Divide-and-rule in the Northern economy
There are strong reasons why North–South comparisons remain vital and valid, but they are looking increasingly meaningless in a global economy.
This week The Smith Institute produced further evidence that there is a “deep, long-term, continuing divergence between the North and the Greater South East” and despite all the talk of rebalancing, government policy is making things worse. Their report, Rebalancing the economy: prospects for the North, rightly pointed to local government cuts, the New Homes Bonus, transport investment and the localisation of business rates as policy levers that all favour the South over the North and it lamented the closure of the Regional Development Agencies and greatly reduced resources within the Regional Growth Fund.
There are strong reasons why North-South comparisons remain vital and valid. It is in everybody’s interests that the UK economy should be firing on all cylinders and even within the ‘new orthodoxy’ of working with the places where the potential for growth is greatest, the limits to agglomeration are acute: the North of England has natural resources – land, water, energy – which are increasingly scarce and costly in the South.
But North-South comparisons in England are looking increasingly meaningless in a global economy. GVA growth – the preferred measure of comparison – is skewed by the City of London and masks the significant inequalities within the Greater South East. More importantly though, a far more meaningful comparison for the North of England would be similar peripheral or ‘lagging’ regions in Europe such as Nord Pas de Calais, Zuid-Nederland and Niedersachsen (North Saxony). Work undertaken by the OECD on ‘lagging regions’ shows not only that their contribution to aggregate growth has been greater than leading regions in the past decade (including in the UK) but that the policy interventions required to stimulate growth can be very different depending on their specific type.
This is not to diminish the importance of measuring and improving the productivity and competitiveness of the North. Indeed, where the report is lacking is a sense of where new and better jobs will come from. Whilst government investment and infrastructure is important, no amount of regional policy can disguide the bare truth that market-led innovation and enterprise remain the primary prospects for regional economic success. Locating the Big Society Bank in a Northern city is hardly going to turn the tide. Local Enterprise Partnerships, described in the report as being ‘weak institutions with unclear mandates and limited resources,’ are the only show in town and businesses and other public leaders need to get over their provenance and give them some backing to ensure the likelihood of modest success. They must seize the powers and initiative they need and not look to London for some kind of budget bail-out.
Ultimately though, it is collaboration between Local Enterprise Partnerships that will most benefit the North as it bids to compete in the global economy. Comparative advantages are less to be found by competition between Northern towns and cities and much more in presenting a united approach to infrastructure and spatial planning and attracting inward investment.
On this count the omens are not good, as LEPs square up in competing for the Regional Growth Fund, there has been little appetite or resource to rescue and preserve RDA intelligence and skills, let alone the pan-regional Northern Way. In the circumstances, LEP collaboration looks something of a luxury, but unless it moves quickly up the agenda localism and economic development will look increasingly like a Southern ploy for divide-and-rule.