Levelling up state administrators’ salaries won’t help us address economic inequality
Last week, the Department of Levelling Up, Housing and Communities advertised for a new set of lucrative public sector jobs. As part of the “flagship” plans to ensure equal economic growth across the country, a team of 12 “levelling up directors” will receive a generous, tax-payer funded salary of up to £144,000. The job? To “work with local areas and central government to drive new and innovative local policy proposals”.
It comes hot on the heels of the news, revealed by the Taxpayers’ Alliance, that a record number of council employees took home more than a whopping £150,000 in pay and perks. That’s a tenfold increase since we published the first Town Hall Rich List in 2007.
Helping towns to prosper and regions to thrive is a noble ambition. We should be proud of London – our very own global city – but we should also be supporting growth everywhere else in the UK, too.
The government is clearly aware that some parts of the country have not shared in the spoils of economic growth that has seen London and the South East become some of the richest regions in Europe. But as is all too often the case, government plans for levelling up seem to rely too much on ill-thought through intervention and too little on trusting the regions to grow themselves.
These highly paid state administrators may simply end up costing the very people they’re trying to help a fortune in tax. Communities are already burdened by multiple layers of administration, from parish councils to metro mayors, who rely on taxpayers’ cash. It is therefore reasonable to assume that another band of bureaucrats is unlikely to deliver any real benefits.
All of this stems from Whitehall’s favourite misconception that problems can only be solved with cash. Time and time again, increased spending results in no tangible benefits to residents who aren’t council employees on telephone number salaries.
Local leaders, not distant central planners, know where and how money needs to be spent. They know the skills they have in their areas, and the skills they need to attract. So instead of yet more central planning, ministers could instead embrace competition and decentralise certain tax raising powers.
The UK has one of the most highly centralised tax systems in the developed world, but decentralised systems tend to have better growth. That could mean raising more money from local taxpayers directly, with local authorities using tax autonomy to attract inward investment and skilled workers.
Defenders of the status quo will argue tax competition would result in a “race to the bottom”, leading local authorities to constantly undercut each other, leaving insufficient revenue to fund public services. But past research – most notably from the OECD – shows that this does not happen in practice. Indeed, tax rates sometimes converge, or even go up. But either way, efficiency improves.
An empowered layer of local government can be more responsive to local choices and local needs. It can focus resources on the services that are most valued by the local community.
Divvying out yet more money on the whims of a new layer of public sector executives is unlikely to bring about the long-term economic growth communities need. Achieving genuine local growth means that Whitehall has to let go of the reins.