The so-called “North-South divide” is in the spotlight like never before. The North’s newspapers have banded together to demand central government takes action. Three years on, the shockwaves of Brexit might just be forcing us to look at our long-standing regional divide more clearly. But who will take action to address the UK’s regional divide – the worst in the developed world?
People living in England’s North, Midlands, South West and the other nations of the UK are right to be angry: 44 per cent of the net new jobs created since 2010 have been in London and the South East, despite this being home to only 27 per cent of the population. This gives real substance to a pervasive feeling that the country is being run by out-of-touch people in the capital with little regard for other communities.
But let’s not pretend that the current situation actually benefits most Londoners either. The capital’s vast investment in transport infrastructure actually hikes property prices; the financial and professional services sectors it specialises in can be highly exclusive; and its economic growth is often extracted from Londoners’ pockets through rent and corporate profits.
There is no doubt that London, taken as a region, gets favoured by central government. But who within that region benefits? Not the vast majority of the people who live there: Londoners experience the highest rates of poverty and inequality of both wealth and income.
This is the reality of the North-South divide. In different ways, all our regional economies are generating poverty and inequality. None of our regional economies are working in the interests of the majority of people living there, and there is common cause across our country in working to address this problem.
So why is the UK so imbalanced when other similar countries aren’t? It’s true to say that France is dominated by Paris; Germany is divided east to west, and Italy from north to south. But the UK is more regionally unequal than even these countries.
What these other countries have – and what the UK conspicuously lacks – is powerful regional and local government. In the UK alone, central government has exercised almost exclusive power over our regional economies: only 6 per cent of tax is raised outside of central government. In France the figure is 20 per cent; in Germany, 52 per cent. These countries’ regional and local authorities spend more than twice as much on economic development as a per cent of GDP compared to the UK regions. The result is that regions which are otherwise similar to the North are more prosperous – like Germany’s North Rhine-Westphalia for example.
That’s why policy makers must stop pretending that it’s particularly difficult to set up new devolved institutions and support their development across England. Sub-regions, such as combined authorities, must remain the building blocks of devolution. But there are specific areas of policy – transport, trade and investment, and innovation for example – where pan-regional collaborations can support a more co-ordinated approach to strategic decision making. Initiatives like the Northern Powerhouse and Midlands Engine can, in time, help to formalise these collaborations into new institutions.
For IPPR’s Commission on Economic Justice (CEJ) we sketched out what this could look like, proposing four regions as a starting point for an England-wide conversation about regional governance.
Potential geographies for regional policy in England. Image: IPPR North.
But devolution can’t solve this problem alone: there is no escaping the fact that we will also need to invest more money in the regions, and this will need to be paid for. But again, there are practical ways of doing so. As we at IPPR North have previously recommended, we should look at the German “solidarity surcharge”, which raised €18 billion in 2017 and has been used to rectify Germany’s East-West regional inequality since reunification. It would raise a similar amount in this country – and would go a long way toward addressing our underinvestment in infrastructure and R&D as well as public health and education.
These are proposals that we are happy to see the UK2070 Commission have also recommended in their recent report highlighting regional inequality.
The UK’s regional divide is now one of the most corrosive problems our country faces, and neither our capital nor our regions can sustain the current situation. The government, and the opposition, need to stop pretending that their current proposals are up to this challenge and develop a much more radical programme of devolution and investment.
The solutions are there for the taking – by the plethora of Tory leadership candidates or by the Labour front bench. But who will take the opportunity to address one of our most severe injustices?
Luke Raikes is a senior research fellow at the think tank IPPR North. He tweets @lukeraikes.
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