Simon Parker is Director of the New Local Government Network.
The vote to leave the European Union will pose the new Prime Minister two key challenges. The first is obviously to manage the hugely complex process of actually delivering a Brexit. The second is dealing with the underlying reason that drove many people to want to leave in the first place: their sense of being left behind by the London elite. Striking the right balance between these two challenges will be critical to the government’s success in the coming months.
Whitehall mandarins have floated the idea of creating a new ‘Department of Brexit’, but this move on its own will only help to ensure that the business of leaving the EU dominates the Government’s agenda to the exclusion of everything else. The focus on leaving the EU needs to be counterbalanced with a powerful new Department for Growth, with a clear mandate to devolve power and drive up regional prosperity across the country, making our towns and cities strong enough to survive the shocks ahead.
Some commentators have rushed to explain that Brexit is at least partially a cry of despair from those who didn’t feel that they had much to lose by gambling their economic future. The data suggest that those voters have a point. While the economies of London and the South East have roared ahead, the rest of the country really has fallen behind. Regional inequality has been growing since the early 2000s, and rocketed around the time of the credit crunch. The UK now has the highest level of regional economic disparity in the whole of the European Union. Such areas as the West Midlands have taken a particularly heavy hit, seeing their prosperity fall well behind the UK as a whole.
The EU referendum campaign has given these longstanding inequalities a newly political dimension. If the vote to Brexit was really a vote for economic as well as constitutional change, then the next prime minister needs to take action to deliver a better economy in areas like south Wales and the Tees Valley. It will no longer be good enough to leave steel production entirely to the whim of the free market.
The relatively prosperous areas that voted to remain – London, south Manchester, Bristol – may also demand political change. Many will say that the capital’s current anguish over the referendum result is a well-deserved taste of its own medicine, but this does not diminish the very real confusion of Londoners. It would be easy to channel their anger into demands for further autonomy from Parliament, including keeping more of the money generated within the M25. The new city mayors due to be elected next year in Greater Manchester and Merseyside may be able to use some of the same thwarted energy to demand greater freedom from the centre.
The new prime minister must ensure that the difficult job of Brexiting does not stop the Government from responding to this very real set of economic and social challenges. This is why we need a powerful new department to bring together the functions of the Scottish and Welsh offices with the Departments of Business, Innovation and Skills, Transport and Communities. This new Department of Growth should turbocharge the northern powerhouse agenda, devolving more power to regional towns and cities and accompanying the new responsibilities with a major programme of locally-led capital investment in infrastructure and business growth.
The Growth Secretary should be given the prime minister’s backing to devolve functions such as the skills system, healthcare and the Job Centre network to help cities reform public services and encourage more people into work. It will also need to set out far more imaginative local tax raising solutions that allow places to thrive beyond their relationship with the Whitehall bureaucracy. At this moment of extraordinary change, nothing should be off the table.
Ultimately, the new department should be given a clear target of radically improving regional prosperity within a decade. Not only would this draw some of the short term economic sting of Brexit, but it would also help to fix the long term economic weaknesses that drove the vote to leave in the first place. The people have given the Government a clear instruction to leave the EU, alongside a quieter but equally powerful demand for shared prosperity.