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The Political Economy of Yorkshire (and Northern!) Devolution

May 23, 2013

This blog has been written by James Silverwood. James is a Tutor in Political Economy and phD student at the University of Hull. This blog will examine the regional dimensions of a possible economic recovery. He can be contacted on Twitter: @jamessilverwood or by Email: james.silvewood@2004.hull.ac.uk.

Contemporary debates in UK political economy, often surrounding the appropriate use of policies to engineer economic recovery, often overlook or ignore the existence of a large-scale structural problem in the English economy . This structural problem relates, not withstanding that the Midlands and some areas of the South of England are having economic difficulties, to the existence in England of a dual economy that can be roughly approximated to the regions of the North and South. Whilst it is not unusual for any one state to have areas of differing levels of economic prosperity, the stark contrasts between the North and South has been brutally highlighted since the onset of the Great Recession in 2008, with it being reported that the differences in regional disparities are greater now than at any time since the Second World War.

One such disparity is in the economic experiences of the dual economies since 2007 on which topic the ONS have recently released a set of economic statistics. As measured by Nominal Gross Value Added output ONS data illustrates that the fastest growing regions since 2007 has been London, South-East and South-West. The third lowest region has been Yorkshire and the Humber who have marginally outperformed the East of England and the East Midlands. The existence of a dual economy in England is further highlighted by examining Nominal GVA output on a North-South basis. Using data provided by the ONS cumulative growth of nominal GVA in the South of England (London, South-East and South-West) shows a marked increase on the nominal GVA output of Northern (Yorkshire & the Humber, North-East and North-West) England. Indeed the main quandary in the contemporary articulation of the dual economy thesis is the experience of the Midlands since 2007. According to the ONS data the Midlands have grown at an even slower pace than the North of England belying the experience of previous economic recoveries when the Midlands have benefitted from the Southern England led consumer and property market led recoveries (more on which later).

As a series of reports by Ed Conway at Sky News have shown the disparity between the South of England and the rest of the UK economy is even starker. For example, Conway notes that the double-dip recession of 2011/12 was an economic contraction experienced exclusively by the Midlands, North, Scotland, Wales and Northern England to which London and the South remained immune. Furthermore even in the midst of economic contraction in 2009 the Eastern half of London suffered no fall in nominal economic output at all and the disparity in real incomes between regions of the UK are now greater than in any other economy in the Europe. Indeed as Conway reports the one relatively bright spot in an otherwise bleak picture is that unemployment during the Great Recession is fairly evenly spread and fails to indicate any sharp regional biases.

If we use the ONS statistics to isolate the London economy however there is even more stark evidence of the existence of an English dual economy. In 2010 average household incomes was 30% above the UK average in London; a situation in contrast to the stagnating level of wages currently being suffered by persons in other areas of the country. Furthermore Q4 2007 to Q4 2012 saw an employment rise of 0.9% in comparison with a 1.7% drop in the rest of the UK and 2007 to 2011 sae a rise in business activity of 11.5% in London as compared with a 1% rise in the rest of the UK. A picture thus emerges in which the London economy is outperforming the rest of England and, given the nominal GVA data, the South can be shown to be outperforming the North of England on the same basis.

A recent study by wealth consultants WealthInsight further supports the dual economy hypothesis, using data accumulated over the last 5 years London is placed third on the global list for millionaires and top for multi-millionaires. What is interesting in relation to the dual economy hypothesis however is not how those numbers compare globally but nationally? Whereas Tokyo millionaires account for just 7% of all the millionaires in Japan and New York accounts for just 7% of all millionaires in the United States then London accounts for 42% of all millionaires in Britain. However when placed into further context we can see that the regional dimension of the location of millionaires may be even starker than this figure. Recent ONS figures have recently names the borough of Elmbridge, Surrey as the largest geographical contributor to income tax in the UK. Inhabitants of the borough of Elmbridge have contributed £1.18billion in tax over the past year, 200times the amount paid by Google, with an average annual income tax bill per inhabitant amounting to £16,000.

Apart from applauding the inhabitants of Elmbridge for not hiding all their income offshore what this does show is that income and wealth is unevenly distributed in the South of England. Of the top ten locations in the UK for average income tax payments all ten were located in the South-East with the first Northern town, Harrogate, appearing at number fifteen on the list. Amazingly the 130,000 inhabitants of the borough of Elmbridge pay more in income tax than entire Northern cities like Sheffield (£812million) and Newcastle (£443million). The average income tax bill for the inhabitants of Blackpool, in contrast, is £2,490 and Hull is £2,560. These figures illustrate that if 58% of millionaires in the UK do not live in London, a vast majority of them reside in the South.

As the GDP data starts to illustrate a possible economic recovery it is important that we ask important questions regarding the location of that growth and who reaping its rewards? Given the evidence put forward in this and subsequent blogs to come it appears that the economic recovery of the contemporary period will follow the same pattern as that of the economic recovery of 1932-37; principally located in the South; based on consumer and property markets. The recovery will thus be unbalanced between regions and economic sectors; a far cry from the lofty aims of rebalancing articulated by the Coalition. More importantly however is that the policies that would benefit this type of recovery in the South are radically different from those needed to spark an economic renaissance in the North.

Rather than being pessimistic about our immediate economic fortunes however I believe that it opens up the space to argue more stringently for the devolution of decision-making structures to the North of England and furthermore provides activists with the ammunition needed to create a critical mass of support in favour for just such a move among the electorate and policy-makers. Devolution could be the means by which we eradicate the dual economy problem and in the North of England spark into life an economic powerhouse that engineered an industrial revolution.

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