Breaking the London bias of the UK economy requires a decisive break with the trickle-down economics that has accompanied London-centred growth writes James Meadway
David Cameron’s spotted a problem. “For too long our economy has been too London-focused and too centralised,” he says, promising £6bn for local councils to spend mostly on transport improvements under the so-called “Growth Deal”.
That’s all well and good. What our London pundits call “the regions” but which some readers may identify as “the rest of the country” have indeed had a decidedly bum deal, economically speaking; and no doubt the extra cash will be well-received in Manchester, Birmingham, and the rest. But that bum deal has got bummier, as it were, under Cameron’s watch. 80% of new jobs created since 2010 have been created in London. And the £6bn additional funding scarcely begins to compensate for the £25bn cuts made to the government’s investment spending. There will be no additional powers for local authorities – no extra tax-raising powers, no extra powers to spend, no extra powers to borrow. They will still depend on Whitehall’s largesse. This is the decentralisation of the begging bowl.
The sums promised will scarcely begin to dent the sheer scale of the imbalance between the London economy and the rest. New figures from Eurostat, the EU’s statistical authority, show just how stark this inequality now is. What you can see below is a graph showing the spread of output per person for each region in each country, measured relative to the EU average. This is reasonable measure of development: the more output per person, the richer an area will be, in general. You can see, for each country, the spread from the very poorest regions to the very richest, from left to right.
Most places in Europe have a bit of a spread. Some countries are richer than others, and some places within a country are richer than others. But outstanding amongst EU members, down at the bottom of the graph, is the UK. The spread of economic outcomes here is extraordinary. We have here the richest single area in the whole of Europe, Inner London. And yet, at the same time, we have some places – in this, case Cornwall and the Welsh Valleys, right at the poorest end of the spread – more comparable to recent EU members like Bulgaria and Romania.
A fresh lick of paint on Manchester’s trams, or some extra cash for roads in Yorkshire, is not going to address this. Not even close. Decades upon decades of underinvestment lie behind this graph. But nor will any old spending help; HS2, should it ever go ahead, will be wildly expensive but, as NEF research has shown, its economic benefits will be limited.
Breaking the London bias of the UK economy will mean not only extra spending and investment outside of London, but decisive break with trickle-down economics that has accompanied London-centred growth. As the crash of 2008 showed, an economy centred on the City of London means a concentration of profits in a very few hands, overwhelmingly in the south-east; but a spread of the losses far and wide, from one end of the country to the other, through the bailouts and austerity. Labour has floated proposals to devolve some £30bn in spending to local authorities; more radically, the SNP has floated the prospect of an independent Scotland becoming a “growth pole” for the north. The case for a redistribution of power and wealth is there for the taking.
Radical economist James Meadway has been an important critic of austerity economics and at the forefront of efforts to promulgate an alternative. James is co-author of Crisis in the Eurozone (2012) and Marx for Today (2014).