Levelling up policies raise incomes, but also make the rich richer | Torsten Bell

Levelling up is all the post-Brexit rage. Rightly so: incomes in Nottingham are less than a quarter of those in Kensington. Now, new research brings important lessons about what levelling up success is – and isn’t – likely to achieve.

It comes from a place some might not welcome: the EU. For decades, Brussels has been levelling up Europe, with structural funds – currently more than €50bn (£44bn) a year – boosting poorer regions. This brings results: an extra half a percentage point on economic growth in those regions. But while average incomes rose, so did income inequality within the regions. Better-off households received bigger income boosts, because pay rose most for more educated workers.

What are the lessons, including for British levelling up? The authors simply call for “more egalitarian” approaches. That’s a cop-out because their findings shouldn’t be a surprise and policy tweaks won’t sever the connection between poorer regions catching up and becoming more unequal.

Poorer households look fairly similar across areas (their incomes depend on national benefit and minimum wage levels) but the rich are significantly richer in more productive places. Hence income inequality is higher within richer than poorer areas in the UK.

If levelling up ever actually happens, it will close north/south divides, making the country as a whole richer. But it almost certainly means parts of the north of England being more unequal. Pretending this trade-off doesn’t exist makes people feel better, but does nothing to help us build a better Britain. Nor does giving up on levelling up. The real lesson is that Britain needs an economic strategy that levels up poorer parts of the UK productivity wise and levels down gaps between rich and poor everywhere.