The northern economy should not just blindly replicate the London one, which has led to large inequalities
What is the Northern Powerhouse for? The focus on the Northern economy, driven by the chancellor George Osborne, has outlined the obvious benefit of having the whole country reaching its economic potential. Is it to emulate London and the South East, with inequality, an overheated housing market and congestion induced by its booming economic performance?
The business case for growth is unequivocal. With a quarter of the population contributing a fifth of economic output, the northern economy is twice the size of Scotland and, if it were a nation, it would rank as the eighth-largest in the EU, ahead of Sweden, Denmark and Belgium. Just halving the output gap between the North and the national average would increase national economic output by £41 billion.
So there is a definite incentive to boost the North’s performance and prospects. The government’s approach has centred on infrastructure investment, improving transport connectivity between the main cities and devolving powers which can help the new combined authorities centred in these cities address issues which hold back growth, such as skills shortages and long-term unemployment.
But aside from the graphs, charts and projections which have Treasury officials excited, what does this mean for people living and working in the North?
The imbalances in our nation’s economy are more than just poor economic growth figures or sluggish journey times – they go right down to people’s incomes. Looking at ONS data on Gross Disposable Household Income – the money people have available for spending or saving – shows how far these imbalances affect the money people have in their pockets.
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There are many good reasons to live in the North – some areas have the highest quality of life in the country, and house prices are low, especially compared with London. But when Northern disposable incomes are £2,300 below the UK average and £7,000 lower than London, there’s clearly a problem that needs addressing.
| REGION | GDHI PER HEAD IN 2013 |
| North East | £14,927 |
| North West | £15,412 |
| Yorkshire and The Humber | £15,252 |
| East Midlands | £15,893 |
| West Midlands | £15,551 |
| East of England | £18,523 |
| London | £22,516 |
| South East | £19,898 |
| South West | £17,693 |
| Wales | £15,413 |
| Scotland | £17,039 |
| Northern Ireland | £14,347 |
| North | £15,271 |
| United Kingdom | £17,559 |
Looking more locally, some areas in the North do have high levels of disposable income. But they compare poorly with the rest of the country: just two, Cheshire East (which covers the chancellor’s back yard in Tatton) and North Yorkshire, made the top 50 of 173 richest areas in terms of disposable income per head. Only five local areas were above the UK average for GDHI per person – all 36 other Northern areas all fall below the UK average.
10 areas in the North with the highest gross disposable household income per head
| LOCAL AREA* | GDHI PER HEAD IN 2013 | NATIONAL RANK (OF 173) |
| Cheshire East | 19,042 | 36 |
| North Yorkshire CC | 18,969 | 38 |
| Cheshire West and Chester | 18,289 | 54 |
| East Cumbria | 17,689 | 64 |
| Northumberland | 17,600 | 67 |
| UK AVERAGE | 17,559 | |
| East Riding of Yorkshire | 17,025 | 79 |
| Warrington | 16,982 | 80 |
| Sefton | 16,757 | 87 |
| West Cumbria | 16,603 | 90 |
| Wirral | 16,183 | 101 |
10 areas in the North with the lowest gross disposable household income per head
| LOCAL AREA* | GDHI PER HEAD IN 2013 | NATIONAL RANK (OF 173) |
| Greater Manchester North East | 14,492 | 146 |
| South Teesside | 14,427 | 148 |
| Barnsley, Doncaster and Rotherham | 14,410 | 149 |
| Sheffield | 14,252 | 150 |
| Manchester | 14,081 | 152 |
| Liverpool | 13,959 | 155 |
| Blackpool | 13,848 | 156 |
| Bradford | 13,654 | 159 |
| Sunderland | 13,556 | 163 |
| Kingston upon Hull, City of | 13,046 | 167 |
| Blackburn with Darwen | 12,276 | 170 |
How will the Northern Powerhouse turn this around? This is the question the government – pledging to deliver a ‘one nation’ recovery – and the opposition parties must answer.
The potential of the North has long been recognised: the last Labour administration charged regional development agencies with this task, and the ‘Northern Way’ transport compact (which the three northern agencies founded) preceded the Northern Powerhouse by more than a decade. In 2012 IPPR North presented our case in Northern Prosperity is national prosperity.
But the problems clearly remain: the lack of well-paid, good quality work in the regions. Tackling this underlying cause has to be priority for the Northern Powerhouse.
The North should pursue growth and prosperity built on higher wages, more jobs and stronger productivity – not simply try to catch up to London and the South East, where the type of economic growth they’ve experienced has created high levels of inequality, stretched incomes to pay for housing and left many behind.
A progressive Northern Powerhouse must reach the pockets of people living and working in the North, as well as offering a good quality of life. Otherwise, we will have simply replicated an economic model which relied on trickle down and failed too many – as these stark figures show.
Danny Wright is senior external affairs officer for IPPR North. Follow him on Twitter
4 Responses to “A Northern Powerhouse means little unless it makes people better off”
cornubian
Yet again poverty in Cornwall is hidden by wonderful statistics. Cornwall is one of the poorest regions in Northern Europe and, along with parts of Eastern Europe, qualifies for Convergence funding from the EU yet where is it mentioned in your article? I’m almost tempted to believe that the English left is rather focused on, in an ethnocentric kind of way, on the Northern English.
JAMES MCGIBBON
Would the south west cover Cornwall!
sofun
woderful
Intolerant_Liberal
If the Labour party is focussed on the North of England, they have kept quiet about it! I thought the Labour party was focussed on affluent middle England???
But I have heard that the South West of England is desperately poor, even compared to Northern England. The Tories and Labour until recently have only been concerned with keeping London and the South East of England sweet.