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“The UK has some of the highest regional inequalities of any advanced country. Today, these are larger than those between east and west Germany and north and south Italy. New technologies, global competition, the loss of old industries — and the failure to support new ones — have all driven that divide.”
This is the opening of a report, “Why hasn’t UK regional policy worked?”, out last week. Co-authored by Ed Balls, former Labour shadow chancellor, this is the second in a series. The earlier one, published in March, examined the failures of UK regional policy. This one asks leading policymakers, including three prime ministers (John Major, Tony Blair and Gordon Brown), what lessons they draw from them.
These are the main conclusions: first, widening regional divisions are not inevitable but correcting them is hard; second, “past policies to grow the UK’s regional economies were geographically biased and insufficiently ambitious”; third, the government has relied too heavily on centralised approaches to delivering more balanced regional growth in England; fourth, policy instability has led to short-termism and damaged outcomes; fifth, sustained top-level political will and leadership are necessary to overcome Whitehall’s centralising tendencies and empower local government; and sixth, today’s cross-party support for the “combined authority” model, in which local governments work together within city-regions, might produce a workable consensus.
Yet some big points of disagreement remain. What, for example, should be the main levers for growth in English regions and what is the right level of decision-making? How far should Whitehall itself drive through a comprehensive reform of local government? Last, but perhaps most important, how is regional revival to be funded? How, in particular, does one balance the self-evident case for greater local fiscal autonomy and accountability with the need to redistribute resources from the rich regions — namely, London and the South East — towards the less productive rest?
What is most striking about these conclusions is how precisely they reveal the core weaknesses of governance and the economy in the UK.
This is hardly surprising. As I have argued in earlier columns on this topic, the extreme regional divergences in productivity are the consequence of both potent economic forces, particularly deindustrialisation and the rise of London as a global financial hub, and failures in policy and politics. The latter in turn reflect a combination of over-centralisation, addiction to policy gimmicks, all too familiar myopia, and hope that the economy, left largely to itself, will solve the problems on its own.
It turns out, alas, that it cannot. The great deindustrialisation of the Thatcher era did not lead to the blooming of thousands of new economic flowers across the country. It led instead to overconcentration on one economic activity (finance) in one part of the country. Worse, that once-verdant tree is no longer what it was. London is rich. But it is no longer as dynamic as before.
Properly understood, therefore, what this report identifies is something bigger than regional economic problems, important though they are. It identifies fundamental and pervasive weaknesses in the UK’s economy, governance and politics. This is particularly important right now, because, whatever these regrets of past policymakers, the thrust of contemporary politics, in the aftermath of Brexit’s fraudulent diversion, is towards changing as little as possible. It is towards a consensus on conservatism.
Given that, it is hard to believe that the deep-seated failures identified in this report and others, notably the government’s own levelling up white paper, will be dealt with by any government. Some even argue that it is impossible to do so: the regional divergence is ineluctable. Instead, we should be even more ruthlessly laissez-faire and encourage people to migrate to the south.
Since London and the South East still make up only 27 per cent of the population, that is evidently impossible. In sum, greater prosperity is needed across the entire country. Regional policy should therefore be seen not as something apart, but as the heart of any sensible growth strategy, which must be simultaneously national and regional. This then has become a core — arguable the core — political, institutional and economic challenge.
Yet what I take from these depressing regrets over past failures is how difficult, perhaps impossible, the task will be. Is the UK able to remedy the failures that have led to huge regional inequalities and low growth? Alas, I doubt it.
martin.wolf@ft.com
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Source: Economy - ft.com
