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Government / Local politics

To rebalance Britain's economy, we need to move the government out of London

This article originally appeared on the blog Flip Chart Fairy Tales in October 2013. It’s reposted here with the author’s permission.

“There’s no point trying to live in London,” wrote the Financial Times’s Christian Oliver back in 2013, after he had spent a miserable afternoon looking for a house to buy in Bromley.

It’s the latest in a series of warnings about the rapid increase in London property prices, which are increasing at rates way higher than anywhere else in the country. This week, a report for the London Assembly called for a suspension of the right to buy council properties, as rising rents in the private market are now beyond the reach of many people. London seems to be developing an economic microclimate as income and wealth become concentrated in and around the capital.

The recent ONS survey of Regional Gross Disposable Income shows this clearly:

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Source: Office for National Statistics.

 

By and large, per capita income decreases the further away you get from London.

As ever, the people follow the money. The regions with the highest population increase are those closest to the capital.

 

More money attracts more people, and bids up the price of property. The country is becoming ever more divided between a wealthy south-east and everywhere else. There are pockets of affluence and poverty everywhere – but the overall picture is clear.

Why is London so rich? Partly it’s because of its financial services industry and its attractiveness to the global rich.

Some of it, though, is simply due to being the capital. Most organisations, public, private or voluntary, have their headquarters in London. This means that their most senior executives are paid in London, regardless of where the organisation’s main income is generated. Even if their customers and main production facilities are countrywide, or even worldwide, most of Britain’s most senior people are based in London – so that’s where most of its high salaries are paid.

Governments might call for a rebalancing of the economy and make noises about regenerating the regions – but as long as the country’s richest people are concentrated in the South-East, not much will change. Attempts to get companies to relocate by offering subsidies and tax breaks have had limited success. In any case, it is rarely the top people who move.

The same is true in the public sector. Operational staff are moved out to the regions, but the bigwigs stay in London. This is to be expected. Managers like to be close to the centre of power and, as long as that power is in London, that is where you will find them.

To rebalance the country, then, you need to move the centre of power.

London is the UK’s capital in two senses. It is the centre of government; but it’s also the business and financial centre. This makes Britain slightly unusual when compared to most major economies, which have their governmental and business capitals in different places. Only France, Russia and Japan also have single capitals. Of these, France and Russia are models of over-centralisation and the Japanese government has been considering a move from Tokyo for some time.

Given that our economy and population are tilting ever more towards the south-east of England, does it really make sense for us to have both our governmental and financial capitals in the same place?

Moving the government to, say, Manchester, Leeds or Birmingham would shift a massive amount of state spending away from London. It would also take a lot of other organisations with it. If the government moved, so would the lobbyists, PR firms, journalists and probably a lot of the charities too, taking their spending power and senior executives with them. This would ease pressure on London’s infrastructure and its property prices.


Parliament will soon be presented with an opportunity to make such a move, for the Palace of Westminster is falling apart. In 2012, a report by the Parliamentary Estates Directorate concluded:

If the Palace were not a listed building of the highest heritage value, its owners would probably be advised to demolish and rebuild. 

Most of the building is a Victorian carbuncle and it hasn’t been fit for purpose in years. It would be better to turn it into a hotel or conference centre than try to make its inadequate facilities work for a 21st century legislature. It may well have to close for five years anyway so it would make more sense to build something new somewhere else. And somewhere else could be outside London.

Of course, there would be a cost to moving the capital – but selling off all the government’s expensive real estate in London would offset some of it. Over time, it would be cheaper to run the government from the Midlands or North, where property and living costs are so much less.

Geographical separation from the City and its financiers would burst the metropolitan bubble. It would encourage ministers and their advisors to associate with a different kind of “business community” and to see things from a non-London perspective.

Most importantly, though, moving the government from London would split our capitals, as so many other countries have done, ensuring a more even regional distribution of wealth and easing pressure on London’s transport and property market.

If we are serious about re-balancing the country, we should stop tinkering around and just moving the BBC and a few Department of Health officials up north. We need to take a bold step and move the entire government. If Parliament will have to move out of its building anyway, why not send it up the M1 – for good?

Flip Chart Rick is a former executive and business consultant. He runs the Flip Chart Fairy Tales blog.
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