George Parkwe in London and Andy Bounds in Manchester, Jan 29, 2020<\/p>\n
After promising to revive \u2018left behind\u2019 areas, the prime minister is questioning the Tory party\u2019s economic orthodoxy<\/em><\/p>\n Boris Johnson wants to banish the \u201cB word\u201d from British politics at 11pm on Friday. From that point onwards Mr Johnson, the architect of the UK\u2019s departure from the EU, hopes the Brexit trauma of the past four years can be replaced by a new unifying national mission: \u201clevelling up\u201d a country whose jagged contours of inequality were exposed in the 2016 EU referendum.<\/p>\n While Brexit supporters prepare for a festival of Union Jack-waving in London\u2019s Trafalgar Square on Friday, Mr Johnson will convene a cabinet meeting at an undisclosed venue in the North of England \u2014 a region previously regarded as terra incognita to many Conservatives, but which now looks to the new prime minister to build a fairer, more prosperous post-Brexit Britain.<\/p>\n The symbolism is clear. Mr Johnson recognises that the Brexit vote was for many people in what has been dubbed \u201cleft behind Britain\u201d not so much a shout of defiance against the EU as a cry for help. The day after he won an 80-seat House of Commons majority, Mr Johnson said: \u201cWhat is this new government going to do? We are going to unite and level up, bringing together this incredible United Kingdom.\u201d<\/p>\n When the prime minister sets out his plans in a speech early in February, the focus will be on the need to secure new trade deals \u2014 including one with the EU \u2014 and the push to spread growth across the country. \u201cBrexit will not be mentioned, unless you count saying that we don\u2019t want to talk about Brexit any more,\u201d says one Johnson aide.<\/p>\n Mr Johnson is attempting to redefine his Conservative party and the country it governs. The party of Margaret Thatcher \u2014 whose 1980s reforms put rocket boosters under London and the financial services sector and spawned a global wave of privatisations that stretched from Latin America to Russia \u2014 is seen by many in the north, the midlands and Wales as ruthlessly in love with the free market but callous about its consequences. Mr Johnson is trying to use Brexit to change that image by questioning the core ideas about state intervention in the economy and regional development which have been the party\u2019s orthodoxy since the Thatcher years. He is promising to shift civil servants out of London, change Treasury rules to favour investment in the north, a \u00a3100bn boost to infrastructure and a nimbler state aid policy to help failing strategic industries. On Wednesday his government nationalised the Northern rail franchise after public anger over its poor performance.<\/p>\n But will it be enough? And will a party which still has its centre of gravity in the prosperous south be willing to accept the tough choices \u2014 and pick up the bill \u2014 so that the prime minister can make good on his promises?<\/p>\n Mr Johnson was propelled back to Downing Street on December 12 by voters in seats long held by the opposition Labour party such as Burnley, Stoke-on-Trent and Dudley, towns cut adrift from globalisation, crushed by market forces and ravaged by a decade of austerity. They voted for Brexit and, as Mr Johnson acknowledged, they \u201clent\u201d their votes to the Conservatives. Now they expect payback.<\/p>\n Tory Eurosceptics have long argued that Brexit would be a great opportunity to \u201creboot\u201d the British economy, but they have not always agreed how. Some argued that leaving the EU would help drive forward the Thatcher revolution, sweeping away Brussels\u2019 regulations on everything from laws limiting working hours and some environmental rules.<\/p>\n In 2017 Mr Johnson and Michael Gove, a fellow Brexiter, used their positions in Theresa May\u2019s cabinet to urge the then prime minister to pursue a robust Brexit, in which Britain could adopt \u201cpro-competitive regulation\u201d and tax \u201csimplification\u201d. Some Conservatives cited Singapore as the kind of free market idyll they envisaged after Brexit.<\/p>\n But Mr Johnson has always been ideologically nimble or, as the former Tory deputy prime minister Michael Heseltine calls him, \u201cthe most flexible politician in modern times\u201d. Realising that his new voters have little enthusiasm for a small state and aggressive deregulation, the One Nation vision Mr Johnson now offers is one in which the state actively intervenes to promote economic recovery. He is offering higher spending, particularly on infrastructure, and has dropped a previous commitment to cut taxes for higher earners.<\/p>\n Although Mr Johnson insists on the \u201cright to diverge\u201d from EU regulations, his ministers say they will \u201cnot diverge for the sake of it\u201d. Indeed, the prime minister argues that he wants the right to set tougher regulations on workers\u2019 rights and the environment than those agreed at a European level.<\/p>\n Brexit itself is only a relatively small part of Mr Johnson\u2019s \u201clevelling up\u201d agenda. He wants to attract investment into about 10 free ports \u2014 zones outside normal tax and customs rules \u2014 in depressed parts of Britain, but most of his policy ideas have little or nothing to do with the act of leaving the EU. Indeed, free ports already exist in the EU.<\/p>\n Nick Timothy, chief of staff under Mrs May and author of the book Remaking One Nation, says the real significance of the 2016 Brexit vote was that it forced politicians to confront the fact that something had gone badly wrong.<\/p>\n \u201cIt made politicians realise they had to do something differently,\u201d he says, acknowledging that the May government did not do enough. But, he says, Mr Johnson will have to be bold: \u201cPeople say this is a one-off chance, but this public policy challenge has existed for quite a long time.\u201d<\/p>\n He notes that Labour governments between 1997 and 2010 tried to revive the regions outside the booming south-east, rebuilding the country\u2019s social infrastructure and devolving power to Scotland, Wales and Northern Ireland, but failed to stop the riptide of globalisation draining life out of former industrial towns. \u201cIt\u2019s hard,\u201d Mr Timothy says, \u201cit will require innovation and experimentation.\u201d<\/p>\n Many economists say Brexit will make Mr Johnson\u2019s task harder. Sajid Javid, chancellor, is keeping a tight grip on current public spending and aims to run a balanced budget on day-to-day spending by 2023. Yet the government\u2019s own leaked analysis in 2018 suggested the Canada-style trade deal with the EU sought by Mr Johnson would cut Britain\u2019s economic growth by up to 5 per cent over 15 years.<\/p>\n Leaving the EU single market will create friction and costs at the border for manufacturers with intricate supply chains \u2014 notably aerospace, automotive, chemicals and pharmaceuticals \u2014 which are largely based in the industrial areas Mr Johnson has wooed.<\/p>\n The prime minister has promised a \u00a3100bn increase in infrastructure spending over five years, funded by cheap borrowing, while the National Health Service, police and science are being prioritised for additional day-to-day cash. Other parts of the public realm, which have lost out during austerity, will continue to feel the squeeze. Blyth in north-east England. The town turned from Labour to the Conservatives in December’s election Mary Creagh, a former Labour MP who lost her seat in Wakefield, West Yorkshire, to the Tories in December, says Mr Johnson is \u201cthrowing out chaff\u201d \u2014 for example his aides have hinted at moving the House of Lords to the northern city of York \u2014 to disguise the fact that the government will not have the cash to transform the regions. \u201cBrexit will make the country poorer forever and that means less money for infrastructure and other areas of public spending,\u201d she says.<\/p>\n How far Mr Johnson will move away from the rigorous free market policies pursued by successive British governments, more or less continuously, since Thatcher came to power in 1979 remains unclear. She ended subsidies for struggling industries, such as steel and coal mining, and millions lost their jobs. Many towns, which grew up around a single industry, lost their main source of income and identity.<\/p>\n Successive Labour governments tried to stem the tide with public spending on new schools, hospitals and community centres but had little success in attracting private sector investment to smaller towns. Economic activity in a globalised world favoured big, well connected hubs with access to skilled workers in the south of the country such as London, Reading and Cambridge.<\/p>\n Mr Johnson is a full-throated champion of free enterprise, unlike Mrs May, who kept business at arm\u2019s length during her three years in Downing Street. Some, like Tim Bale, a professor of politics at London\u2019s Queen Mary University, question whether the prime minister can persuade his largely southern party to accept an agenda of higher public spending \u2014 and probably higher taxes.<\/p>\n \u201cI\u2019m pretty sceptical,\u201d he says. \u201cWe have heard this from three Conservative governments under David Cameron, Theresa May and now Boris Johnson. This is basically a small state, low tax, low regulation party which will find it quite difficult to do serious stuff about the structural problems in this country.\u201d<\/p>\n Patrick Minford, however, one of Thatcher\u2019s favourite economists and a prominent Brexit supporter, says it is time for a change. The government should borrow not just to build infrastructure but for day-to-day spending. Pushing growth up to Mr Javid\u2019s ambitious target of 2.8 per cent would also allow room for tax cuts. \u201cMonetary policy has run out of road,\u201d he says. \u201cWe need fiscal policy.\u201d<\/p>\n Prof Minford, of Cardiff Business School, says it is \u201ccommon sense\u201d for Mr Johnson\u2019s government to rescue Flybe \u2014 a regional airline and early beneficiary of the new administration\u2019s commitment to the country\u2019s regions \u2014 because air travel between provincial cities is important but demand not strong enough to deliver commercially. \u201cRegional airlines have gone bust. But it is vital infrastructure.\u201d<\/p>\n Jim O\u2019Neill, the former Goldman Sachs economist and Treasury minister who helped devise the Northern Powerhouse strategy under the Cameron government, also backed a new approach. \u201cEconomic liberalism is supposed to be the best way to deliver productivity gains and in the last decade it has not done that. Across the G7 countries since the financial crisis it has not worked.\u201d<\/p>\n He believes the Treasury should loosen the straitjacket. Mr Javid is rewriting rules, the so-called Green Book, that currently discourage state investment in poorer places. Existing rules mean that areas such as London receive more money because they are more productive. Mr Javid told the FT in January that the rules \u201centrench\u201d inequality.<\/p>\n Lord O\u2019Neill argues that the government\u2019s new cost\/benefit analysis should take into account one-off transformational gains that fundamentally improve the potential of an economy. But he fears that the new politics favour investing in towns \u2014 some now represented for the first time by Tory MPs \u2014 as opposed to big cities in the north. Older, less racially diverse and pro-Brexit, these towns backed the Tories heavily even in areas devastated by industrial decline in the 1980s and austerity in the 2010s.<\/p>\n He argues that the economics suggest that building up cities such as Manchester and Leeds as alternative business locations to London will have the biggest impact, with improved public transport allowing peripheral towns to feed off the success of local centres.<\/p>\n Diane Coyle, Bennett Professor of Public Policy at the University of Cambridge, also warns against spreading \u201cthe worst kind of jam too thinly\u201d. She questions whether the government has the necessary commitment to close a north-south divide that on some measures was as wide as the one between the old East and West Germany.<\/p>\n She says Mr Javid\u2019s \u00a3100bn infrastructure fund is too small. \u201cIt will take hundreds of billions,\u201d she says. \u201cWe have not done this since the Victorian age.\u201d Some could be borrowed but \u201cwe will have to pay more tax\u201d, she adds.<\/p>\n Like the riots that ripped apart England\u2019s inner cities in the early 1980s, the 2016 Brexit vote forced politicians to reappraise what is happening in their own country. The big test for Mr Johnson remains making good on his \u201clevelling up\u201d slogan.<\/p>\n He models his economic style on Lord Heseltine, who combined support for the free market with a belief that the state can help reverse decline. His role in reviving Liverpool\u2019s redundant inner city docks after the 1981 riots in nearby Toxteth is still seen as a model for regeneration. But the peer says the prime minister has some way to go.<\/p>\n \u201cHe calls himself a Brexity Hezza,\u201d Lord Heseltine says. \u201cWe shall see.\u201d<\/p>\n The passionate pro-European, now 86, has urged the prime minister to accelerate efforts to push more power and money out to regional mayors to allow local communities to help themselves. \u201cIt\u2019s a mistake to say they just have to regenerate the north,\u201d Lord Heseltine says. \u201cThey have to regenerate the whole economy.\u201d<\/p>\n The north: from \u2018managed decline\u2019 to election victory<\/span>In<\/p>\n 1981 \u2014 after a summer of inner city riots \u2014 the Conservative government of Margaret Thatcher considered abandoning parts of the north to what the then chancellor Geoffrey Howe described as \u201cmanaged decline\u201d.<\/p>\n In a letter dated September 4, and only released by the state archives in 2011, Mr Howe, a Cambridge-educated classicist, asked: \u201cShould our aim be to stabilise the inner cities\u2009.\u2009.\u2009.\u2009or is this to pump water uphill? Should we rather go for \u2018managed decline\u2019?\u201d He realised how controversial the approach would be. \u201cThis is not a term for use, even privately,\u201d he counselled cabinet colleagues. \u201cIt is much too negative.\u201d<\/p>\n The causes of the Toxteth riots in Liverpool and those in Manchester, Leeds, Birmingham, Bristol and London were manifold. Racial harassment of young black people by the police was the spark, but unemployment rates of as much as 50 per cent in some places had robbed many people of hope as well as money.<\/p>\n Thatcher blamed the poor. \u201cWe have a whole generation brought up on five hours a day of TV,\u201d she told the cabinet on July 9. \u201cWe have poured money into big employments in Merseyside; a failure.\u201d<\/p>\n As her government cut subsidies and sterling soared, allowing a flood of cheap imports, industry across the north of England and the Midlands collapsed. More than 1m manufacturing jobs were lost between 1979 and 1981. Almost one in five people in the north-east were jobless, compared with one in 10 in the south-east. Hundreds of thousands of people moved south for work.<\/p>\n Michael Heseltine, the then environment secretary, accused his own government of \u201ctactical retreat, a combination of economic erosion and encouraged evacuation\u201d.<\/p>\n Three years later the fight moved from the cities to the coalfields. A plan to shut up to 75 pits over three years sparked a year-long strike across Yorkshire, Durham, Lancashire, South Wales and Scotland. More than 160,000 coalfield jobs were lost in the decade after 1981. By 1996 Grimethorpe, once a thriving pit village in South Yorkshire, was the most deprived area in the UK. And some coalfield communities are still struggling to find a new purpose.<\/p>\n But with memories fading, these are some of the places that overturned 40 years of enmity to vote Conservative at December\u2019s general election, while big cities in the north such as Liverpool, Manchester, Sheffield and central Leeds remain Tory-free zones.<\/p>\n