New transport projects will help, but a real fix requires more fundamental reformsby Paul Wallace / January 17, 2020 / Leave a comment
If there is one thing beyond Brexit that now fires up Boris Johnson it is the task of breathing new life into the economy of central and northern England, whose disenchanted voters gave him his landslide victory in December. But rebalancing the British economy away from London and the southeast is a monumental task, the more so since the prime minister’s hard version of Brexit will sharpen regional imbalances. The deeper one probes Britain’s widening north-south divide the more evident it is that there is no “oven-ready” simple solution.
Rising resentment of London in less favoured regions reflects the capital’s growing economic dominance. Over the past two decades London’s share of total UK output has risen by a fifth, from 20 per cent in 1998 to 24 per cent in 2018. No other of the UK’s 12 regions increased its share over that period. The biggest decline has been in the northeast, down by a tenth (from 3.2 to 2.9 per cent), followed by Yorkshire and the Humber.
Compared with five other big European countries, the UK stands out for its mix of one economically dominant region and several lagging ones. London is second only to the Île-de-France (essentially the greater Paris region) in output per worker, according to an analysis by national statistician Richard Prothero in 2018. But the UK also has eight of the 14 lowest-ranked regions out of 52 (the other six low-performers are in eastern Germany and southern Italy). Though the picture brightens a bit when disposable household incomes per person are compared, reflecting generally high employment rates in the UK, it still remains fairly dire.
Creating a more balanced national economy would be in everyone’s interests. Not only would it help the regions that have been lagging behind but also it would reduce congestion and overcrowding in London and the southeast. Johnson’s mission to “level up” regions, proclaimed the day after the election, makes economic sense for the country as a whole as well as serving the electoral self-interest of the Conservatives.
The main way in which the government plans to achieve that levelling-up is through a big boost to infrastructure in the left-behind regions. This is definitely worth a try. Research by the think-tank IPPR has documented the shortfall in public spending on transport in the north compared with London. It finds that on average over the past decade expenditure per person in the capital has been more than double that in the north.
But improvements in infrastructure, however desirable, will be at best a partial remedy. For one thing, such projects take time to plan and to implement. More important, a good transport system is only one ingredient in the complicated baking mix that causes some regions to rise where others stay flat.
London shines as a region not just in Britain but also in Europe because its productivity is so high. The capital specialises in knowledge-intensive activities, such as finance and business services, and has become a tech hub. A prime advantage as an international financial centre is that it can draw upon a huge workforce, including commuters from surrounding regions, with diverse skills. But even in other kinds of services that are less knowledge-intensive, productivity is considerably higher than the national average.
The point is that human capital counts more than physical capital in determining regional success. By all means, improve the transport infrastructure in the north. But the real priority is to improve the skills available to employers there and to encourage new businesses in the growth sectors of the economy. That is why the project of reviving northern regions should focus on supporting vocational education, while fostering links between business and the universities.
There is one other crucial ingredient in the mix: devolution of power. England is an extraordinarily centralised state. Far too many decisions are taken at Westminster and Whitehall rather than at a local level. The very term used by Johnson, to “level up” regions, smacks of this overweening central control.
Making matters worse, policies set nationally are in a constant ferment as departments are reshuffled, ministers come and go and policies chop and change. A crucial reason why vocational education, now upheld as a priority, is such a mess is that there has been no consistency at the top. A report by the Institute for Government in 2017 highlighted the “sheer scale of churn” in the sector, with 28 major pieces of legislation and 48 secretaries of state over three decades.
If anything, there will be even greater centralisation under Johnson, certainly if his adviser Dominic Cummings gets his way in magnifying still further the overreach of the prime minister. But since Cummings is looking for revolutionary thinking, why doesn’t he recommend moving the capital to a northern city such as Leeds or Manchester?
The idea isn’t new. The Economist suggested the reform as long ago as 1962 and Prospect revisited the idea in 2002. But the opportunity is new since MPs will in any case have to decamp from the Palace of Westminster in the mid-2020s while it is being renovated. A temporary stay outside London could pave the way to a permanent relocation, with the historic site left to tourists. The main ministries could then follow.
It won’t happen. Instead Johnson appears intent on imposing a hard Brexit that will inflict the greatest damage on northern and central regions, according to a leaked government analysis of January 2018. If that indeed occurs, any fillip to those vulnerable regions from boosting infrastructure spending will largely be an exercise in damage limitation.