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The Cost of Living and Levelling Up on the Periphery

As peripheral communities pull together to rebuild and recover from the pandemic, we now face the devastating impact of the cost of living crisis, driven by the sharp rise in energy and food costs. This worsening predicament has affected rural areas disproportionately severely.

Households in rural areas have a far bigger fuel poverty gap than those in urban areas. Rural households would need fuel bills to fall by £501 to get them out of fuel poverty, compared to £223 in urban areas.[i] Overall, the average estimated energy cost of homes in rural areas is 10% higher than in mainly urban areas – and this is before the 2022 price increases.[ii] Fuel costs are more uncertain for the 14% of households who are not connected to the gas network, usually due to infrastructure constraints. The majority of these households are on Britain’s periphery,[iii] and most use heating oil, the price of which fluctuates considerably – doubling in price between January 2021 and September 2022.[iv] Heating oil is not subject to a unit price cap, unlike gas and electricity. Rural households also pay more to travel, spending an average of £113.90 a week on transport, compared to £76.20 for those in urban areas, and transport costs are a higher proportion of their disposable income (12.3% and 9.9%, respectively).[v] This difference even extends to food prices, with rural households spending 2% more than urban areas each week on food and non-alcoholic drinks.[vi]

There couldn’t be a more important time to truly level up the parts of the United Kingdom, as recognised by the Government in their Levelling Up and Regeneration Bill, put before Parliament in May this year.[vii] The Bill sets out 12 Missions to address the worst social and economic inequalities in the UK, aiming to reduce unequal regional productivity, pay, investment, health, infrastructure, education, skills and much more. Levelling up is so important because previous research by Britain’s Leading Edge has identified a “policy corridor” across the country[viii] – areas on the periphery have not historically had a strong Government policy or investment focus, and are consequently more deprived.

Looking at some of the Government’s 12 Levelling Up Missions, we can see how imbalanced the situation currently is:

  • Mission 1: pay, employment and productivity will have risen by 2030 in every part of the UK. Our research shows that workers in Britain’s Leading Edge have lower total median weekly pay than the rest of the UK, at £446 compared to £493 in external local authorities which are not part of Britain’s Leading Edge. This contributes to the lower productivity experienced in Britain’s Leading Edge. However, our employment rate for 16-64 year olds is almost the same as in external authorities, at 75.4% and 75.8% respectively, in 2021. We must make sure that people living in peripheral areas have the skills needed to drive the sustainable economic growth that we so desperately need. The rural economy is 18% lower in productivity than the national average.[ix] It is harder for students in rural areas to access higher education and improve social mobility: only 14% of young people in rural areas go to university, contrasted with 27% in urban “social mobility hotspots”.[x] The rural/urban gap is a drag on the economy as a whole: if it was closed, £43 billion could be added to the English economy.[xi]

  • Mission 4: the UK will have nationwide gigabit-capable broadband and 4G coverage by 2030. Gigabit internet access to premises is considerably lower in Britain’s Leading Edge regions, at an average of 13% compared to over 32% in external authorities. If fast broadband can be rolled out to all parts of the UK, businesses are more likely to switch their focus from the South East. This means we have a real chance to reduce the numbers of talented young people leaving rural areas for job opportunities in cities. In turn, this could drive productivity gains and address the demographic imbalances we so often see in Britain’s Leading Edge regions.

  • Mission 8: well-being will have improved in every area of the UK by 2030. Perhaps as a testament to the strength of our local communities, life satisfaction ratings and happiness levels are higher in Britain’s Leading Edge than the rest of the country, and levels of anxiety are lower.

To achieve meaningful levelling up, what more can be done by Government, and what can Britain’s Leading Edge members contribute in return? The twelve predominantly rural regions which make up Britain’s Leading Edge have so much to offer the United Kingdom as a whole. We are the energy powerhouses of tomorrow, capable of generating clean, reliable, renewable energy for the whole country. Our rich natural capital enables floating offshore wind and deep geothermal energy. Providing the devolved powers and funding to fully capitalise on this energy wealth will help the UK’s future electricity resilience. This is crucial at a time when imports of energy are becoming increasingly unreliable, with catastrophic cost of living rises and inflation driven significantly by energy costs. We can feed the United Kingdom. Food supply chains are particularly vulnerable to the kind of disruption we have seen during the pandemic and the invasion of Ukraine, which is only likely to be exacerbated further by the effects of climate change. As the UK imported 46% of its food in 2020, developing better domestic production is essential.[xvi] Britain’s Leading Edge can give extra resilience. Much of the UK’s food and drink sector (our largest manufacturing sector) is in Britain’s Leading Edge. Similarly, 40% of the UK’s agriculture, fishing and forestry businesses are in Britain’s Leading Edge areas.[xvii] This means Britain’s Leading Edge has a major role to play in securing the domestic food supply, and helping the economy by increasing food exports.

Meaningful devolution and prioritising local growth are the keys to unlocking our potential. Local authorities know their residents, businesses and geographies. We know what works and what doesn’t when developing and supporting our neighbourhoods. We are used to delivering capital expenditure projects at a large and small scale, driving growth and working with communities to create thriving places. These skills were honed further during the pandemic, when local authorities worked with Government at pace to assess and deliver targeted economic support that kept so many SMEs afloat. Local authorities are ready to take on more responsibility for economic growth, ensuring that smaller communities are not overlooked by the sometimes urban focus of central Government.

If Government stands by – indeed, accelerates – its existing commitments to devolution and levelling up, local leadership will be empowered to deliver peripheral economic growth for the benefit of the whole country. The County Councils Network assesses that devolution to county areas could generate more than a million new jobs over the next decade, create an additional £26bn for the United Kingdom’s economy and save central Government nearly £12bn a year for the next five years.[xviii] Making these economic strides can come with tangible social and health benefits – a recent study of the effects of devolution in Greater Manchester found that people had better life expectancy after devolution, with residents of the most deprived areas showing the greatest improvement.[xix] Progress of this kind will require passing the relevant legislation such as the Levelling Up and Regeneration Bill; ensuring powers are matched with single-pot long-term funding; and providing sufficient Government focus on agreeing devolution deals. Britain’s Leading Edge stands ready to work with Government for the benefit of our residents and the wider country.

[i] Rural Services Network/Kovia (2022), Rural Cost of Living. Available here. [ii] Rural Services Network/Kovia (2022), Rural Cost of Living. Available here. [iii] Affordable Warmth Solutions and BEIS (2015), The Non-Gas Map. Available here. [iv] Office for National Statistics (2022), RPI: Ave Price - Heating Oil, Per 1000 Litres. Available here. [v] Rural Services Network/Kovia (2022), Rural Cost of Living. Available here. [vi] Rural Services Network/Kovia (2022), Rural Cost of Living. Available here. [vii] UK Government (2022), Levelling-up and Regeneration Bill. Available here. [viii] Britain’s Leading Edge (2019), Launch Document. Available here. [ix] The All-Party Parliamentary Group for Rural Business and the Rural Powerhouse (2022), Levelling Up The Rural Economy: An Inquiry into Rural Productivity. Available here. [x] Defra (2022), Statistical Digest of Rural England. Available here. [xi] The All-Party Parliamentary Group for Rural Business and the Rural Powerhouse (2022), Levelling Up The Rural Economy: An Inquiry into Rural Productivity. Available here. [xii] The Andersons Centre (2022), Cost of Farming Squeeze Apparent. Available here. [xiii] Defra (2022), Statistical Digest of Rural England. Available here. [xiv] NICRE (2022), Infrastructure and Networks: Rural Enterprises and The Levelling Up Agenda. Available here. [xv] The All-Party Parliamentary Group for Rural Business and the Rural Powerhouse (2022), Levelling Up The Rural Economy: An Inquiry into Rural Productivity. Available here. [xvi] Defra (2021), United Kingdom Food Security Report 2021: Theme 2: UK Food Supply Sources. Available here. [xvii] Woolgrove, N. and Wills, J. (2022), Levelling Up the Periphery: Investing in Our Natural Assets for A Richer Future. Available here. [xviii] Grant Thornton (2020), Place-Based Growth - The Role of Counties in 'Levelling-Up' England. Available here. [xix] Britteon, P. et al (2022), The Effect of Devolution on Health: A Generalised Synthetic Control Analysis of Greater Manchester, England. Available here.

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