Regional inequality is history? Only if you choose to ignore it 

This week in the Commons we watched local government ministers try to defend their decision to target government funding cuts on the most deprived council areas so that over this Parliament councils serving the ten most deprived areas will have had their spending power per head cut by sixteen times that of the ten least deprived areas.

Just last month, Cities Minister Greg Clark apparently declared that the north-south divide ‘is history’.

They couldn’t be more wrong. Recent analysis that I’ve done shows that regional inequality as measured by the Gini coefficient is now the highest since records began in 1997. And the income of the richest region (London) is now over ten times that of the poorest (Northern Ireland), with the gap having grown every year since 2010.

The economy may be growing again, and have edged past its pre-recession peak according to national headline GDP but this hides major variations between areas. Once you adjust for population change and inflation the latest regional GVA figures reveal that since 2010 output has actually shrunk in many areas, including Yorkshire, the North West and the East of England.

The fact is that whatever Tory Ministers would have us believe, left to their own devices market economies tend to push regions apart. Areas with good infrastructure and services are the ones that attract people and investment, economies of agglomeration mean it makes sense for firms to group together, and globalisation means that those areas are well placed to compete in international markets do well while others risk stagnation or decline.

That’s why government has such an important role to play.

Labour in government showed what could be achieved. After 2000, regional inequality fell every year save one, until immediately before the global financial crisis when it started to tick upwards again. GVA per head growth from 1999-2009, though still more robust in some regions than others was much more equal than the decade that preceded it. Job creation was rapid in all regions, with the employment rate in areas such as Scotland, Wales, the North East, and Yorkshire and the Humber all improving faster than the country-wide average.

Politics makes a difference. One factor was the now-abolished Regional Development Agencies which were set up in 1998 and were found to have created or safeguarded over 200,000 jobs and increased regional GVA by £4.50 for every £1 they spent.

A new Parliament will demand new solutions to the old problem of uneven economic development. There are two things a new government could do straight away. First, adopt an official regional inequality index to measure the gap in wealth and opportunity between different parts of the UK. Second, build a regional impact assessment of policy into the Budget process, just as we do for income now.

Next the new government must redesign the way we deliver balanced growth across the country, starting with radically reforming the Local Enterprise Partnerships (LEPs) in England.

There’s no appetite for more organisational upheaval but that doesn’t mean we need to be stuck with the status quo. With more capacity, funding and independence LEPs could become organisations with real teeth – capable of making a difference in their areas.

Tory ministers don’t get it. They can’t admit that inequality between local areas is a problem so of course they can’t provide the solution. But a Labour government can and will make a difference.

John Healey is the MP for Wentworth  and Dearne