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How should the next PM level up? An example from Spain

Ivan Jimenez
August 9, 2022

With Liz Truss and Rishi Sunak expected to renew commitments to 'left-behind' regions as their hustings move to Darlington, Ivan Jimenez urges the candidates to take a leaf out of the Basque Country's book on economic and urban renewal.

As the Conservative Party leadership roadshow ventures north to Darlington, the two candidates, Liz Truss and Rishi Sunak, are expected to face renewed calls to set-out their respective plans for "levelling up". Providing fresh opportunities and investment to Britain's "forgotten" towns and cities was a central theme of the Conservative's 2019 election win – and labelled a "defining mission" by Boris Johnson on the steps of Downing Street. Now it falls to either his former chancellor or foreign secretary to uphold the agenda and deliver on their promise to voters.

For both Truss and Sunak, it will be a tough sell. A recent report by the End Child Poverty Commission found that almost two-fifths of children in the north east of England are living in poverty. While productivity levels, between London and much of the north, point to a divided nation in terms of economic activity. These are issues that cannot be corrected overnight.

The challenge, though, is not insurmountable. If they're looking for a credible blueprint on how to truly level up parts of the North, the develop Bilbao and the surrounding region of Biscay, in the Basque Country, this past 40 years, could serve as a guide. This region located in the northeast of the Spanish State shares many similarities with the likes of Darlington and other 'forgotten' towns and cities across the UK, and was decimated by the industrial decline in the 1970s and 80s. When the 2008 recession hit, its rate of unemployment escalated above 16 per cent and productivity and wages plummeted. Some skilled workers left the region for cities including London, Munich and Paris, and local opportunities quickly dried up.

Yet, now, less than 15 years on, Bilbao and the surrounding region of Biscay is a hive of activity, and a region that boasts education levels and GDP, per head, comparable to Sweden, unemployment rates are the lowest in the state, and so are levels of income inequality. Ordinary families are feeling the benefits of the region's 'levelling up' success as a whole, too, with household income in the top quartile of OECD regions, and their once-gritty, post-industrial cities, Bilbao and San Sebastian, now global centres for culture, gastronomy and advanced services.

What makes the Basque model so unique, and successful, is its genuine commitment to devolution. The provincial government for the Basque Country, Biscay, has its own tax-raising powers, for example, and can tailor its policies specifically for the needs of the region. This has made it attractive to international investors and workers alike, with the region not only home to innovative new start-ups, but also major global employers, including Mercedes-Benz and PWC.

If Truss or Sunak replicated this, across the North, they could pull new industry and workers to alternative urban centres, outside of London, and stimulate the regional economy. The case for this sort of devolution has been supported by think-tanks, including the Centre for Cities, which recently produced a report citing a "lack of leadership" as the biggest bulwark to levelling up.

Investment, too, will be essential, particularly against a backdrop of economic uncertainty. During the industrial recession in Bilbao, in the 1980s, the Biscay government invested in a new technology park, which has been key for the city's development as a hub for the European tech industry. Comparable commitments to northern regions in the UK would show that the Government has a long-term strategy for their development.

The same should apply to education. The former Conservative leadership contender, Tom Tugendhat, rightly identified that investment across this area is fundamental to levelling up, and pledged to establish new institutes of technology across the UK. Truss or Sunak would be wise to follow his lead on this, and to see the benefits of upskilling the UK workforce, where possible. This was a key pillar of the Basque success story, post-2008, and now sees the region near the top of the pile. in terms of educational attainment, with 26 per cent of residents holding advanced degrees in STEM (Science, Technology, Engineering, and Mathematics) subjects – double the proportion of both the EU and the United States.

And, lastly, both candidates would be minded to look at the benefits that cultural investment can bring. To date, under the outgoing prime minister, Boris Johnson, "levelling up" funding has been allocated to small-scale projects, such as local libraries and community arts centres. This is important, of course, but so is establishing cultural icons, which attract external funding flows. In our case, we have the Guggenheim, once derided, but which now symbolises the Basque turnaround – it stands as a beacon of a once-deprived city that now contributes 425 million euros to regional GDP, generates over 9,000 jobs, and drives up tourist numbers. It has been the catalyst for the delivery of a full-scale urban renewal programme, including a new metro system and business centre.

The term 'levelling up' may be a slogan, but regional inequalities are real. This is something that should weigh on the minds of Truss and Sunak as they speak with voters in Darlington, and across the North.

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Ivan Jimenez is Managing Director of Bizkaia Talent, established by the Biscay Government in the Basque Country as part of its strategy to revitalise the region.
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