Should regional inequalities in the UK be a priority? The budget, which will be presented on March 15 by Jeremy Hunt, the finance minister, must answer this question. Unfortunately, recent work suggests that the challenge is more difficult than previously thought.
It turns out that the UK has two regional problems not one, and as a result also a huge national conflict. Long-standing competition is the relative weakness of regions outside London and the South East; however, since the financial crisis of 2007 we have noticed a new, specific slowdown in these previously dynamic regions. Regional inequality then does not worsen, but this is not due to equalization. The country is suffering from something more serious than rising regional inequality: national stagnation, in which even the old engines of growth are crumbling.
Co-authored by Ed Balls, former shadow chancellor of the exchequer, with Anna Stansbury and Dan Turner, the paper “Tackling UK regional economic inequality: constraints and approaches to policy intervention” looks at the longer-term challenge. The report “Capital Losses: the role of London in the UK’s production enigma” by the Center for Cities, focuses on the post-financial crisis slowdown in the country’s richest region. These analyzes come to a common conclusion: the country needs a radical liberalization of the means of land use.
As noted in the first of these articles, there are various strategies to address the regional inequalities brought about by the last four decades of deindustrialization. One of them is that these inequalities are associated with different living standards, life expectancy and level of education. Another is that they are connected to the “geography of depression” that was revealed in the Brexit vote. Finally, low productivity levels in large parts of the country translate into low relative productivity in the UK as a whole.
So what should you do? This report concludes that low academic percentages are no longer an obstacle in lagging countries. There is no financing. The most likely constraints are weak transport infrastructure, support for innovation clustering outside the South East, and restrictions on emigration to London and the South East due to high housing costs.
So there are things to do. In particular, it makes sense to invest more in university science, technology, engineering and mathematical education, more resources to increase infrastructure, especially transport and government, spending on the potential of the main research and development clusters located outside the south.
Among the points this report makes is that migration often goes in the “wrong direction”, from the most fertile to the least fertile regions. This also dictates the conclusions of the London report, but the most surprising outcome of that is that the growth in London productivity has become the same as the economic crisis of the rest of the country: sadder. Productivity growth per manufacturer in London plummeted from 3.1 per cent a year between 1998 and 2007 to just 0.2 per cent afterwards.
One immediate reason is that “superstar industries” such as finance, professional services, and information and communications have stopped growing as fast as the overseas economies with which they compete. Besides, it was already before Brexit (although that madness can’t have helped). Another explanation is that the costs of commercial activities have shifted to more productive sectors. Finally, the provision of housing discrimination discourages immigration from both within and without. This could undermine the advantages of agglomeration that London has generated in the past.
The country is complicated. High regional inequality is the result of long-term rapid productivity growth in London and the South East, the rest of the deindustrialized region. Then, after 2007, London’s economy also stagnated. And so regional inequality, while still very large by European standards, stopped getting worse. But this “healing” is even worse than the disease: it worsened the effect of the economy as a whole and therefore, among other things, deprived the state of the resources that should deal with its challenges, including regional inequality.
Disbursement of councilors will help London grow faster. A better post-Brexit deal for sectors in which London owns will also do the trick, but capital has more control over its fiscal resources, as the Center for Cities report suggests, with the urgent need to do more in cities. . the weaker As all parts of the British economy fail, regional problems are even more pressing than before. Leveling down is the worst possible response to leveling challenges.