Why Osborne's budget failed to deliver what the North really needs
The north of England is not without its fatcats; indeed the Chancellor himself represents a constituency that will be suitably impressed with the reduction in the top rate of income tax.
But whilst tax measures have important impacts on our spending and saving, what the north needed more than anything else was a budget for jobs growth. Whilst nationally unemployment is forecast to peak at just under 9 per cent, many places in the north are already well over ten and there are few signs of this falling any time soon.
The much heralded notion of regional – or local – rates of public sector pay only got brief mention in the budget speech as central government departments are given some license to start considering them ahead of the Independent Pay Review Bodies' report in July. But there is flimsy evidence that high rates of public sector pay are a real block to private sector jobs growth – and by the time we find out the public sector pay freeze will have brought things back into line anyway. Meanwhile taking out yet more spending power from public sector pay packets in places which need spending most is not going to help. So what will?
Later this month the Organisation for Economic Co-operation and Development will reveal the findings of three years' worth of careful study of so-called 'intermediate regions' – a category that applies to the North East, North West and Yorkshire & Humber – and what separates those that have been growing and those that have lagged behind.
Top of their list of priorities comes human capital: the value placed on the skills and talents of the local population. Greater Manchester's much-welcomed City Deal – also announced on Budget Day – creates a City Apprenticeships and Skills Hub for 6000 young people but beyond this there was very little in the budget to boost skills. IPPR proposed a jobs guarantee for young people to prevent the scarring effect that long periods of unemployment can lead to. This could be done for less than half the cost of the Corporation Tax cut (which benefit the City of London above all others) and yet would yield the same improvement to national GDP – and preserve human capital at the same time.
After skills comes infrastructure as the second driver of northern growth. Osborne's admission that underinvestment in transport infrastructure in the north has been chronic is right. Again, a welcome nod in the budget to broadband and to the next piece of the Northern Hub puzzle - £130m improvements to lines from Manchester to Sheffield, Rochdale, Halifax, Bradford, Bolton, Preston and Blackpool – but hardly the kind of injection needed to rebalance years of southern-focused investment. IPPR North recently published five Northern Rail Priorities costing just £800m (2.5 per cent of the HS2 budget) which would bring over 20,000 jobs and a £4bn boost to the northern economy over the coming decade.
And thirdly the north needs innovation. Investment in universities and in a new Centre for Aerodynamics is certainly welcome, but there is no mention as to where the new centre will be. If, like the Crick Institute, it is based in London then there is a danger of a double whammy effect as the north loses not only the initial investment but also the long-term impacts of the jobs and research grants that then follow. We will have to watch this space.