Rebuilding the regions

By Karel Williams and Sukhdev Johal

Rebuilding the regions is like rebalancing the economy. It is  a sound bite which fits easily into  Westminster speeches as a consensual national objective which will not frighten swing voters. The problem is that our dire regional problems now require radical policies which challenge entrenched private interests and decentralise power in ways which are both necessary but also unthinkable and undoable for the metropolitan political classes.  So “rebuilding the regions” nicely illustrates the limits of the current form of one nation politics.

The regions face dire and worsening problems which are generally misread by the Westminster political classes which deny the need for a new policy imaginary and regional de-centralization to implement it. From this point of view, the Labour leadership in Westminster is (so far) part of the problem and the question is whether (what remains of) the Labour Party and movement in the regions can become part of the decentralised solution.

Old policies are hardly adequate when we face dire new problems about a jammed national economy and stranded populations in the ex- industrial regions.

Thermostatic national economic management has failed because there is no orthodox policy option which will put the economy onto a sustainable growth track of 2.5 % per annum.  Expenditure cuts are not delivering debt reduction let alone growth. And there is no Keynesian expansionary alternative in a country with a £100 billion trade deficit and a need to keep the bond markets happy.

This complicates the problem of the decline of ex- industrial regions of the North and West which fell behind in New Labour’s credit led boom.  By 2008, the three weakest regions (Yorkshire and Humberside, West Midlands and Wales) had output per capita which was less than half that of London and (on current trends) likely to fall to one third of the London level within a decade.

Their decline has now turned into free-fall.  The tradeable goods base in manufacturing has collapsed so that half the adult population in the ex-industrial regions now depends on publicly funded jobs or benefits. The coalition’s austerity policies of public expenditure and welfare cuts then become a vicious anti regional policy which strips out jobs and demand from regions where the private sector has created no net new jobs for twenty years or more.

The Westminster political classes see this as a problem about failed and underserving regions which have, one way or another, become dependent on transfer payments.  As  Nick Clegg cautions,  “ you can’t revive the regions with hand outs from Whitehall” funded by the taxes paid by the City of London. In this case, the solution is for all the provincial cities to become more like London and emulate that glittering exemplar of success. As Lord Heseltine argued, after the Olympics,  “our aim must be to become a nation of cities possessed of London’s confidence and elan”.

But many of us in the regions believe we cannot all be like London because London stands in the way. London finance has an undue influence on  Westminster politics which directly protects the banks from reform and indirectly allows finance to extract value from the regions. National income accounts do not measure the fee deductions from regional pension contributions or the clip on PFI schools and hospitals.

We need a new policy imaginary which is practically focused on managing  what is left in the ex- industrial regions. If you go to a town like Swansea, the big factories are long since closed and all that’s left is a foundational economy of mundane activity which survives because it is sheltered and distributed according to population. Practically, state funded health and education employ more than 30 % of the workforce and privately operated utilities and retail account for another 10%.

The biggest influence on mass welfare in the ex- industrial regions is how we manage such  foundational  activities.  And the first step is for local and regional authorities to ask “ what have you done for us lately?” questions of private companies and public service providers. Their answers will highlight issues about value extraction, fragmentation and under-investment by actors who do not understand that corporate social responsibility should begin at home.

Consider Swansea, where  the docks have become the maritime quarter and a marina where one of the big supermarkets, Tesco in this case, has built a superstore which takes the better part of £100 per week from every household that shops there. The Swansea council and Welsh regional government need to ask Tesco whether that store is anything but a device for trucking the groceries in and the money out across the Severn bridge; and then inquire how Tesco plans to connect with Welsh supply chains and skill formation .

Coalition politicians are dead set against pressing any of these difficult questions which challenge private power and existing business models and equally opposed to taking actions which encourage real local and regional political autonomy.  In Lord Heseltine’s review, corporate  business is offered a bigger regional role at the Local Economic Partnerships in spending  the handouts from London and Brussels. In the Eric Pickles version of localism, local authority pension funds are to be used to fund central government’s infrastructure projects

And we should not expect too much of the good intentions of Ed Miliband and Labour’s Policy review. Because, when the economy isn’t working, Gouldite calculations about swing voters and electoral coalitions inhibit the adoption of challenging and divisive policies for the common good which will never poll well in Worcester or Luton.

So the big question for the Labour Party is outside the policy review. Do Labour councils in the ex-industrial regions have the intellectual chutzpah to challenge their subordinate role and, in due course, the political ambition to press for the English regional government which Tony Blair failed to deliver?

Karel Williams and Sukhdev Johal are academics whose research on financial reform and productive renewal is available on the cresc.ac.uk web site