Rebuilding the regions

12th November, 2012 7:00 pm

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 web site

This piece forms part of Jon Cruddas’s Guest Edit of LabourList

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  • Donald Stavert

    Very Interesting and challenging and I agree that the dead hand of Westminster is a problem

  • Redshift1

    Brilliant article!

  • Great stuff. I’m totally for regional government but it must have teeth – that means at least as much power as the Welsh assembly. I think there is much to be said for the Hannah Mitchell Foundation vision of an assembly for the North

  • This is a good artlcle as far as it goes, but in the end the prescription provided boils down to the formation of regional government with, I assume, considerable powers so that it has authority to do somewhat more than ask Tesco what it’s done lately (the answer to which will be fairly obvious and unsatisfactory).
    Perhpas the authors were limited by the number of words they were allowed to the outlining of the problems of the distorted national economy, so it would be helpful if thy could come back in these comments boxes and set out in a little more detal, for the few of us Labourlist readers more interested in substance than Glasmanina witterings, how they’d see regional government actually having a beneficial impact on regional economies, and what powers they would need to this end. Answers/views in the following areas might help:
    Development of intra-regional supply chains, the rolefeasibility of regional investment banks,local authority bonds, pension fund use, combatting growing intra-regional e.g Manchester’s tendency to suck in etc etc.

  • Oh, amd I should add that the idea that we are in actuality constrained by the bond markets in the deficit spending we need to make to invest in the regions is nonsense, and out of place in an otherwise sound setting out of the issues.

  • Dave Postles

    Yes – and there is still a manufacturing base (other than automotive) in the northern regions which can be developed, although it will not provide the employment prospects that it once did. High-value textile manufacturing is returning. It requires a skilled workforce. The cost gap is closing for high-value textiles. Commerce is recognizing the benefits of location – proximity of supply for JIT, but also negotiating new lines. There is the possibility of a manufacturing renaissance on a minor scale in the northern locations. It’s such a shame that the RDAs were replaced by the ineffective LEDs.

  • Steve

    Rebuilding the regions is about much more than the economy. As the article suggests decentralisation and devolution of power from Westminster and Whitehall is needed. At it’s core is much needed constitutional refrom – a significant area of failure for Jack Straw and his colleagues. Regional government is neither wanted nor sensible in England. It was rightly and soundly rejected in the North East in John Prescott’s days. The better route is to go with the grain of economic geography and its drivers and build devolved democratic and economic units around the major cities. Another recent rejection was the concept of elected city mayors. The reason for their rejection was a perception of their superfuity through lack of power. Local authorities in England have been gradually emasculated and nowadays have almost no powers. Schools, housing, transport, health all gone to unaccountable NGOs and quangos or contracted out. In order to revive the regions there needs to be a reform of local government with city units defined by their current economic boundaries rather than their historic ones. Powers need to be handed back to cities which should have real democratic and economic authority. Even London with its elected mayor is a pale shadow of what is needed. Powerful city authorities will be able to form partnerships with investors and employers to strengthen infrastructure and improve the skills of the workforce.

    With the re-emergence of decentralised power comes the downgrading of centralised authority. The House of Commons needs to be downsized the number of MPs reduced by 50% or more. As Nadine Dorries so clearly demonstrates most of them have little to do. Their so-called constituency work is a reflection of the centralisation of power and really is nothing more than duplicating Citizens Advice Bureaux. With power shifting away in one direction to the EU and in the other to newly re-energised city authorities the House of Commons will have a less important role. It goes without saying that the House of Lords just disappears.

    So the answer to rebuilding the regions is local government reform and effective devolution of power and responsibility to contemporary city-based economic and democratic units.

  • If we’re going to think properly about regeneration across Britain we need to think decentralisation and drop the centre – regional thinking. E.g. you talk about the ‘Welsh regional government’? There is no regional government in Wales, there are local authorities and then there’s the national government, the Welsh Government, in the National Assembly for Wales.

  • I too am a supporter of regional government but why is it that the form of the region has to be imposed by government. Devolution to the South West government zone was never popular. However, at the same time as Labour was losing the battle of the North East government zone, a petition of 50,000 signatures was collected calling for the creation of a Cornish assembly. Even Prescott admitted that devolution would have succeeded if it had been offered to Cornwall rather than to the artificial and unloved South West Region.

    For some more insight into were Labour got it wrong: The Dark Side of Devolution Top Down vs. Bottom Up Regionalism in England – Cornwall and the North East Compared:

  • Lēoht Sceadusawol

    town I live in is a classic example of the result of the death of
    industry. The largest employer in Trowbridge (county town of Wiltshire) is the council.

  • The failure of the 2004 regional assemblies project was down to two main reasons:
    1) The powers that were to be devolved to the regions were insignificant, offered no meaningful level of devolution and were not worth the cost of implementation. Devolved powers to the level of those enjoyed in Wales are required!
    2) The ‘Regions’ were defined by a central government who not only ignored the natural regions defined by the alliegencies, loyalties and identities of people, but threw together people from different ‘natural’ regions despite the many protestations from them! For instance, there is no such folk as Yorkshire and the Humber folk; they are either Yorkshire folk or Lincolnshire folk! For regional devolution to succeed, both these issues must be addressed!


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