2nd opinion: Where the jobs are

So far as affordable housing is concerned, Britain is divided into two separate, and unequal, countries. In parts of the North, affordable housing is in surplus, but in much of the South it is in acute shortage.

In the north of Britain, tens of thousands of good homes have been demolished, and about a further 10,000 homes are likely to be demolished in Glasgow over the next decade. Similar large-scale demolitions are planned in Sandwell, Liverpool, Newcastle and County Durham. The reason for surplus housing is simple: the population of north-east England, north-west England and Scotland has fallen by about 290,000 over the last 10 years and this trend is likely to continue as the number of jobs in the North continues to decline.

In London and the south of Britain, the problem is the opposite. There is a desperate shortage of affordable housing. The average house price in London has now risen to £200,000, out of the reach of most households in Britain. And in 2000/o1, one-third of London boroughs were legally required to house more homeless households than they had social housing lettings available. Again, the reason for the housing shortage in London is simple. The population of London has grown by about 280,000 since 1991, fuelled by jobs growth.

Obviously, we need more homes in London and the South. The mayor's Housing Commission suggested that about 500,000 more homes, including 224,000 affordable homes, will be needed in London over the next twenty years. Radical changes may be needed to achieve this, as the supply of affordable housing in London is falling. The stock of affordable housing in London fell by 63,000 from 1990 to 2000, largely owing to the effects of the right to buy outpacing housebuilding.

More homes in the South is only half of the answer; we also need to create more jobs in the North. The government has set its face firmly against such a policy. The argument is that regional policy does not work. Yet regional aid does work. There is a substantial body of research that points to the capital incentives of the 1960s and 1970s as having created over 600,000 jobs in assisted areas of the North, Scotland, Wales and Northern Ireland (Regional Studies Association, Labour's New Regional Policy, November 2001, page 11).

European aid to poorer countries also appears to have had an effect. Ireland used to be one of the poorest countries in Europe, with a low economic growth rate and a falling population. Since becoming one of the largest recipients of European aid, Ireland has become the Celtic tiger, with the highest growth rate in Europe and a booming population. The average person in Ireland now has a higher income than the average person in Britain – this would have been unthinkable fifteen years ago.

The central need in British public policy is to steer some of the growth in employment and population from the South to the North. At present, the UK only spends 30% of the European average per head on regional aid in areas of high unemployment. France spends twice as much as the UK on regional aid to firms. Italy and Germany spend six times as much as the UK.

More regional aid would not just tackle the paradox of a glut of affordable housing in the North and a shortage in the South. It would reduce the transport congestion in London, congestion that makes it difficult for the capital to compete as a financial centre with Frankfurt and Berlin. It would reduce unemployment and therefore crime and inter-community tensions in places like Burnley and Belfast. And it would save the vast cost of demolishing homes in the North and building homes in the South.

A private investor choosing between the North and the South will take little account of the effect of that investment on housing, schools, hospitals and transport. Only the government can take these into account – and the sooner it acts, the better.