Yahoo Finance Is action man Gove up for a daring investment adventure?
Michael Gove has become the British economy’s Mr Fixit. While Rishi Sunak gives the appearance of someone who obsesses about little other than how and when to reduce the national debt, it is left to the MP for Surrey Heath to chart the government’s next steps.
As the new boss of Whitehall’s most clumsily renamed department – for “levelling up”, housing and communities (DLUHC) – it is Gove and not the chancellor who appears to have the job of joining the random dots on Boris Johnson’s map to a brighter, more equal and more planet-friendly future.
In recent exchanges across the floor of the House of Commons, Gove has shown that his brief is a wide-ranging one. Asked last week about the lack of rail lines in north-west Leicestershire, he happily trod all over transport secretary Grant Shapps’s toes to say the area “could have no surer champion in the jousting required to secure the [rail] investment needed”.
With the Home Office, education department and the Treasury also in his sights, not to mention the vexed topic of devolution, Gove added: “We need to ensure that all communities feel they have the right investment not just in transport, but in skills, schools and ensuring that streets are safe and communities can take back control”.
It is clear that Gove is the cabinet’s action man, one who not only attends to his immediate brief, but also addresses the broad issues facing the country.
The UK is likely to become more uneven, with the least competitive locations forecast to grow at the slowest rates
Prof Robert Huggins
As he goes about fashioning a bolder Britain, there are reports he could refer to that show how areas of the country not known for their private-sector prowess – or not any more at least – could benefit from significant public investment. This would be investment quietly binned by Treasury officials after it was found to offer little bang for each buck spent.
The latest productivity index from the thinktank Be The Business shows that firms with between two and 249 employees in the north-east and north-west of England improved during the pandemic at a faster rate than the same-sized firms in London and the south-east. Still in its infancy, and with only 1,000 respondents across the country, the index nonetheless illustrates how companies, even in deprived areas, are using technology, improved management skills and innovative ideas to boost output.
Importantly for Gove, the index shows that infrastructure investment in the north-west and north-east will have a receptive audience of up-and-coming businesses.
However, a separate study by Cardiff and Nottingham Trent universities, based on a broader range of data, reveals the very low base from which private sector productivity improvements outside London and the south-east start.
This may seem obvious when the UK Competitiveness Index, now in its 21st year, shows that former industrial area of Blaenau Gwent in Wales is the least competitive locality. Not far behind are the battered economies of Redcar and Cleveland in the north-east, and Mansfield in the east Midlands. What is saddening is that south Tyneside is also among the 10 worst performers, and Kingston on Hull, Stoke-on-Trent and Sunderland are not far behind. By contrast London boroughs grab nine out of the top 10 spots.
One of the report’s authors, Prof Robert Huggins of Cardiff University’s school of geography and planning, says there is a link between areas that are climbing up the productivity rankings and government investment. Liverpool, Leeds and Glasgow and Clyde Valley are among those improving lately. However, Huggins says the only major factor that has changed is City Deals, agreements between Whitehall and key cities that pre-date the current government.
“The problem for the UK is that such funding remains limited both its terms of the amount of funding available and the limited number places able to access it,” he says.
What’s worse, he says, is that these deals remain exceptions, and rather than the competitiveness landscape being levelled up, “the UK is likely to become more uneven, with the least competitive locations forecast to grow at the slowest rates”.
Gove will need to heed these warnings as he continues his negotiations with the Treasury. He shares Sunak’s free-market sympathies, but appears more open to the idea that long-term public investment complements private sector spending and will not make those in deprived areas put their feet up.
There is always a risk that areas that haven’t seen much government cash in a half a century won’t know what to do with it. But if these reports show one thing, it is that the risk is worth taking.
