Summary:
Any policy that stands a chance of levelling up “left behind” regions is unlikely to be cheap and uncontroversial. But if you will the end, you must will the means. Now that the pandemic has shattered cultural and economic barriers to remote working, government should offer an income-tax break to workers who move to areas most in need of regeneration.
Detail:
A powerful way to boost “left behind” places is to encourage members of the professional classes to live there. This is not because such people are “better”; rather, the structural reality is that employers and amenities locate themselves where skilled people with disposable income live, while those with social (and actual) capital can often mobilise more effectively to advance their own interests, and the interests of their communities.
This reality is partly why success in regional growth policies is so rare. But it also leaves open the possibility of a virtuous feedback loop, if a first group of skilled people can be persuaded to move to an area in need of levelling up.
That is precisely the opportunity the pandemic affords. Cultural and economic barriers to remote working have been shattered, and professionals in cities have a new appetite for more spacious, more affordable, less densely populated places. One in seven Londoners wants to move out of the city as a result of the pandemic, according to a London Assembly survey. Topping the list of what people are looking for are private gardens, proximity to green space and a bigger home.
So how to entice some of these workers to areas most in need of regeneration? In short, as a carrot, government should give them an income-tax break. For example, income up to £100k and for up to five years could be exempted from tax, with participants losing their exemption if they move out. Research is needed to understand the size and duration of the tax break that’s sufficient to attract people whilst minimising cost to the Treasury. One might find that the British love of a bargain can entice people without too much money at all.
Similarly, careful thinking is required to select which areas and people should be eligible. For example, people who already live within commuting distance of a designated area should arguably be ineligible, but what counts as commuting distance would have to be defined. Moreover, local schemes should close once a certain number of people has moved in, so that areas are not overwhelmed.
The newcomers will stimulate the local economy and create jobs through the money they spend locally on anything ranging from house renovation to shopping and leisure. Academic research also finds that the presence of skilled employment pushes up the wages of all workers in the local labour market.
The private sector will respond with new investments. For example, “food deserts” (areas lacking healthy, affordable food) exist because supermarket chains look at local incomes (among other factors) when deciding where to open a store. So the mere presence of people on higher incomes could be enough to attract supermarkets to areas that are currently under-served.
Once a first group of newcomers is settled and improvements start to materialise, others will follow suit – without any tax incentives. And thanks to this new pool of local skills, more employers can move in and fill roles that require an office presence at least part time – and bring more jobs in the process.
There’s a virtuous loop for public services too. There will be more money to spend on local services through more council tax, business rates and central funding based on population. At the same time, increased demand from new users will also make more investments and upgrades viable: more demand means more projects that represent good value for money, and therefore attract Treasury funding. This is more than theoretical: the government has committed to spending a lot of money on infrastructure in the North, and the economic case looks a lot better if government nudges people up there too.
Another positive effect is that the new arrivals will likely leverage their privilege to demand better services. For example, they might be in a better position to hold the school governor to account as well as volunteering their time to improve the school.
Perhaps the biggest challenge of this scheme is the danger that the existing local population resents it, because of the negative effects of gentrification. This risk can be reduced in several ways. First, engaging early with the community and allowing them to shape the scheme (including its boundaries) will be essential. Second, proponents should identify and communicate how the scheme can tangibly improve the life of locals, for example through jobs and regeneration. Third, it may be wise to give the local community the final word in approving the scheme. The power of rejection should ensure that locals have real influence, increasing their engagement and ultimately leading to more positive attitudes. There should be a clear objective that the new community integrate harmoniously with the old.
Finally, it’s worth responding to criticisms that the scheme is zero sum, “robbing Peter to pay Paul”. In short, this isn’t about emptying London. It’s about redirecting some of the projected growth of big cities towards those towns most in need of regeneration. London will continue to thrive, but perhaps we won’t need to spend quite as much upgrading its infrastructure to accommodate fast population growth. The case for Crossrail 2 will be less, replaced by dozens of smaller and cheaper projects in towns across the country. And if we succeed in creating a more regionally balanced economy, we would boost the country’s economic performance overall.
2034-11