Another Tory budget that does nothing for the north

George Osborne still has no serious strategy for balanced growth.

John Healey MP is a former treasury minister

The chancellor claimed in his Budget speech, “today we back all regions of our country”. He said the same thing in 2010 in his first Budget, pledging to rebalance the economy so that it “generates local economic growth… in all parts of the country”.

But his fifth Budget this afternoon simply confirms that this ambition is dead – filed away under ‘too difficult’ or perhaps ‘don’t care’.

His tax relief for regional theatres, support for start-up routes at regional airports or the three-year extension of tax breaks in enterprise zones are a feeble gesture to the regions. Far from stopping the rot and rebalancing the economy away from London and the South East, under the coalition the inequalities have deepened.

The latest ONS figures show that the regional share of UK output has fallen in every part of the country since 2010, other than London and the South East where it has risen.

Unemployment in the South East has fallen in the last four years, but in the North East it is unchanged. House prices are up 40 per cent in some areas of London since the global financial crash, but are still 50 per cent lower in some parts of the country, leaving thousands of households in negative equity.

Across the UK, the average worker earns £2,000 less in real terms than they did in 2010, but in my home area in South Yorkshire, it’s over £3,000. The chancellor’s ‘recovery’ has barely reached Rotherham or Barnsley.

This unbalanced recovery is partly caused by spending cuts that have hit the poorer regions hardest – in council budgets, social security and public sector jobs. But it’s also because there is no serious strategy for balanced growth.

In the late 90s, I worked with Ed Balls and others to overturn a Treasury orthodoxy that had become ingrained after years of Tory control – that all government could do was offer regional ‘palliative care’, nursing the consequences of poor productivity, investment and job creation but doing nothing to change the causes or the economic fundamentals.

The result of this work was the regional development agencies (RDAs), which brought about an economic step-change across the UK – regional GVA increased by £4.50 for every £1 RDAs spent and job creation in the areas that lagged behind like Yorkshire and Wales outstripped the national average.

In 2010, coalition ministers scrapped the RDAs, replacing them with Local Enterprise Partnerships (LEPs) which have been derided as ineffective by everyone from Lord Heseltine to the CBI. Launching early work on a few long term projects such as HS2 can’t hide the fact that the government simply has no plan for regionally balanced growth.

If the long-overdue economic recovery is lift the whole country, not just a few favoured parts of it, then this ‘business as usual’ Budget for the regions isn’t good enough.

If he meant what he said, he’d have done three things.

First, set out a national strategy for regionally balanced growth, with a ten-year plan for boosting our most disadvantaged regions.

Second, subjected every Budget measure to a ‘balanced growth test’ – does it reduce or exacerbate regional inequalities?

Third, reform LEPs to give them a proper strategic role in their local economies, and the long-term funding to improve the lot of their areas.

Britain cannot be a country that is successful and fair for the long-term when our economy and its riches are so skewed towards London and the South East. Neither George Osborne nor the policies he announced today can do this. For a Budget that benefits the whole nation we need a One Nation Labour government.

2 Responses to “Another Tory budget that does nothing for the north”

  1. uglyfatbloke

    And of course HS2 will help to drain talent and money out of the north and into London while pushing up house prices along the HS2 corridor. So that’s a great help. As usual, London will benefit and we’ll all get to pay for it, Yippeee,

  2. JC

    Why should George Osborne do what you say? Many people outside London would disagree with your three points anyway. Your proposal is that there should be more government control of development, and the evidence suggests that less control will allow more opportunities for regeneration of businesses.

    New industry will move where it wants. Governments will not make a difference.

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