Remainers must make a radical offer to Britain’s deprived regions

The solution is EU membership coupled with a new kind of capitalism 

February 01, 2019
A disused coal mine near Stoke-on-Trent. Photo: Wikimedia commons
A disused coal mine near Stoke-on-Trent. Photo: Wikimedia commons

Britain’s towns are ailing. Often dependent on one industry whose time has passed, a couple of factories under intense pressure from globalisation, a now closed mine or some fading tourist attraction their economic base is dwindling or disappearing. The new industries are passing them by, attracted to the cities where there are the skills, the bustle and a critical mass of customers prepared to try the new.

There are poles of growth and vitality in the regions outside London—university cities like Leeds, Manchester, Liverpool, Bristol and Newcastle have boot-strapped themselves up impressively over the last 20 years even if they fall short of the wealth and economic diversity of the capital. But the wider story is dismal. Seven of the ten poorest regions in Northern Europe are in England with average per capita incomes at the same level as Mississippi or Romania—disproportionately exposed to the ailing town effect.

Worse, too many people are trapped. Nearly all of the 30 social mobility cold-spots identified by the Social Mobility Commission as districts of substantial economic and social stagnation are in those self-same regions. Life expectancy actually fell in the northwest and east, Yorkshire and Humberside and the east and west midlands between 2014 and 2016. These were the heart of the Brexit vote, aided and abetted by a huge majority of the over 65s. To win any second referendum, there needs to be well-thought through plan for these voters that addresses what is happening—and credibly provides a solution. Their complaint is well-known. It can’t get any worse (actually it can and will post-Brexit if right-wing Leavers run our affairs), so why not vote to leave the EU?

Last week the German Coal Commission proposed that coal mining in Germany cease by 2038, in order that the country might meet its climate change targets, but also proposed that the last coal mining districts receive €40bn (£36bn) to devise appropriate economic renewal strategies. It's a scale of resource of which devastated British mining towns can only dream—vastly outmatching anything Theresa May might offer Labour MPs to vote for her deal. But then Germany has a constitutional commitment that all citizens in all parts of Germany enjoy broadly the same living standards and opportunities. The enormous gap between the M25 area and the rest of Britain would be constitutionally impossible in Germany. The ascendant British Brexit right argues that our inequality is the necessary price you pay for successful capitalism, and that compensating big redistributive transfers inhibit wealth generation. Firstly they self–evidently don’t. Secondly successful capitalism has no relation to taxation levels as Germany proves. And thirdly the price of avoiding action of this kind is the disillusion that drives events like Brexit.

Step one in a renewal programme is thus the entrenchment of two constitutional principles: that all British citizens should have equal living standards and opportunities—and secondly that every locality and region should have the appropriate political autonomy to tax, spend, borrow and initiate policies as it sees fit. At a stroke stricken towns as various as Birkenhead and Weymouth, Mansfield and Stoke would have the wherewithal and capacity to begin renewing themselves. As importantly the opportunity would persuade a higher proportion of their best and brightest to stay—rather than be siphoned off to the cities. One of the reasons so many able young doctors, teachers and professionals leave is because there are so few people like them, locking towns into a downward vicious circle.

The other vital move is to start creating the incentives and ecosystem for a local, value creating capitalism. British capitalism is too often organised to extract value rather than create it, led by big companies headquartered in London. There is little loyalty to the local or to local people. Classically Melrose, a thinly-disguised asset-stripping, value extracting company took over GKN last year. Its aim was surely not to invest in GKN. Rather it was to break it up and sell it off, bringing the headquarters back to London from the west midlands.

Such a take-over is easier in the UK than in other capitalist countries. British companies have few anchor shareholders loyally committed to their purpose; rather they have a multiplicity of disengaged shareholders whose chief criterion is how any strategy supports the immediate share price, including selling in a takeover. Workers are notations on a spreadsheet. Training is a cost not an investment. A company’s job is to make assets sweat—not to steward people and places as part of their mission. Britain’s ownership and financial system—even to the way directors are remunerated—imposes that barren worldview. The result is the economic wasteland that is much of England. There are jobs—but pay, conditions of employment and prospects are bleak.

It needs a wholesale makeover—from company law to reform of the asset management industry, from building new financial institutions to a new architecture that permits young companies not just to start-up—but to scale-up. The jobs of the future lie with a myriad of micro-producers, new companies exploiting fabulous 21st century technologies and vast opportunities to mentor, care, teach and coach in personal interactions. Put the necessary architecture to foster those together with a new constitutional settlement supported by some serious fiscal transfers, and Britain can start to breathe new life into its towns and regions. This has to become the core of the Remain case—giving back real control and taking advantage of the growth possibilities so vastly enhanced if we remain inside the EU.

Will Hutton is the author, with Andrew Adonis, of Saving Britain