Rebalancing Regional Economies

Wednesday 14th May 2025 Westminster Hall

11:00

[Peter Dowd (in the Chair)]

I remind hon. Members that they may only make a speech with prior permission from the Member in charge of the debate and the Minister. If you do not have that permission, do not try to speak. As is the convention for 30-minute debates, there will not be an opportunity for the Member in charge to wind up. I also remind Members that the debate is only half an hour; if the Member in charge does take interventions, bear in mind that the Minister also has to respond.

11:01

[Andy MacNae (Rossendale and Darwen) (Lab)]

I beg to move,

That this House has considered the potential merits of rebalancing regional economies.

It is a true pleasure to serve under your chairship, Mr Dowd. This Government have rightly prioritised growth, devolution and the need for growth to be seen in all regions and nations. Last year’s Budget and this year’s spring statement freed up £113 billion of infrastructure investment. Huge amounts of work are being done to develop industrial strategies that will drive forward key sectors. We have new trade deals, and have seen the corporate world commit record levels of investment in renewable energy, artificial intelligence and many more sectors.

Brilliant stuff—but what does it actually mean to the people of Rossendale and Darwen, Blackpool, Winsford, Macclesfield, or Cornwall? Clearly not much yet, given the kicking we got in the local elections. These small towns and coastal communities are the places where productivity is lowest.

[Rachel Gilmour (Tiverton and Minehead) (LD)]

My constituency is both rural and coastal, which presents a unique set of challenges in terms of deprivation and neglect. Urban areas often receive targeted investment, but rural and coastal communities can be overlooked. Does the hon. Member agree that the Government must adopt a tailored approach, taking into account the rural premium in the index of multiple deprivation, to specifically address the distinct needs of such areas and unlock their significant economic potential?

[Andy MacNae]

I agree with the hon. Member; her point is largely the thrust of my speech, so hopefully I will align with her thinking.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Member for securing this debate. He is absolutely right about regional rebalancing of the economies. From a Northern Irish perspective, I can encourage him that Invest Northern Ireland has decided to relocate many of its upcoming businesses outside the Belfast metropolitan area, as a way of moving forward, but does he agree that location can never overtake viability in the economy?

[Andy MacNae]

Absolutely. That is the essence of growth for all. It is about going beyond location and beyond geography as a determinant, and getting the right outcomes for everyone. Our small towns and coastal communities are where productivity is lowest, and where the cost of living and housing crises have hit hardest. They have been left out and let down for so long that it is no wonder trust and expectation are so low—but those are the places where the next election will be won or lost, and where this Government must deliver for our communities if we are to live up to our promises.

To mean something to Rossendale and Darwen, and to places like it, growth must translate into real and tangible change in every neighbourhood. It must mean good jobs and accessible opportunities for young people where they live. It must mean that our towns feel clean and safe, and that people have the houses they need. It must mean that our small and medium-sized businesses thrive and put more money in people’s pockets. It must mean that our roads, buses and rail systems actually connect to where people need to go.

I think we all get that—I certainly know the Minister does—but what worries me is that, when it comes to actual decision making, too often the investment planning defaults to big cities and existing growth areas, with the role of small towns seemingly reduced to just feeding people into the great city machine. Indeed, it can often be a presumption that the answer for small towns is nothing more than better transport into a city. Such thinking totally misses the point.

[Alex Ballinger (Halesowen) (Lab)]

rose—

[Chris McDonald (Stockton North) (Lab)]

rose—

[Andy MacNae]

I will give way to my hon. Friends sequentially.

[Alex Ballinger]

My hon. Friend is making an excellent speech. Does he welcome the news announced today that 12,000 civil servants will move out of London and into the regions to work on exactly these issues? Would he recommend that some of the civil servants moving to the west midlands should come from the Department for Business and Trade, so they can focus on the automotive sectors, the defence sectors and the advanced manufacturing that really make our region great?

[Andy MacNae]

I thank my hon. Friend for his intervention. Indeed, that movement out into the regions is vital; a thrust throughout this debate is the understanding of regional and local realities. That movement can only be welcomed, and it should be as broad as it possibly can be.

[Chris McDonald]

I was very exercised by my hon. Friend’s point about “feeding people” from small towns into cities—a very patronising view espoused by ill-informed lobby groups such as the Centre for Cities. Does he agree that that view denies the reality: that people who live in towns want their towns to be successful and have real pride in their towns, including places such as Stockton, Billingham and Norton in my constituency? That success is good for the country, good for those towns and good for the people who live in them.

[Andy MacNae]

I agree 100% with my hon. Friend. It is the pride that we have in our towns that really matters. Good things should happen in our towns, not just in some distant city that only a tiny proportion of people in a town might be lucky enough to be able to travel to. That includes pride in our neighbourhoods; neighbourhoods are important to their residents.

Having said that, I do not deny for a moment that cities are our economic engines and that we desperately need to address the productivity gap between our regional centres and London—but, as we have said, this process cannot just be about the cities and the big towns. It matters little to the people of Bacup how well Manchester is doing. Instead, we need to see the good things happening in Manchester mirrored in places such as Bacup. That is the true test of whether we are delivering for all.

[Afzal Khan (Manchester Rusholme) (Lab)]

I thank my hon. Friend for securing this important debate. Greater Manchester has the fastest growing economy in the UK, with the most diverse range of sector strengths in the country, but despite that, Greater Manchester’s productivity is still 35% below London’s. Does he agree that we cannot rebalance our regional economies without major investments, such as the Northern Arc, which could double the size of the region’s economy in 30 years?

[Andy MacNae]

I thank my hon. Friend for that intervention. That is largely the point: we must rebalance our economies by bridging the productivity gap between our cities, including our northern cities, and the rest of the country. At the same time, though, we must make sure that that growth in cities such as Manchester, which in many ways is doing great, is felt in Lancashire and other places at the same time.

[Perran Moon (Camborne and Redruth) (Lab)]

I thank my hon. Friend for securing this important debate. My point is similar to that of the hon. Member for Tiverton and Minehead (Rachel Gilmour). We often discuss the rebalancing of regional economies in terms of urban versus rural or north versus south, but does my hon. Friend agree that we must consider more nuanced geographical and socioeconomic factors, including those of communities in remote coastal areas such as Cornwall, whose characteristics differ substantially from inland rural communities on issues such as non-resident population, the cost of beach safety, the ability to attract construction workers and, of course, a massive challenge with housing costs?

[Andy MacNae]

I entirely agree with my hon. Friend. Indeed, the requirement for bespoke interventions is the thrust of the latter parts of my speech.

Whether places such as Bacup feel the benefit of Government interventions is a test for whether we are delivering growth for all. The last Government failed spectacularly in this challenge and, if we are to avoid the same fate, we must do things differently.

[Luke Myer (Middlesbrough South and East Cleveland) (Lab)]

It is now nearly 13 years since the Institute for Public Policy Research North published its landmark report, “Northern Prosperity is National Prosperity”, which set out in black and white the evidence that investing in the regions—all regions across the UK—is one of the best ways to achieve growth nationally. Does my hon. Friend agree that it is long past time that we devolved power and funding in order to create jobs in all our communities across the UK?

[Andy MacNae]

I thank my hon. Friend for that intervention—I remember that brilliant report very well, and that process of devolution is a crucial element of getting this right.

What are the underlying issues and what can we do about them? It is perfectly understandable that, in looking for growth, we go first to places where it can be achieved most easily at scale and at the lowest cost. That is an instinct backed-up by long-established practices. We see it manifest in announcements around the Oxford-Cambridge corridor, the lower Thames crossing, Heathrow and Old Trafford.

[Will Stone (Swindon North) (Lab)]

While I welcome the Oxford-Cambridge corridor, does my hon. Friend agree that extending it down to places such as Swindon would not only boost the economy in my region, but also the country?

[Andy MacNae]

Indeed; part of the thrust of my argument is that these growth corridors must extend into the areas that need them most, and I am sure that Swindon very much needs to be part of that mix. The focus on those easier areas is perfectly reasonable, but if we continue in this vein of only doing the big and easy things, all the money will be gone before we get anywhere near the likes of Rossendale and Darwen.

In places such as my home, delivering growth is not easy—it is complex and bespoke and needs sustained focus. There is rarely a silver bullet and, if there was one, it would be tough to deliver. But, if properly valued, the long-term benefits of doing the hard yards are huge not just in economic terms, but in terms of health, crime, housing, environment and general wellbeing. That is the rub: as things stand, too often we do not fully value these benefits, either quantitatively or qualitatively. Ministers make decisions and advisers advise. The Government guidance for investment is the Green Book, which sets out how decisions on major investment projects are appraised. It was last reviewed in 2020 and is subject to another review now. Despite a clear intent for that guidance to support regional rebalancing, it is clear that embedded practices too often default to over-reliance on simplistic and short-term cost-benefit ratios.

[Lisa Smart (Hazel Grove) (LD)]

We have had debates on the Green Book in Westminster Hall before, and I am sure the hon. Gentleman agrees with me that there is a real opportunity, in the Treasury’s review of its methodology, to drive growth in our regions and in constituencies such as mine. We should be valuing things such as investing in the tram-train between Manchester Piccadilly and Marple in a way that generates growth. Does he agree that that is an opportunity that the Government should seize?

[Andy MacNae]

I agree 100% with the hon. Lady. It is a huge opportunity, and I will come to the specifics around it very shortly.

Some Departments still require projects to surpass a certain benefit-cost threshold before the investment decision gets anywhere near a Minister’s desk. It is a statement of fact to say that that reliance on benefit-cost ratios favours better-off areas and quick wins, contributing to regional and sub-regional imbalance over many years. That issue does not stop with the Green Book—it is broader than that; I would argue that it can be summed up as the simple human temptation to take the quicker and easier option.

The problem has historically been compounded by a failure to join up investment thinking across Departments and geographical footprints—for instance, local regeneration funding not being linked to regional transport or housing strategy. The great failure of the last Government’s levelling-up programme was to abandon any sort of strategic approach and simply rely on bidding competitions and piecemeal sticking-plaster interventions determined by the likelihood of a good headline.

If we are really to see the benefits of growth in places such as Rossendale and Darwen, we need to address all that head-on. The Green Book and appraisal practice must change to properly value all impacts of investment in our small towns. We must ensure that all appraisal processes, including departmental models, follow the intent of that guidance. Green Book best practice must be updated to ensure that project funding is primarily based on strategic objectives, which may include aspects that cannot be valued quantitatively, rather than arbitrary forecasts. That must include ending all arbitrary benefit-cost ratio thresholds based on limited economic forecasting, replacing them with strengthened and broadened place-based systems of evaluation, with public transparency about the calculations.

Appraisals must recognise the long-term and interlinked nature of key interventions extending over the period by which the benefits are valued, and address the excessive discounting of long-term impacts. More fundamentally, our strategies must insist on doing the hard yards, while giving the fiscal flexibility, regulatory framework and sustained leadership to deliver effectively.

The question “What does this do for our most deprived and left-behind neighbourhoods?” should be embedded in every investment strategy and decision process. We should develop tests that seek to answer that question and by which we can judge investments. By insisting on truly holistic, place-based approaches designed to benefit all, we can deliver much more meaningful impact. In delivering that sort of approach, devolution and local leadership could and should play a vital role—but only if we do it right.

It has been well argued that to close national productivity gaps we need to focus investment through integrated settlements towards the cities and devolved authorities. With developed institutions and the greatest ability to get things done, I agree with that, but that is the relatively easy bit. We must also do the hard bit: such progress must be in parallel with targeted investment in deprived towns outside the immediate economic envelope of the city, in line with original strategy and founded on the principle of growth for all that cuts across devolved areas. That strategy must be supported by flexible funding and delivery capacity to respond to specific challenges and opportunities.

We cannot continue to justify Government investment flowing into the likes of Manchester while the towns of Lancashire do not even appear in the picture. As a practical example, take the TransPennine route upgrade—a major project that will transform connectivity between cities and major towns across the Pennines. It has been presented, in some quarters, as a transformational project for our region. However, if I ask, “What does this do for Rossendale and Darwen, or any small town on or near the route?”, the answer is, “Frankly, not much—all it does is take trains past us a bit quicker.”

Would we not rather think about the rail upgrade as one part of a wider project that enables a growth corridor, and in which we make a positive impact on small towns and rural areas in that corridor a fundamental requirement of the investment, for instance by insisting on local procurement, associated recruitment and skills programmes, investment and startup incentives, brownfield remediation, housing renewal, local transport improvements, public realm investment and so on?

Such an approach could be delivered through a partnership of Liverpool, Manchester, Lancashire and West Yorkshire authorities, with mayors sharing accountability. It would require a fully place-based appraisal mechanism, flexible funding and long-term delivery capability. It should also be expected to bring in other agencies such as Homes England, Active Travel England and Historic England to provide additional leverage. By insisting on such an holistic approach, we could get something far more impactful, and bigger than the sum of its parts.

We have tried all this before with regional development agencies, housing market renewal, the single regeneration budget, the new deal for communities programme, local enterprise growth initiatives, local enterprise partnerships and so on. Many of these things were great, but they never quite got there. Too often programmes would retreat into doing the same easy thing over and over again, lose strategic focus and just deliver a lot of nice-to-haves or be pulled back into spending orthodoxies by risk-averse oversight. As Gordon Brown reflected—I will not do a Scottish accent:

“The frustration is that we haven’t made enough progress. Given the deindustrialisation of Britain, we haven’t managed to find a way to generate the kind of growth and wealth in the areas of the country that were at the heart of the first Industrial Revolution.”

This Government, who were elected by those very areas, must again take up that challenge.

For too long, geography has meant destiny. Small towns such as Bacup, Whitworth, Rawtenstall and Darwen have been at the back of the queue and left behind, as others shout louder and seemingly offer easier solutions. Our decision-making process has compounded that and left our communities behind. We must change the game. Our new default must be to put our left-behind neighbourhoods first. We must learn the lessons of the past and not allow established orthodoxies and a desire for easy wins to stand in the way. In the end, we simply cannot afford to fail those communities that need us most.

11:17

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Alex Norris)]

It is a pleasure to serve with you in the Chair, Mr Dowd. It was a pleasure to hear the outstanding contribution by my hon. Friend the Member for Rossendale and Darwen (Andy MacNae). I am grateful to him for securing the debate, and I am grateful to my colleagues who have come and found a way to contribute to it as well. This is a very important debate. The frustration over the imbalances both between and within regions is felt locally, whether it is in Teesside or Cornwall or anywhere in between, so it is right that colleagues are interested in this.

I have a whole argument to set out, but instinctively I will start with something I have said for a number of years, both when I shadowed this brief in opposition and throughout my time in government—something, most importantly, that the Prime Minister has said on multiple occasions: we see the fundamental transfer of power and resources from this place to local communities as a huge priority for this Government. We do that because we believe it is right that people should have a stronger say over their future, be it their economic future, their social future or the future of the fabric of their community, but we also strongly believe that that is what delivers.

It is right that the No. 1 mission for this Government is growth, but if we are to get that, the heart of our growth mission must be making sure that everybody has good opportunities, and that prosperity is spread across the UK. This is hard to say, especially as a Minister, but also from Westminster itself: it is an inside job. When I became the Minister for local growth, a job I loved doing, I did not walk through a sheep dip that gave me omniscience over Lancashire, Teesside, the west Midlands or Halesowen. The experts are my hon. Friends, but more importantly they are their constituents. My role—and our job as a Government—is to get those resources and powers out to them, so that they can change their communities and shape their economic futures. That is an important and huge goal.

It is very hard not to get into a conversation, as my hon. Friend the Member for Camborne and Redruth (Perran Moon) says, about either north or south, urban or rural and city or town, and that is a feature of this debate. But certainly when it comes to growth across those areas outside London and the south-east that have had the hardest time over the past few decades, I do not see these things as either/or’s. I think they interlock.

[Afzal Khan]

This is an important debate. In Manchester, a shocking 11 children in a class of 30 are living in poverty, which we know impacts their development, experiences, education and mental health. We must ensure that the economy works for the people we serve, so does the Minister agree that tackling child poverty must be central to our plans for regional rebalancing, especially in areas such as Manchester Rusholme?

[Alex Norris]

I agree that child poverty is particularly cruel. It is cruel because of the hardship that those children grow up in, but it is also cruel because their potential is snuffed out before they have even had a chance, and we should want everybody to have a chance to play their role in their community. That speaks to the very important point that even within communities that are thriving, there are still some of those neighbourhoods. This is a conversation about towns, but it is also a conversation about neighbourhoods. The very poorest neighbourhoods exist in all parts of the country, and we should have a real neighbourhoods focus for how we tackle that.

As I said, I think that these things interlock. I make no apology for believing that there is an importance in ensuring that our cities thrive. If our largest 11 underperforming cities got to the national average, that would be worth £20.5 billion; to the Exchequer, it would be £63 billion of additional output. That is a huge prize. I am thinking about Belfast and the incredible success story that is going on there in banking and finance, in the creative industries and in tech generally. These are incredible opportunities, which have the potential to change that community and change lives.

However, it is right that colleagues here, such as the hon. Member for Strangford (Jim Shannon), should ask, “But what does that mean for Newtownards? What does that mean for Coleraine? What does that mean for Ballymena?” Those conversations are very much in the spirit that my hon. Friend the Member for Rossendale and Darwen led us off in. We will as a Government—this has been part of the debate already today—look to back those projects that have a potentially transformative impact. Whether that involves the Oxford, Milton Keynes and Cambridge corridor or unlocking the growth potential of our cities, we are going to do those things. We think that that should be at the core of our industrial strategy. I am talking about backing places with potential for growth, and growth with a degree of speed as well. There is the clustering that is going on. I am thinking about Liverpool and Manchester and some of the technology clustering. We are going to back those things. We think that is the right thing to do. But I want to give colleagues a real assurance that our approach has a lot more than that, too. As I have said, it is about power and it is about resources.

With regard to the power piece, I am very proud of our devolution agenda. As a Government, we have built on what the previous Government did. They did good things in establishing the mayoralties that they did. We want that to go wider and deeper, which I will talk about in a second. In recent months, I have been working very closely with our mayors on the development of local growth plans, so that—again, in the spirit of what my hon. Friend the Member for Rossendale and Darwen says—rather than Ministers sitting in Whitehall with a map and working out where they think there might be some potential, we are saying to the leaders of those communities, “Get together with your community. Tell us where your economic future is. Tell us what the hurdles are to realising that economic future. Tell us what resources you need to deliver that economic future. We will agree those plans with you and we will back you. We will give you the power to do that. You can use tools, such as investment zones or freeports, but we want you to say what it takes.”

I am very pleased to say that as we get to the spending review this year, we will see those plans come out. Whether we are talking about the Liverpool city region, the east midlands—my area—the Greater Manchester combined authority, the west midlands or elsewhere, people will see emerging very exciting plans that will be about a new vision, a new understanding of where this country’s potential and opportunities are, because suddenly they will be popping up all over the country. I am really excited about that, but we need more people to be part of the settlement.

The devolution steps taken by previous Governments were good ones, but it could go much further, so we have made a commitment to a deeper devolution settlement—more powers across housing, planning, transport, energy, skills, employment support and more, so that locally those tools are there to shape place and to shape the economic future. I am delighted to say that Lancashire is soon to be part of this. We want more people to be in on that settlement because we think it delivers for their communities, so it is great that the Lancashire combined county authority is up and running. Of course, there are six areas in the devolution priority programme. That means that when those priorities are delivered and over the line, in addition to the devolution we have already, the proportion of England covered by devolution will rise to 77%, or just over 44 million people, by next May.

[Perran Moon]

Will the Minister give way?

[Alex Norris]

I will shortly. That will cover the entirety of the north, which may well be the point that my hon. Friend wants to make.

[Perran Moon]

I wholeheartedly agree with the principle of devolving powers out of this place and into regions, but does the Minister agree that in certain parts of the country, namely Cornwall, it will be very difficult for the model that is designed within the English devolution Bill to apply? Does he agree that we need flexibility and a nuanced approach to those areas that are desperate for devolution but will not and cannot sign up to the model that is currently Government strategy?

[Alex Norris]

I recognise that Cornwall is different. That point is obviously established in multinational architecture as well. There is no doubt that there are differences in Cornwall. I know that my hon. Friend and his Cornish colleagues are making that case very strongly to my hon. Friend the Minister for Local Government and English Devolution, and I am hearing that case as well. We know that that will continue. We need to have a programme that fits, and my hon. Friend will understand our need for coherence, too, but I appreciate the spirit in which he makes his point. I know there are differences in Cornwall, and those conversations will continue.

[Luke Myer]

Do the Government accept the subsidiarity principle wherein powers should not just sit at the mayoral level, but should be as close to the community as possible? That would empower our local authorities and communities themselves, rather than just creating structures that sit above communities and are distant from them.

[Alex Norris]

My hon. Friend, with characteristic vigour, takes me to the next part of my argument. I do not see the finished devolution product being a shift of power from Whitehall and Westminster to a regional or sub-regional body that is far away from communities and the local authority. I think that transfer is an unalloyed good, but I do not think it is the whole job.

That is why I was so pleased that my hon. Friend the Member for Rossendale and Darwen was the one who opened the debate. Our plan for neighbourhoods is a step in that direction—we are saying that we want money and power to be held at a neighbourhood level, to shape place. We think that is the second part of devolution. The first part probably gets the most public attention—creating new mayors and new structures creates a lot of interest. For me, the magic is in that next stage, which is where communities really take control for themselves—and of their future.

That is not just rhetoric from me; we have put our money where our mouths are. The £1.5 billion we have committed to the plan for neighbourhoods will deliver up to £20 million of funding and support for 75 areas over the next decade. It is hopefully a starting point. In April I had the pleasure of visiting two of the areas, Darwen and Rawtenstall, which are in my hon. Friend’s constituency. I was struck by the energy—my hon. Friend always has that characteristic energy, of course, but his former colleagues in local government had it too, as well as the neighbourhood board and all the folks who had come to play their role in that process. I was struck by how ambitious they were for their communities, and the plans they had. As I go around the UK talking to people, mentioning local growth and the plan for neighbourhoods, it is striking how they want to use the money to catalyse further investments in their communities.

[Andy MacNae]

This is all wonderful stuff, and obviously we are massively behind these plans, but does the Minister agree that in order to make the most of the plan for neighbourhoods, we must address the infrastructure constraints within the sub-regions—constraints that have traditionally held back our areas? In the case of Rawtenstall and many areas, it is the rail links. There is also the transport grid. There are so many aspects of this. We will only get the value for money out of our plan for neighbourhoods if we address the infrastructure around our areas, too.

[Alex Norris]

I agree with that. When I visited my hon. Friend’s constituency, I was struck by the fact that he is in a valley, and if anything is wrong with that road, everything is wrong with that road and everything grinds to a halt. Of course the plan cannot be seen in isolation.

I have only one minute left, and I want to cover the Green Book before I conclude. My hon. Friend made a very good case for updating the Green Book. As he said, a review is under way. That will ensure that the Green Book provides objective, transparent advice on public investment across the country, including outside of London and the south-east, meaning that investment in all regions gets a proper hearing and areas get proper backing for growth. I encourage colleagues to continue to talk to the Treasury, as I know they are doing, about what they want to see from a future Green Book to ensure that they are getting the investment they need in their communities.

There has been a lot of energy in this room; there is always a lot of energy in the room when we talk about local devolution and local leadership. We have huge untapped potential in this country, and what it takes to tap into that potential, and that desire for communities to take control of their future, is a Government who support the transfer of money and power from this place to them to allow them to shape place. I am really excited to be getting on with that job, and to be working with colleagues in doing so.

Motion lapsed (Standing Order No. 10(6)).

11:30

Sitting suspended.