Levelling up secretary Michael Gove has cast aside traditional ‘trickle down’ economics in a keynote speech to northern leaders in Liverpool, arguing only state intervention can close the north-south divide.
In remarks that will be unpopular with many senior figures in his own party, the Tory minister said traditional free-market approaches had failed places outside of London.
Speaking to the annual Convention of the North gathering of political and business leaders, he said there was a ‘moral’ case to level up the country, including through devolution - but in a warning to mayors, he also said that ‘with power comes responsibility’.
The cabinet minister, who last week published his flagship levelling up white paper to a lukewarm reception, said he made ‘no apology’ for the length of the document.
It was a testament to the complexity of the issue at hand, he said.
“There needs to be an argument that is made,” he added.
“And that argument - and it may seem odd coming from a politician on the right of the spectrum - is an argument with what one might call trickle down economics, or classical economics.
“There has been a traditional economic view, not just on the right but generally on the right, which says that the market will find its own way.”
That argument says that although parts of the country are ‘over heating, in London and the South East’, eventually ‘jobs and investment and prosperity will move away’.
“But actually all our experience is that that is not the case,” he said, adding: “If you leave the free-play market forces entirely to themselves, then what you see is inequality growing and particularly geographical inequality growing as well.”
This did not mean a return to state policies of the 1950s and 1960s, he said, adding that ‘what we cannot, should not do and must not do is direct capital investment and direct the private sector where to go’.
“What government needs to do is make sure the economic soil is irrigated, it needs to make sure that the climate as far as possible is conditioned for growth.”
Calling levelling up 'the central mission of our times', he said that meant the right policies and interventions on transport, housing - including conditions in both the private rented sector and social housing - and education, he said, as well as research and development investment.
Asked by the Liverpool Echo whether the government had itself played its part in widening the geographical gap via austerity, he said there had been a ‘longstanding debate’ about the measures taken after the 2008 economic crash, adding 'you can never know with hindsight' whether those decisions 'were judged just right'.
The levelling up secretary was also asked about the Integrated Rail Plan, which resulted in a halving of the budget for high-speed east-west rail links in the North, despite no economic analysis having taken place - leading northern mayors today to demand a rethink.
Asked whether he was ‘convinced’ it would mean someone could live in Liverpool and work in Sheffield, to laughter in the room, he paused, before responding: “You make a fair point.
“I think the amount of money we are putting into the IRP is significant, one of the most significant investments in rail infrastructure.
“But it’s against the backdrop, you’re quite right, of disproportionate investment in transport infrastructure - as with so much - in London and the South East and so we won’t overcome that inequality overnight.
“I think it is a major step forward but I also recognise the scale of the challenge we have.”
