Rebalancing Regional Economies

Lisa Smart Excerpts

Wednesday 14th May 2025 Westminster Hall

[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.