How Yorkshire can play its part in delivering on the government’s mission of economic growth - Luke Raikes
Economic growth is the new government’s most important mission. Families might not feel every jump or dip in GDP directly, but when our economy doesn’t grow, they feel it in their pockets and in their crumbling public services. So, what can this new government do differently, and how can Yorkshire play its part?
The last few governments always talked a good game on growth, but their actions told a different story. They often put measures that would improve growth way down their list of priorities – and always below holding their fractious party together.
Productivity measures how efficiently our economy grows, and the UK went from the second highest in the G7 in the decade before 2007, to the second lowest since. Yorkshire’s productivity also slipped after the financial crisis, from 90 per cent of the national average, to 85 per cent before the pandemic – though the pandemic narrowed the gap to 88 per cent as London struggled. And we have all felt this in our pockets. If wages had continued to grow at the pre-recession rate, the average earner would be £190 better off per week. I’m sure most of us could have put that money to good use.
But to look forward, the new government’s first steps are actually quite clear. Mostly, do the opposite of the last lot. Here are three steps they can take to help productivity to grow, and with it improve living standards and tax revenues.
Step one should be to invest wisely and long-term in areas like transport, skills and innovation. Many of these public funding streams were cut since 2010. Our rate of capital investment is 17 per cent, compared to 21 per cent in Germany and 23 per cent in France. The litany of broken promises is almost too painful to list, from HS2 to northern transport failures and broadband rollout. And this underinvestment is felt particularly keenly in places like Yorkshire where bus miles travelled fell by 32 per cent between 2010 and 2023.
We do need to invest more, but we also need to invest better. In a new Fabian Society paper, we recommend this spending is made more stable, not chopped and changed every year, or even every spending review. And much of it will be better spent if devolved to local councils and mayors, with sensible safeguards, but not the Whitehall micromanagement we’ve seen to date.
Step two is to improve the quality of work. Some business groups have stoked fears that improving workers’ rights will hit productivity and jobs. But the opposite is often true. Better pay and job security can mean higher productivity. And we currently have one of the weakest employment rights frameworks in the OECD, from our atrocious levels of sick pay and parental leave, to our lack of employee representation and working time regulation. 365,000 people are being paid below the legal minimum wage.
Here, the government’s new deal for working people provides a great starting point, by upgrading rights. Enforcement is crucial and good businesses, as well as trade unions, want to see the rules properly enforced. The single enforcement body the government proposes must retain the expertise of its constituent agencies, and it must have real teeth.
Step three is to build strong and stable institutions and governance. Nationally, we have had a succession of so-called ‘strategies’ that were really branding exercises, and important organisations like the Industrial Strategy Council were short lived. At a local level, devolution to mayoral combined authorities provides a rare but important glimmer of hope.
There are a number of quite simple measures the new government can take. They need to get government departments working together on growth, and bring nations and regions round the table too. And devolution must go further, providing longer-term funding, directly supporting mayors to bring buses under public control, and giving them powers over local rail too.
This is where Yorkshire can really contribute. Strong mayors, delivering locally, and representing their region in national decision making, will make a bigger difference than many realise. Local economic spending in the UK is half the rate of France and Germany. And when you visit those countries, you can feel the difference – from nicer streets and squares, to better public transport. There’s no reason why we shouldn’t have that standard of living too, and this is closely linked to productivity.
We have a new government which seems to have a higher regard for evidence than the last. So, it should be no surprise that under Rachel Reeves they have already started to take these first steps. Our new report sets out some more detail on the above proposals which will help them follow through.
This will take time. We need to learn from the hype and disappointments of ‘levelling up’. The hard task of addressing the fundamental weaknesses of our economy will take longer. The government must do the right thing for our economy, and hope that people will reward their serious approach with the patience it requires.
Luke Raikes is deputy general secretary of the Fabian Society and tweets @lukeraikes