In 2010 in his first Budget, George Osborne promised to rebalance the economy so that it “generates local economic growth… in all parts of the country”.
Six years on it’s painfully clear that he and his Conservative colleagues failed. Gaps in regional wealth have grown not narrowed.
The latest ONS figures show that the regional share of UK output has fallen in every part of the country since 2010, other than London and the South East where it has risen. And new figures I’ve released today show that the Gini coefficient measure of regional inequality has risen in every year since then.
Unlike in the Labour years when the unemployment rate in the North East fell to within a percentage point of the South East, unemployment in the North East is now double that of the South East, despite recent jobs growth. House prices are 93 per cent higher in London compared to the low-point after the global financial crash, but in other parts of the country they haven’t recovered at all, leaving thousands of households in negative equity.
The Brexit vote gives the gulf in regional economic fortunes fresh political as well as economic impetus. Recent analysis for the Joseph Rowntree Foundation has confirmed that it was working class, less-qualified, “left behind” communities in England and Wales who were mostly likely to back leaving the EU. Labour must show it can narrow the opportunity gap between different parts of the country which was the part of the breeding ground for Brexit.
Existing inequalities have been exacerbated by spending cuts that have hit poorer regions hardest – in council budgets, social security and public sector jobs. But the root cause is that the Government has no serious strategy for balanced growth.
In the late 1990s, I worked with Ed Balls among others to take on a Treasury orthodoxy that had become entrenched after years of Tory control – that all government could do was give “palliative care” to poorer areas, nursing the consequences of low productivity, investment and job creation but doing nothing to change the causes or the economic fundamentals.
The result of this work was regional development agencies (RDAs), that brought about an economic step-change across the UK – regional GVA increased by £4.50 for every £1 RDAs spent and job creation in the areas that lagged behind like Yorkshire and Wales outstripped the national average.
In 2010, coalition ministers scrapped the RDAs, and it’s now clear that the local enterprise partnerships (LEPs) which replaced them can’t and won’t do the job in their present form.
So following the Brexit vote, it’s time the government looked again at what more it could do lift opportunities in the whole country, not just parts of it.
Labour should campaign for a national strategy for regionally balanced growth, with a ten-year plan for boosting our most disadvantaged regions, and a “regional gains test” for post-Brexit trade negotiations– does it reduce or exacerbate regional inequalities?
We should back the work our councils and Mayors are doing narrow the gap between areas. I set up the Labour Housing and Planning Innovation Network to capture some of the great work our Labour councillors are doing on housing and planning, and this could be done right across the range of economic and social policy.
Finally, we need to champion reform of local economic partnerships to give them a proper strategic role in their local economies as I set out in a recent report for the Smith Institute, and back the devolution of more power to our towns and cities.
Ministers say they want to make a success of Brexit. Labour must ensure post-Brexit Britain works for the whole country, not just parts of it.
John Healey is MP for Wentworth and Dearne and a former Treasury minister