The regional divides across the British economy are now a major problem, and how policy can improve economic growth in poorer cities and redistribute across the country is a big political question. But Britain is not the only nation facing this.
Although governments in Japan and the UK face many distinct challenges, urban economics explains the changes that cities in both countries are experiencing. The reorientation of economic activity towards high-skilled exporting work has increased the economic importance of large cities, and left others with disadvantaged industrial bases and labour markets. Ideas from abroad give us some idea how to respond to these large, structural issues in cities, even if the political and environmental contexts differ.
For instance, in 2008 Japan introduced a hometown tax credit, or furusato nouzei, where residents receive a discount on their local tax bill if they decide to transfer a portion of it to a hometown of their choice. The idea is that in Japan’s devolved tax system, local government in less prosperous parts of the country has greater needs but fewer financial resources than cities with strong economies and lots of workers. The hometown tax tries to encourage workers in Tokyo to transfer some of their taxes to the local authority that gave them the skills to work in the capital, and ¥64.5bn (£450m) was transferred out of Tokyo this way last year.
Japan’s hometown tax has been used to direct revenues to local governments hit by the Great East Japan Earthquake such as Onagawa. But it has also established a curious market where municipalities offer goodies to taxpayers as they compete for Tokyoites’ hometown tax allocation. Websites have been set up to showcase which hometowns offer the best delicacies to picky hometown tax payers, including rice, fruit, and sake.