AI on skills. As we already know, the skills required for the better integration of AI into the workplace are not just technical skills in computer science. They also include skills like design, communication, critical thinking and creativity. Whilst overstated, there is a significant risk of creating an underclass of low-paid, low-skilled work. Avoiding this requires that AI does not exacerbate existing inequalities. Specifically referring to local government, the submission recommends that there is significant role for government (at all levels) in coordinating and bringing together educators, employers and individuals across sectors and places to develop shared solutions for the benefit of local government.

16. In addition to the important question of how the levelling up agenda can address green and net-zero issues, we consider the concept of a “sustainable local economy” to be defined in much broader terms. Government must consider a wider range of policy areas to truly achieve sustainable economies across the UK, we recommend this includes:

a. Education and skills: The UCL Institute of Education (IOE) is home to the greatest global concentration of expertise and specialism within education. 25% of UK education research takes place at the IOE, spanning education policy and equity, improving learning, parenting and families, and young people’s health and wellbeing. The IOE also hosts the largest concentration of longitudinal studies in the world, providing unrivalled insight into social change.

b. Housing and planning: The UCL Bartlett Faculty of the Built Environment undertakes world-leading research into how the built environment can

11 https://www.greatermanchester- ca.gov.uk/media/1909/gmipr_tr_amissionorientedapproachtocleangrowth.pdf 12 https://www.greatermanchester-ca.gov.uk/media/2132/gm-local-industrial-strategy-web.pdf address health, wellbeing, productivity, energy use and climate change and be made better for everyone. This includes the role of planning and public policy, local and regional economic development initiatives, spatial planning, and design and infrastructures.

c. Health inequalities: UCL Health of the Public is tackling research into preventable disparities in the distribution of ill-health, studying patterns of health and disease across societies. Our academics are exploring the determinants of health, how to prevent and treat mental and physical ill health, and how to optimise healthcare delivery in order to improve people's health across the life course. This includes the Institute for Health Equity and the UCL Institute of Epidemiology & Health Care.

d. Transport, infrastructure and connectivity: UCL undertakes world-leading research that contributes to making transport systems safe, sustainable, efficient, secure, equitable, accessible to all and considers how transport can promote health and wellbeing. We also lead in digital communication and networks, the development of which is needed to eliminate digital poverty.

e. Artificial intelligence (AI): The UCL AI strategy, AI for People and Planet, emphasises inclusion and diversity as a core principle, seeking to include marginalised, disfavoured or disadvantaged communities and positively fostering inclusion and diversity in all our AI research, education and training.

Targeted regional investment: how could ‘shovel ready’ growth projects in England drive local growth and jobs? How could clustered R&D investment support local growth? How should priorities be agreed across the regions?

17. Innovation and R&D are crucial drivers of economic growth and the UK government rightly wants to increase R&D both across the country, but also in regions that are currently underserved by R&D funding outside “the Golden Triangle”. The UK suffers some of the greatest regional disparities in productivity in the EU, and this too can be addressed by greater investment in innovation and R&D. Targeted regional investment is therefore a critical part of a levelling up agenda.

18. However, this must also look to how university funding can be made more sustainable to support the growth in activities in universities that the government desires. Currently project grants cover only the direct costs of the project, such as researchers’ salaries and lab materials. They do not cover all the overheads: infrastructure, facilities, office administration and the like. That leaves universities to find about 30 per cent of the cost of research via other means.13

19. The question of how to structure this investment beyond simply investing in universities as anchor institutions (as recommended above) is not a simple one. As

13 https://www.timeshighereducation.com/opinion/uks-research-funding-boost-must-not-overlook-overheads addressed by a recent report from Nesta14 the UK’s network of technology translation or applied research institutes (to help develop and commercialise lab- scale research) is comparatively small and this could be bolstered through levelling up funding.

20. The UCL Commission on Mission Oriented Innovation & Industrial Strategy (MOIIS) co-chaired by Professor Mariana Mazzucato and Lord David Willetts worked alongside the Department for Business, Energy & Industrial Strategy to develop and implement a “mission oriented” innovation framework15. This commission recognised that the solutions to a range of challenges – from climate change to healthy ageing – will require technology adoption programs (e.g. electric vehicles), regulatory experimentation (e.g. regulatory sandboxes for self-driving cars), or significant upskilling (e.g. building energy efficiency retrofit). All these things can be more easily achieved in specific regions or places, rather than across the country at the same time. This means that a mission-oriented approach can be complemented by significant activity at the local scale. Government should investigate how a national industrial strategy of this type can be complemented by local industrial strategies in this way. Government must also develop the mechanisms for local government to better align with national priorities.

Regional funding: how should the UK Shared Prosperity Fund be specifically targeted to replace EU Funding and address regional inequality? What role should local structures play in allocating funding to best achieve regional growth? What role could the British Business Bank have in the post-Covid-19 levelling up of regional economies?

21. Implementing a levelling up agenda will require substantial investment in regions across the UK across a number of policy spheres. UCL’s expertise can help to inform the deployment of that investment. In particular, our ability to work across disciplines, sectors and in diverse partnerships can inform the multi-faceted response required. Our location within London also strengthens our ability to work with national policymakers.

22. The UCL Institute for Global Prosperity argues that localisation of basic services should form the basis of a new industrial strategy for the 2020s. Investment in the infrastructure of care, health, education, transport and communication at the local level would increase people’s capacities, capabilities and opportunities for economic and social participation. These engines of investment improve people’s quality of life at the local level and regenerate local economies. By bringing localisation of basic services to the heart of a new industrial strategy control would return to places and people and help to secure livelihoods in the face of broad technological and societal change16.

14 https://www.nesta.org.uk/report/the-missing-4-billion/ 15 https://www.ucl.ac.uk/bartlett/public-purpose/policy/commission-innovation-and-industrial-strategy-moiis 16 https://discovery.ucl.ac.uk/id/eprint/10096789/8/Moore_Towards%20Prosperity_With%20DOI.pdf 23. The UCL Institute for Innovation and Public Purpose has investigated the role of patient finance, often offered by state institutions and national investment banks, in the innovation process. Given the important role that innovation looks set to play in the levelling up agenda, patient finance will be particularly important. As innovation is inherently uncertain and involves long lead-times it is often difficult to raise finance from private sources, and for this reason many government’s provide financial offerings through state investment banks (e.g. European Investment Bank, KfW in Germany, and BNDES in Brazil).17 Whilst the British Business Bank (BBB) can in some ways mimic this type of institution, it is also unable to raise finance on the bond market (making it more of a fund than a bank) and its limited offering of financial structures (for example it cannot offer equity finance), means it may require structural changes to support levelling up.

ENDS

August 2020

17 Macfarlane, L. and Mazzucato, M. (2018). State investment banks and patient finance: An international comparison. UCL Institute for Innovation and Public Purpose, Policy Report Working Paper Series (IIPP WP 2018-01) https://www.ucl.ac.uk/bartlett/public-purpose/wp2018-01