UK’s geographic inequalities need tackling, but are they really London’s fault?

UK’s geographic inequalities need tackling, but are they really London’s fault?

Last week’s edition of Radio 4’s Any Questions was held in Keighley and, as you would expect, the issue of the economies of the north of England was discussed. Sadly, it did not reach an elevated plane.

Jake Berry MP banged the drum for Northern Powerhouse, for which he has ministerial responsibility, and assured the audience that a Prime Minister Johnson would drive it forward. We shall see. Dan Jarvis MP, who is also Sheffield City Region “metro mayor“, made the strong and absolutely valid case for much improved rail services in the north of England, but spoiled it by (not for the first time) playing a familiar anti-London card, saying that “transport spending has recently risen by more than twice as much per person in London than it has in the north of England in real terms” and arguing that a paucity of public investment in the north explains “why regional inequality persists”.

The first claim is highly contestable in many ways, and ignores the routinely ignored fact that if London’s transport network falters – and much of it is under severe strain – so will its economy, which will be bad for the rest of the UK, including the north of England. Indeed, the regional inequalities Jarvis is, quite rightly, concerned about would be greater were it not for London’s economic power. This not to argue that those inequalities are OK or that they should not be corrected. Rather, it is to point out that London-blaming is a populist non-solution to a problem that is nothing like as simple as is popularly claimed.

This is demonstrated by a new report from the excellent Resolution Foundation think tank, written by Stephen Clarke, which looks at the UK’s geographic inequality in productivity and living standards. Clarke says the 2008 financial crisis and Brexit have pushed regional inequality up the political agenda, the first perceived as emanating from the capital’s financial sector – “the bankers” of populist demonology – and second suggesting a clear divide between Remain-voting London and Leave majorities across much of the rest of England and in Wales. He welcomes this renewed focus, but does so while also showing that in some respects the picture is not as clear as often painted.

Two measures of geographic inequality are examined. One is living standards as defined by household incomes. Clarke shows that variations in these across the UK’s nations and regions have are now a lot lower than when they peaked in 1990. Back then, taking in housing costs, household incomes in the south east of England were more than 40% higher than in Scotland, which was the poorest part of the UK at that time. Today, they are just 20% higher than in the poorest part of the UK, which is nowadays the north east of England. Looked at that way, the “north-south divide” – a term Clarke does not use – has narrowed considerably over the last three decades. Overall UK geographic inequalities are now at their lowest level since the 1970s.

The other measure Clarke looks at is productivity, or economic output. London is noted for having by some distance the UK’s highest productivity, and the UK is most unequal of the G7 countries in this respect – an aspect of the much-resented London dominance of the UK economy, perhaps. What are the national trends in inequality viewed in this way? Clarke writes that while “differences across the UK remain stark”, these divides have not been increasing – indeed, they have remained the same since 2005.

Where does London fit into this pattern relative to other parts of the UK? Judged per job or per hour worked, London’s output is a considerable 56% higher than that of Wales, the least productive part of the UK. That is the same level of variation as in 2005. When UK productivity is measured per person, London again stands out, this time for being responsible for a different overall trend. “If you exclude London from the calculation, the variance in output per head has not changed since the later 1990s,” Clarke writes. But if you include London, the numbers change because, to quote Clarke again: “London, with higher productivity levels, has increased output at a faster rate than other parts of the country by growing its workforce and working longer hours.”

This increase in the hours worked in London has occurred since the financial crisis, underlining that the UK’s recovery from it has been largely due to the resilience and vigour of the capital’s economy. The city’s massive “tax export” to every part of the UK except the east and the south east of England is further evidence of that. Yet it is evidence routinely ignored or denied by those whose arguments for strengthening UK regions and nations too often involve blaming London for an economic power without which their situations relative to the capital would be even worse.

Stephen Clarke is quite right to say that “pursuing a more equitable distribution of economic opportunities across the UK should be a priority” and to advocate devolution “coupled with real local economic leadership” as part of the solution to this. At the same time, his report shows that, for all the political noise about “rebalancing” the Uk economy, the UK’s geographic inequalities have at least not worsened for a considerable period of time and also serves as a reminder that London’s economic success is a big reason why.

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Categories: Analysis

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