Northern prosperity is national prosperity

Original

IPPR North, economy, regional issues, taxation, transport

Author(s):  Lewis Goodall
Published date:  16 Apr 2012
Source:  IPPR

Rebalancing has become one of the weasel words of British political life. It has joined ‘green’, ‘localism’ and a host of friends as one of those political words everyone supports but no-one seems quite sure what it means. Beyond the rhetoric and the government’s commitment to the concept, it is difficult to see what it has meant so far in policy terms. In its most useful manifestation, it must surely involve the oft-mentioned but little-realised aim of shifting our economy away from its crippling overreliance on the City of London to other industries.

 

It must also be geographic, revitalising the massive productive potential of our regions outside the Greater South East. To many, this would seem an obvious thing to do: the problem has been that governments, of both stripes, have over the past thirty years, put all of our economic eggs in one basket. Since 2008, when our overreliance on the City and its toxic credit cocktails was horribly exposed, that series of mistakes has cost us all dearly. To get out of this mess, we must think outside the geographic box that is London and the South East and look for growth in the rest of our country and in particular where we have most potential to grow: the North of England.

This desire to limit the North-South divide is not born of a crass egalitarianism or a desire to make the country fairer for its own sake. Rather, the continuation of a centralised economic policy and a reliance on London and its environs costs every man, woman and child in this country in hard cash.  The UK economy would be £40billion better off if Northern economic potential was properly utilised and brought closer in line with other English regions. Narrowing the difference in output by only 50 per cent between the North of England and the other English regions would be equivalent to raising productivity by over £1,600 per English worker. Even if the North’s output could be increased to half the level of the English average when excluding London, we could still increase national output by over £15 billion. 

In 2012 the country is desperate for growth. Both Labour and Coalition governments have thrown the kitchen sink (even the odd utensil) at recovery. Despite these efforts little has been achieved with growth stalled and confidence weak. The economy may be slipping back into recession and since the downturn began, five, yes five years ago we have lost at least 7.4% of the nation’s GDP, which, we will not recover until 2014 at the earliest. Unemployment lags even farther behind, with 2.7 million of our fellow citizens out of work. We need new ideas and new thinking and crucially, new places to create jobs and wealth.

Presently, the North’s performance is fatally undermined by a lack of investment and policy focus. The English regions simply cannot compete and be open for business when so much of our investment continues to pass them by. For example, recent research by IPPR North showed that of those infrastructure projects currently in the pipeline, over £2,700 is being spent per head in London and the South East whilst North Easteners are being asked to make do with a fiver each. How will foreign firms and business take our regions seriously as economic players if our own governments doesn’t? We live in the most centralised country in the OECD. This only hampers our economic development as a nation and we need the drivers of growth to be devolved to our great cities.

These findings are part of the Northern Economic Futures Commission’s Interim Report. The Commission is a body of fifteen of the most respected voices from across the North of England and beyond, and was formed in July 2011. Since, it has been considering written evidence from a multitude of contributors and oral evidence from some of the most authoritative figures in business, academia and the public sector. It is charged with plotting a course for the North of England economy to become one of the great success stories of the 21st century.

The interim report is only half of the story. It details the transformative contribution that the North West, North East and Yorkshire and Humber could make to national prosperity. To get there, we require a total shift in mindset from government. The Commission will publish its Final Report in the Autumn which will contain policy recommendations and changes needed to start this transformation. Before any of this can happen, however, we must change government’s whole view.

We’ve lowered (and raised and raised) VAT, we’ve raised (and cut) income tax, we’ve tinkered with national insurance and we’ve offered tax breaks here, there and everywhere to little avail. What we haven’t yet done is break out of the suffocating paradigm that our country’s wealth will be (and can only be) created by two or three of our regions. To really ‘get out of this mess’, we need get every part of our country firing on all cylinders.