Brown’s Cash Blitz Is Hurting Poorest Areas

Worth A Look, Poverty, Frontier Centre

Gordon Brown’s public spending boom is impoverishing the parts of the country it is supposed to help, according to new research to be published this week.

Record levels of spending have made many regions of Britain “colonies” of London and the southeast, widening the north-south divide, the research from Reform, a think tank, shows. Not only are large areas of the country becoming financially dependent on the taxpayers of the southeast, but high government spending has the effect of stifling enterprise and driving young people away.

In many parts of the country, people earn more working for the government than they would in the private sector. Only in the southeast are private sector employees paid more.

The report, Whitehall’s Last Colonies: Breaking the Cycle of Collectivisation in the Regions was compiled by a team led by Professor Nick Bosanquet, an economist at Imperial College London. It shows that between 2001 and 2004 there was a big migration south by young people aged 20-29, with London and the southeast gaining nearly 40,000, and East Anglia almost 12,500. All other regions except the southwest had a net loss of young people.

The effect of the emigration is to “grey” the populations of the least successful regions, the research shows, with more than 42% of people in Wales and the northeast over the age of 44, compared with fewer than 32% in London.

“This trend is worrying for two reasons,” the report says. “First it puts greater pressure on the public services of the northern regions, and for their state sectors to expand to accommodate an ageing population. Second, it places an increasing burden on the economies of London and the south, as their working populations face increased congestion and living costs.”

Alistair Robertson, 22, an intern with Reynolds Porter Chamberlain, a law firm, moved to London from Hull when he was 18 to go to university and has remained in the capital. “I came to London because of the opportunities, and although I’m very fond of Yorkshire, in terms of commercial opportunities it’s all in London,” he said.

“The country is going ‘Londoncentric’, and ultimately, in terms of job opportunity and advancement, the London tag is pretty helpful. Looking for work in Hull was never a consideration.”

Reform’s research, derived from official statistics, shows the full extent to which Britain’s regions have become dependent on London and its hinterland.

The capital, together with the southeast and East Anglia, have a third of the population of the United Kingdom and receive a third of public spending but pay 47% of personal taxes.

In the northeast, northwest and Northern Ireland, nearly one in four households have at least one person on incapacity benefit, compared to one in 10 in the southeast. There is a similar picture when it comes to tax credits and income support.

The combination of welfare dependency with the fact that the public sector is the largest employer in many regions -providing 30% of jobs in Northern Ireland and roughly a quarter in Scotland, Wales and the northeast -means “working populations are dependent on the state for most or part of their income,” the report says.

“The regional imbalance of the UK economy is already stark,” said Bosanquet. “The danger is that it will become self-perpetuating, with some regions increasingly starved of talent and investment and reliant on income transfers from the southeast, to the detriment of the UK as a whole.”

Reform’s central claim, that high levels of public spending are destroying enterprise, is supported by figures showing that regions with the highest levels of spending are bottom of the league for creating new businesses. London has three times the rate of business formation of some northern regions.

Bosanquet added that where the government has the power to influence decisions by private firms, it should do so in favour of the regions. “They shouldn’t even be thinking about putting a supercasino in London or the southeast,” he said. “It should definitely be in Blackpool or somewhere else in the north of England.”