The truth about the north-south divide and ‘levelling-up’

By TruePublica: A searing report that emerged last year by the former head of the civil service warned that the economic gap between the north and south of the country was so great it echoed Germany after the fall of the Berlin Wall. He said 50 years of ‘unstated’ government bias towards London will take another 50 years to reverse.

The issue is now at the very heart of government policy. It’s called ‘levelling up’ and it will dominate areas of economic politics for some time to come, alongside that of the never-ending spectacle that is Brexit. It will also cause the national debt to climb, for taxes to be increased and pension funds to be raided. The reality is that the Tories great transformation of Britain has failed. Margaret Thatcher’s neoliberal, free-market, share-owning dream has fallen flat on its unequal face. It might have worked if greedy politician’s had kept the reigns on the banks and corporations – but they didn’t.

The yawning economic divides between London and the north are now comparable to those in Germany after the fall of the Berlin Wall, the powerful report warned. In a milestone investigation into Britain’s stark regional inequalities, his most striking conclusion draws parallels with German reunification in the 1990s, when leaders there faced a huge uphill battle to heal the economic chasm between West Germany and the former Soviet East.

He pointed to the vast waves of investment poured into the Eastern half of the country over the years that followed, thanks to a national consensus in Germany that the gap had to be closed.

The British government must now do the same for the north, he concluded.

In our own version of Ronald Reagan’s 1987 ‘tear down this wall’ speech, in which the US President demanded the Berlin Wall be pulled down once and for all, Lord Kerslake calls for a ‘sea change’ in the way Whitehall and Westminster operate. Otherwise, he warned, areas such as ours will never catch up and infrastructure in London and the south-east will simply not be able to cope in the future.

Stark regional divides are apparent in everything from life expectancy to income levels, he said, arguing that a new long-term ‘plan for England’ – one that takes in the different answers needed for different areas, underpinned by proper devolution – is now needed, along the lines of plans already in place in Wales and Scotland, as well as a £250bn renewal fund.

Kerslake also said that – “The policy orthodoxy has been that the growth of London would lead to a direct net benefit to other areas of the country.” This was the beating heart of the Thatcher/Raegan reformation programme that was often billed as an economic miracle – with its so-called ‘trickle-down’ effect. The problem was nothing trickled.

 

Brexit – born out of division

Brexit was, in part, caused by this north-south divide. Half of the country was left behind after the collapse of manufacturing, coal and steel from the 1980s and traded in for the ‘service ‘economy that benefitted the south. Thirty years of neglect was followed up with a Conservative government who compounded these problems by doubling down on a disastrous decade of austerity after the banks collapsed.

The result was that the UK’s economies have drifted further and further apart. Despite claiming to be closing that divide, successive governments have instead pursued an ‘unstated and countervailing bias’ towards London in their policymaking, Kerslake says, a ‘de facto’ assumption that investment would be better channelled there.

“An overwhelming body of evidence points to a historic concentration of public investment in London and the wider south-east. This applies whether this is spending on research and development, culture, sport, the arts, national administration, national media or even military expenditure.”

And the chickens have come home to roost.

Towns in the North have ‘leant’ their votes to Boris Johnson to get Brexit done – as if somehow this ideology will change their fortunes. Johnson has but a few short years to completely transform the country. Leaving aside Brexit, which many on the hard right of the party have confirmed will take 50 years to reap the rewards of, it appears that it will now take 50 years to reverse this policy of investment inequality across the nation.

Part of the grand ‘levelling-up’ plan is HS2. But it won’t deliver anything much to that part of the world until probably 2040.

A huge gulf exists between the UK’s best-performing regions and towns,” argues Lord Kerslake, “making us one of the most regionally unbalanced countries in the industrialised world.”

And it is here that we get to the crux of the matter. Political failure. A lot of it.

Britain is the 28th most regionally divided out of 30 major Western economies studied for the report while having one of the most centralised governments on the planet. The UK also has some of the lowest levels of government investment in the Western world, but what does get spent goes disproportionately towards London.

So much money was spent on London that when the financial crash came along – it was largely insulated. The banks were bailed out at a cost of some £500billion and everyone else was made to pay. In the more deprived north, they were made to pay an even higher price.

 

Terrified

The one skill that this government has is the use of Dominic Cummings and predictive technologies. They understood how to win Brexit against the odds and then win an election – they also understand that Britain is on the brink and they need to act fast. They are terrified of what comes next if they don’t. Jeremy Corbyn understood this too who also promised £100bn of structural expenditure to level the playing field. It’s not like this is a mystery any more, in government they know how serious this now is.

In our report Is Big data Predicting The Fall of Britain – we quoted from another report that said – “Ten years ago, it was predicted that huge advances in technology could be derailed by mounting political instability, which was due to peak in the US and western Europe around 2020. It blamed wealth inequality and public debt.”

The startling findings in this report make for disturbing reading if you are the government. It predicts that around 2020 instability and mass public disturbance will break out because of political failure. “The standard of living of the masses falls, increasing their potential for violent mobilisation. The state tries to counteract this – for example, by capping rents – but such measures alienate the elite whose financial interests they hurt. Since the elite has also been expanding and competing ever more fiercely for a finite pool of high-status jobs and trappings, the class as a whole is less willing to accept further losses. So the state must tap its own coffers to quell the masses, driving up national debt. The more indebted it becomes, the less flexibility it has to respond to further strains. Eventually, marginalised members of the elite side with the masses against the state, violence breaks out and the government is too weak to contain it.”

The ‘levelling up’ projects this government desperately keeps propagandising over is about the north-south divide. It will be the centre-piece of the budget this year. Even George Osborne, one of the worst Chancellors the country has ever produced understood this concept. But his grandiose statements of the day amounted to nothing as the regional investment funds he proposed was stifled by the political ideology behind austerity – his own policy. Unbelievably, Osborne is still the chair of his failed project. Having blown both feet off, lost power over Brexit, the old Tory party has ushered in a party that have no principles or driving fundamental beliefs except getting into power, grabbing more of it and staying there.

 

Doomed

The big problem with the ‘levelling-up’ project is that it won’t deliver anything in the right time scale, won’t be viewed as worth waiting for, won’t be believed even if it is and will inevitably increase the national debt, stifling our ability to defend ourselves from the smallest of economic shocks. Before then, Brexit will have arrived, the economy will have gone into a highly predicted recession and austerity will be continued to combat the incorrect predictions about how robust the economy is. And there are some solid figures to support the allegations of just how fragile Britain is right now.

Inward investment into Britain has disintegrated since the 2016 EU referendum vote. £trillions in financial and product assets have been transferred out of the country into the EU and productivity has collapsed to its worst levels for over 100 years.  In our report “Brexit – The truth about the economy” we contacted the National Institute of Economic and Social Research last April who confirmed that Britain’s economy would lose £770bn of GDP by 2030. The reality is Brexit is currently on course to cost the economy £200billion by the end of this year alone.

‘Levelling-up’ is a great idea. It should have been done thirty years ago when the north fell off a cliff. It’s only being peddled now because the Conservative party knows Britain is probably only a year away from Brexit bringing a long recession and its promises of a ‘dawn of a new era’ evaporating into a dreamscape. And just like George Osborne’s failed Northern Powerhouse project, it is too late and doomed to fail if the economy can’t support it.

 

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