‘Five things the Labour Chancellor should do to deliver good growth in every postcode’

The new Chancellor of the Exchequer, John Healey, is no stranger to the Treasury, having served as a minister in the last Labour government (during some of his latter period there, I chaired the Council of Economic Advisers). That bodes well. He will, of course, have a lot of difficult fiscal calls and macroeconomic challenges to deal with, but he also has a strong mandate from the new Prime Minister to create economic growth everywhere across the nation – or as Andy Burnham puts it, ‘in every postcode’. 

In his previous Treasury role, Healey looked at how to make the spatial distribution of economic activity across the country more even, through institutions such as the Regional Development Agencies of the New Labour period (sadly demolished at a stroke by the incoming Coalition government) and initiatives such as the Local Enterprise Growth Initiative. He therefore brings both experience and a clear commitment to this agenda. 

Having the Treasury firmly behind this agenda is crucial. That was true in Gordon Brown’s time as Chancellor and it will again be now. Indeed, the emergence of modern metro Mayors was driven by George Osborne’s Treasury, while the Levelling Up project wilted without the then Chancellor’s backing. We are now hearing that responsibility for local economic growth will shift to the No.10 North, but that will not get us far unless Healey makes sure that the Treasury is fully on board – and I am sure he will. 

READ MORE: ‘Doing things differently everywhere’

In light of this, The Future Governance Forum (FGF) has five recommendations for the new Chancellor as he seeks to make a success of this agenda.

First, John Healey should devolve more power over expenditure to the Mayoral Combined Authorities. The integrated settlements are a great start, but need to go much further. They represent a significant opportunity to support regional reform through revenue assignment, with strategic authorities controlling multi-year budgets that could enable them to reprofile programmes and investment towards prevention. This would be consistent with Andy Burnham’s talk of a ‘preventative state’ and his desire to put place at the centre of his government’s programme. We think ‘place-based pilots’ (announced in the Autumn 2025 Budget) should lead to full Total Place style settlements that extend integrated settlements to a much wider range of public service spending.

Second, the Chancellor should devolve more funding – including capital budgets and elements of the National Wealth Fund – to regional and local government. He should also follow through on, and potentially accelerate, the work on fiscal devolution begun by Rachel Reeves so that Mayoral Combined Authorities have greater powers to raise revenue for themselves. 

Third, the Chancellor should introduce a growth investment tracker to shine a light on how the most growth-friendly forms of public investment are currently spread across the country and ensure that in future they are better targeted towards regional growth. This would highlight any unreasonable disparity in public spending between London and the South East and the rest of the country (a disparity Andy Burnham has spoken of), enabling the Chancellor to ensure every postcode in the UK gets the investment it needs to deliver growth.

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Fourth, decisions by the Chancellor and the new No. 10 North on where public investment goes must increasingly put the goal of ‘growth everywhere’ at their heart. This means doing more to promote the strategic case for investment projects outside of South East England (like rail in the North, for example). One way the new Chancellor could do this is by ensuring that civil servants use the recently revised Treasury Green Book guide for investment appraisal in a positive way that supports regional growth. 

Fifth, the Chancellor must look closely at the case for creating regional business banks – new local financial institutions that understand their regions, and better serve small businesses. New ‘gap funder’ banks should also be considered, co-investing alongside venture capital to drive up investment in the regions. They could use the UK’s enormous finance talent pool to create visible, proud local institutions that are close enough to read a region and big enough to act at scale. With expert board and executive teams and a dedicated regional purpose, development banks could connect energy, defence and technology opportunities to underserved local economies.

Securing healthy, sustainable growth for the economy as a whole is a formidable task – although recent figures suggest progress is being made. Boosting growth in all regions of the country, let alone every postcode, will be equally challenging. But by taking forward our proposals, the new Labour Chancellor can make a strong start and set a firm direction of travel for the UK economy.

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