Give us a Barnett formula for the North to match the Marshall plan we have for the South

by Kevin Meagher

“Power, wealth and opportunity” should be “in the hands of the many, not the few” intones Clause Four (Section Four) of the Labour party constitution. An admirable sentiment and one that we could usefully start by applying to our unbalanced and dysfunctional national economy.

No, this isn’t a moan about the iniquities of the Barnett formula, which was revealed last week to shower a fifth more public spending on Scotland than England.

For those of us living north of the Wash, our beef is not with our Caledonian neighbours, but our Southern English brethren. Yes, the problem is our old friend the North/ South divide; that drag anchor that mars all efforts to deliver the wise words emblazoned on the back of our membership cards.

You can see why, when the unemployment rate in the South East is now half that of the North East. The TUC estimates that there are 158,000 fewer jobs now than there were on the eve of the recession in December 2007. During that time, the North West and Yorkshire and Humber regions have lost 60,000 jobs apiece. London, on the other hand, has actually seen 122,000 more jobs created.

Meanwhile the Chartered Institute of Personnel and Development’s latest quarterly labour market outlook found a stark differential in business confidence, with employers in the South expecting to increase staffing levels over the next three months, while those in the North predict further job cuts.

The government’s response to this glaring asymmetry? The department of business has just confirmed that it has only managed to green-light one out of fifty approved bids to its new regional growth fund, the scheme designed to bolster the private sector in those regions most reliant on the public sector (and therefore most exposed to cuts). Yet even if all its projects were up and running, this £1.4bn pot amounts to just a third of what Labour’s regional development agencies were spending.

It’s much the same with the 22 much-vaunted enterprise zones which are to be dotted around the country. They may help boost growth in the areas they cover, but they are costly and only have a temporary effect; making them the economic equivalent of knocking back an espresso in order to cure dehydration.

It is little wonder we have such a problem, though, when public investment in transport, defence, science and technology, the olympic games, crossrail and the first stage of high speed 2 all see London and the South East receive the lion’s share of the cake. That’s before we include the battalions of civil service jobs needlessly kept close to the capital.

So one of the underlying problems perpetuating the North/South wealth and opportunity divide is public spending – or, more specifically, its allocation.

As the IPPR recently pointed out, spending on transport in London is now £802 per head compared with just £333 in the North West, £272 in Yorkshire and Humberside and a paltry £248 in the North East.

The think tank has recently launched a commission to explore the “dominance of the prosperous and powerful Greater South East” and why the “lagging regions” of the North West, Yorkshire and Humber and the North East are struggling to keep up.

Let me skip ahead and offer a provisional recommendation. We need a Barnett Formula for the North to match the Marshall Plan we already have in place for the South. London and the greater South East are economically successful, in part, because generous state spending makes them so.

Why is this? In short, virtually our entire opinion-forming class is to be found in the capital. Unlike many other countries, our capital city is not only home to our politics, but also our finance and most of our top-drawer culture and arts. But it doesn’t stop there. It includes our broadcasters. National newspapers. The headquarters of most of our top listed companies. Every government department. Think tanks. Trade associations. National charities. The whole kit and caboodle.

That’s an awful lot of vested interests serving to neuter the impulse to spread employment-enhancing state spending out of the South East and further north. As a result, England has no geographic checks and balances. No counterveiling centres of power. No “second city” worthy of the name.

Yet we continue to pump-prime our unequal settlement, with the risk that the bow of the southern English economy is now lifting clear of the water as the stern of the north sinks deeper into the icy depths of economic stagnation.

The Economist recently christened this phenomenon “Londonism“. The affairs of the capital are now unaligned with the interests of the rest of the country. What is good for London is not necessarily to the benefit of Leicester or Liverpool.

Take the Olympics. Birmingham previously bid to host the 1992 games. Manchester, in 1996 and 2000 (before going on to host the successful Commonwealth Games in 2002). Yet it was a no-brainer that a successful British bid for the 2012 Olympics had to come from London – our only global brand city.

Or what about the new national football stadium? Again, “let’s rebuild Wembley” trumped a more rational decision about the best location – one that might have taken into account issues like accessibility and suitable motorway links – which would have favoured Birmingham or perhaps Nottingham. (Of course, if the decision had been on footballing merit, the location of the new stadium would have been somewhere on the M62 – equidistant between Manchester, Liverpool and the Lancashire clubs of Blackburn, Bolton and Wigan).

And, of course, there’s the Millennium Dome. Ah yes, spending the better part of a billion pounds on a glorified gazebo cum educational theme park and then launching it in the middle of winter in a poorly connected part of the capital was, in retrospect, never going to be a winning idea.

But the Lowry Centre at Salford Quays (the second largest Millennium project) generated more bang for a fraction of the buck. It has been an unquestionable success – both culturally and economically; forming the centrepiece of a wider regeneration that has transformed one of the poorest parts of the country.

Andrew Adonis even suggested we should locate a new elected second chamber in Salford. Even swivel-eyed regionalists like me dizzy at such a prospect, but what about putting the rest of the BBC up there? It’s perfectly technologically feasible. Despite the whinging from some of their London-obsessed staff, five of Auntie’s departments have just headed north to Salford’s gleaming MediaCity; a complex that is closer to Canary Wharf than the dark satanic mills and grimy docksides of yore.

And why not do the same with government departments? Liam Byrne’s proposal before the last election to ship tens of thousands of civil servants out of London was exactly the kind of thing we should have been planning a decade earlier. Apart from a cadre of civil servants needed to brief ministers, why not send the rest out to the provinces? It’s cheaper, overall, for the taxpayer and it spreads both wealth and opportunity around the country.

The corollary of having the High Speed Two rail link – with faster journey times to and from the capital – is that it should, in future years, make our small, cramped country a good deal easier to get around by train. Combined with real time communication technologies there is absolutely no reason why even senior officials need to hang around in London. Why shouldn’t The Man in Whitehall become The Man in Whitehaven?

Political choices have led us to our current unbalanced pass. We have turned London into an economic vortex – sucking economic life away from our great cities and conurbations and towards a Metropolis that buckles under the strain of its self-aggrandising role as a city-state. We can and must make different choices in the future in order to remedy this situation.

It’s time that all those who spout on about localism backed up their rhetoric with hard commitments. Real devolution – of power, wealth and opportunity – should form the bedrock of our future thinking.

It’s easy. Read Clause Four again. And then take out a map.

Kevin Meagher is associate editor of Labour Uncut.

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13 Responses to “Give us a Barnett formula for the North to match the Marshall plan we have for the South”

  1. swatantra says:

    We need to bring back Regional Govt on the Agenda, so that these problems specific to these Regions are given priority, and dealt with strategically.

  2. Eric Hyland says:

    Kevin, this whole ‘London (or inside the M25) must have have it all’ attitude has always been with us. Shamefully the Labour government actually accelerated it. The Millenium dome, built at a cost of about £900million and had no immediate use (oh, we’ll think of something), the siting of the replacement Wembley on the old site at a cost of at least two, probably three times the cost of building it in the midlands, to say nothing of the massive inconvenience caused to fans having to travel from the north.
    This north/south thing is one of my pet moans. The allocation of cash for public transport, the earning power, not just jobs available but the take home pay. Then the southerners pity us poor northerners.
    There’s much more I could say on this subject but i think that will do for now.

  3. Nick says:

    The government’s response to this glaring asymmetry?


    It shouldn’t respond. It’s the people of the North’s choice. If they want greater prosperity they can do two things.

    1. Create the wealth
    2. Demand that the government takes less of their wealth.

    Taking other people’s wealth doesn’t help the country, since you’re making people poorer.

    It’s only those things above that work. The first is blatantly obvious but since you’ve acquired an entitlement mentality, its not attractive because you would rather have the government mug and steal for you.

    The second is less obvious until you realise that the government is always taking a cut out of all taxes to keep for itself. It’s not efficient, and the evidence points to this being a very large effect. 50% is wasted.

    If we take HS2 as a good example. Yep, it does give faster times – eventually. During the time it is built, it will invariably give slower times, and that’s ignored.

    Next, lets look at the cost. 30 minutes saving.

    Now look at the cost. Debt costs (ignore running cost) divided by the number of passengers.

    Then you can work out the cost per minute that is saved.

    Ah yes, the ticket buying public won’t pay that. It’s too much. So the solution is then that you we steal more money of people who don’t use it, making them poorer (including those up North), in order to pay for the minority who do use HS2, and they are the rich. Someone on minimum wage is paying 2,500 a year in taxes just for someone else to shave a bit of time of their journey.

    That’s the really sick part of your attitude. Penalise the book, in order for people like you to get around quickly.

  4. Oliver says:

    Fantastic stuff. The trouble is, it’s an argument that won’t ever get a fair hearing. This particular kind of inequality fails on deaf ears even amongst the ‘Southern Left’, who often can’t/won’t appreciate the London-centricism that happens in this country, whether it’s the media, economics, culture or whatever.

    What makes Londonism worse is that it’s self-fulfilling. Whenever something needs to happen or needs to be built, it ‘has’ to be London because that’s where the other stuff is or that’s where the tourists already are.

  5. Real devolution is needed not to mention federalism, no doubt there. But Labour never really did offer real devolution to real regions did they? In Cornwall, a real region with historic and cultural integrity, we gathered a petition of 50,000 signatures calling for a Cornish assembly and Labour totally ignored us because we didn’t fit their artificial government zone regional plan.

    Try a grass roots approach to drawing regional boundaries and you might have a little more success.

  6. swatantra says:

    When it comes to drawing any boundaries they should bear in mind geographical and histiorical ties and not make it a numbers game. A sense of belonging is far more important tha being a number.

  7. Kevin says:

    Nick – caught you! You’re being satirical aren’t you?

  8. Eric Hyland says:

    Am I the only one who finds the whole ‘South good, North a bit (well a lot really) nasty and cheap’ thing completely unacceptable.
    My point is, it is not just money that is lavished on the south, but that all national events should be spread around the country. I.e. All royal events, most notably remembrance Sunday. There is no reason why this should not take place in every major city on a rotational basis with the Queen in attendance.
    All sporting events take place in London. No reason for this other that London must have it all.
    Not just sport but all art and culture, must take place in London. No reason for this other than London must have it all.
    Where is the anger. Oh I forgot. All the nation press is in London.

  9. Kevin says:

    Eric – Amen to all of that. Time for all self-declaring localists in British politics to step up to the mark…

  10. toothgrinder says:

    Nick, Eric – and others – you are so right about Londonism and it is nothing new. When the ‘British National Oil Corporation’ was headquartered in Glasgow as a sop ot the Gnats, the HQ employed naerly 50 people…the ‘brabch office’ in London employed many hundreds, if not thousands.
    Beware, however of the Barnett formula. Barnett only covers a proportion of Government spending; Scotland still contributes more to the exchequer than it gets out of it. Barnett was devises a a politcal tool and nothing more.
    So what can we do about it? Nothing really. Labour/Tory and Lib Dem London MPs will always band together to protect London and their own interests – party affiliation means nothing when it comes to a question of spending money, so you find Kate Hoey singing the ‘subsidised Scots’ song alongside tories and lib dems, though she lives in the most heavily-subsidised part of the UK.
    Labour’s fondness for ‘centralism’ – although actualy it is really ‘south-east corner-ism’ – has been a disaster, but nobody in the upper echelons of the party is going to allow any change. They like things the way they are.

  11. GuyM says:

    The problem you face is no one in their right mind wants to move out of the south east as they know career wise it’s a step that is hard to reverse.

    I have turned down well paid offers to relocate to Leeds, Bristol and Newcastle in the past as I want to stay working in and around THE global city.

    I also don’t feel like having my efforts overly subsidise other areas and weaken investment in London.

    As for sport, Wembley has the name and history and is now a fantastic stadium. Wembley, Twickenham, Lords, Wimbledon and now the Olympic Stadiums are in London and rightly so.

  12. Kevin says:

    GuyM – sheer reverse nimbyism – I want it all in my backyard.

  13. Tim says:

    Finally someone critically examining the public funding of the North myth. Another factor is the fact that funding applied to the South East has an increased investment multiplier factor. The £200,000 funding of a cheif exec’s job in London creates wealth for property agents, Range Rover garages, etc. The £18k job in the DVLC in Swansea, produces jobs in Aldi’s and Netto’s!!!

    Not only that high profile public sector posts create even greater pump priming, as an extreme example, having most areas of governement in London means that all of the foreign embassies are based in London, bringing in massive wealth to the capital, this doesn’t appear in the traditional North/South funding debate, but you don’t get many high profile foreign diplomats visiting clerical officers in the DSS in Newcastle! similarly if all of the heads of organisations are based in the capital meetings will usually involve those outside London travelling to London with all of the advantages for local businesses.

    Another aspect of the economic distortion of our “metrocentric” economy is the London weighting apparent in public services. Government agencies have to pay more for staff in London than they would in other regions, why not examine all public sector posts and then transfer the ones that don’t need to be in London out of London and into the regions, where the London weighting doesn’t have to be paid. Not only would this have the impact of reducing costs it would act to smooth out the economic disparity in the national economy. It’s interesting when jobs need to be moved out of the norht to save costs (closing pits, shipyards, steel works, etc) we are told it’s the way of the world, well why not move jobs out of the South East when they can be delivered more cheaply elswhere.

    Take funding for Network Rail, massive public subsidy to what is ostensibly a national organisation, yet not only is the rail network over represented in the South East corner, nearly all of the recent infrastrucure developments have been in the South East.

    I have an idea how we could reduce the deficit would be to sell of Hyde Park. The impact would be minimal to the majority of the population of the country, the value of the real estate, released for housing would be phenomenal. It would definitely help the the building industry and would only inconvenience a very small area of the population, result all round!

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