The Independent View: Clegg is right to worry about the North

The North once again compared fairly unfavourably to the south in yesterday’s unemployment figures. It’s safe to assume it will do so again in next month’s figures, and the month after that. While political commentators note the UK’s slide towards a triple dip, most people outside London don’t need clinical economic definitions to tell them that money is tight.

But let’s be clear, this disparity is not a consequence of idleness, nor has it happened by chance. Public policy and investment decisions have made it all but inevitable. London has vast infrastructure spending exemplified by Crossrail, a Government proactively championing the city’s financial services and a local leader with a voice which cannot be drowned out. The majority of the country is not so fortunate. This is not to have a pop at London but to recognise the origins of its success and argue that they be replicated across the country. Nick Clegg in his Mansion House speech on Monday was right to note that the world’s most successful economies are driven not just by their capitals, but by multiple thriving centres. As one newspaper bluntly put it, cities in the North “have been left to wither by London bias”.

While inequitable infrastructure spending and lack of political voice have got plenty of attention, the largest issue holding back regions like the North is inadequate skills policy. Most people have local roots which mean they want to stay in their local labour market. Local commitments and responsibilities render jobs 300 miles away largely irrelevant. Equally – with the exception of graduates, senior managers and certain specialists – employers tend to look locally for new employees. Skill level disparities between different parts of the UK have widened over the past decade.

Our new report, published today, builds on our Northern Economic Futures Commission, and highlights how successful local skills strategies can help transform areas. Such strategies each have the same core elements: they take a long-term view; they aim to provide a bridge between employers and learners; they involve a broad range of stakeholders in the decision-making and organisational processes; they are backed by good intelligence and high levels of collaboration; and they form just one component in a wide range of economic development initiatives, albeit a very important component.

City regions are a sensible scale at which to engage with businesses in order to develop local networks of training providers, employers and employee representatives, particularly in key growth industries. A proactive local skills strategy can also help connect the disadvantaged with employment opportunities and encourage employers to better value skills training. Lifelong learning and work progression in turn have a key role to play in increasing social mobility and reducing in-work poverty. The report in addition argues for a push to double the number of young people in advanced (level 3) apprenticeships by 2015 and for devolution of a significant proportion of welfare-to-work funding to local authorities and their partners in city-regions.

The net migration of graduates towards London and the lack of economic investment in the North mutually reinforce one another. Two-speed austerity just exacerbates this, with unequal innovation spending and the new homes bonus transferring capital to the south, and public sector cuts and reductions in local authority budgets disproportionately haemorrhaging the north. How can the northern economy be expected to thrive with so much money being sucked out of it?

The budget is a month away. It will contain no Crossrail for the North, and may not even contain an enhanced version of the distributional analysis of how the budget will affect different localities). Announcing the intention to urgently implement the skills recommendations in the Heseltine Review and our report however would be a good start. Nick Clegg’s speech struck the right tone, but words from Westminster ring hollow outside the M25. Actions would speak much louder.

The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.

* Graeme Henderson is a Research Fellow at IPPR North

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9 Comments

  • Oh God, not this refrain again. No the north (to use a horrible generalisation – many areas of the south also have problems with poverty) is not having “money sucked out of it” because it still receives a very large net subsidy from government funding. It is simply being showered with less central government net payments than it used to be. The question is, how can the UK’s less well off regions adapt to an environment where public money is much more scarce than it used to be and spend it better?

    Clearly infrastructure and training are two absolute key priorities. But the Lib Dems have already identified these as top of the list and are putting what money there is into boosting them. But it has to be a cultural change as well. Unless “the north” can regain its purpose in terms of building exporting, profitable businesses with goods and services to sell to the rest of the world, all the government cash in the world isn’t going to help sort out the situation.

  • cllr Nick Cotter 21st Feb '13 - 9:49pm

    If HS2 is to go ahead (which is very likely) then WHY doesn’t the project start in the North and build southwards, rather than start in London and head northwards – HOW About that for creating lots and lots of construction work in the north ?? Nick

  • @ Nick
    Isn’t that because the capacity is needed in the south first?

    Overall, I think the Liberal Democrats have already started tackling two of the main points of this piece, training and infrastructure. There is already a regional growth fund as well.

    What Graeme Henderson doesn’t seem to realise is that money is not being “sucked out” of the North. This is a lazy generalisation (as is the use of the term “the North” anyway, given the levels of deprivation in some areas of the South). In fact, it receives a massive net subsidy every year as it contributes far less in taxes than it receives in spending. The fact is that the economy in many regions became massively over dependent on the state and given the cuts, this massive net inflow of funds is now being reduced.

    Aside from infrastructure and training, the basic problem is one of engineering a cultural change, where depressed regions don’t look for state subsidies but look to see how they can build profitable, exporting private businesses. Unless these can return and play a major role, increased state funding is never going to fill the gaps and may, in some ways, make the situation worse.

  • Graeme Henderson 22nd Feb '13 - 11:37am

    Cllr Nick – Good point and something we have argued for, but sadly unlikely to happen.

    RC – Identifiable public spending per head, excluding social protection, is £6,647 in London, but only £5,385 in the north east. For Yorkshire and the Humber the figure is just £4,841, and yet studies have shown that the higher level of public expenditure received by London does not correspond to objective measures of need.

  • RC, a few months ago a conservative mp from a north east constituency stated, on a local tv programme, that the north east region is the only region in the country with a positive GDP and has been for some time. This contradicts both your assertion that the north pays less tax than the cost of public spending in the region and that public sector employment results in a net subsidy.

  • the new homes bonus transferring capital to the south

    If that is where people move for work, that is where the new homes for them should be built.

  • Congratulations to Graeme and his people, and indeed Nick and Vince, for turning the spotlight on this issue. Solutions are long term and complex but when you realise that at the height of austerity we are spending 6bn on Crossrail in one of the best connected capital cities on the planet while its still a struggle to get across country by rail in the North from anywhere, you see the problem. Labour despite it cohorts of northern MPs failed to re-balance the economy and the Coalition is running out of time to make the difference. The problem with HS2 is that it is jam tomorrow and acts as a brake on other less ambitious infra-structure investment sorely and obviously needed now.
    We don’t want a future promise of more economically valuable infrastructure in the north while construction goes on in the South East and London now. A fair share of transport funding could be well used now.

  • Stephen Donnelly 22nd Feb '13 - 3:38pm

    Clegg is right to worry about the North, but this report from the Northern Economic Future Commission is not something he should spend too much time reading. Some of the content is special pleading by those on the commission, and there is little of interest or encouragement to private sector SMEs.

    Government investment should be targeted on infrastructure and education. having successfully got rid of the wasteful RDAs, we do not need more quangos setting up to channel funds into their pet projects.

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