Many people have long suspected that the economic success of the South-east has been at the expense of the North. But are they right?
The Sustainable Communities Plan has evolved to include a Northern Way and a Midlands Way in addition to the original growth areas proposed in the South-east. But there is a continuing perception that insufficient attention is being paid to the problems arising from differential growth between North and South. The view remains that the economy of the South should be restrained so as to help to regenerate the North.
Differences in regional performance are universal. In the interwar years the Barlow Commission was established and the Distribution of Industry Act 1945 provided the cornerstone for post-war regional policy. Through the mechanism of industrial development certificates and office development permits, it sought to restrict the development of industrial space (and subsequently offices) in southern England. This provided the stick element of policy. The policy carrot was the provision of tax, loan and grant inducements for establishing businesses and factories in development areas.
Between 1951 and 1970 regional policy could not achieve an even distribution of growth. But did policy make a difference? Cambridge economists Barry Rhodes and John Moore have concluded that, in the assisted areas, 250,000-300,000 additional jobs were created over seven years.
Thus, while southern regions have grown more rapidly than the North, regional policy did have a positive effect. More recently, local regeneration initiatives have transformed cities such as Manchester and Newcastle. And, as shown in the Northern Way, government expenditure in the three northern regions averages £600 per head more than expenditure in the three southern regions. But there is a continuing perception that if only the South could be restrained then the North would prosper better. Why should this be so and is there any justification for it?
First, there is no sound basis for seeking to restrict people’s choice of where they live and work, especially when the incidence of net migration to the South is so limited. In 1998, for example, net inward migration to the three southern regions and London amounted to 19,000 people.
Second, the three southern regions and London comprise half of the UK’s gross value added. To seek to restrict their economies is to risk the growth of the national economy.
In 1998, net inward migration to the three southern regions and London amounted to 19,000 people
Third, much of the inherent growth in the South is driven by natural increase of its indigenous population and businesses. The experience of development controls between 1945 and 1979 demonstrates that restraint was not successful. Furthermore, local authorities are proud of the economic clusters created in knowledge-based activities such as motorsports, engineering, biotechnology, pharmaceuticals and software design.
Fourth, in a market economy investment cannot be forced in a particular direction through controls. Business investment is increasingly footloose and if a software business is not allowed to develop in Cambridge, it can just as well locate in Calcutta as one of the assisted areas. It is the carrot that is the key determinant of location. Ireland has been spectacularly successful over the past 20 years in attracting international investment based on a policy of offering inducements.
Faced with complaints that the Milton Keynes and South Midlands strategy would damage the regeneration of other regions, especially the West Midlands, the public examination panel concluded that: “There is nothing to support suppressing economic growth in the South in the hope of benefiting more northerly regions … We conclude that, while development of more northerly regions should continue to be promoted with all vigour, there is an element of wishful thinking in the idea that this will somehow relieve the South of the need to cope with its own growth.”
There is no justification for neglecting to plan for the growth of southern England. The South must be encouraged to plan for its long-term potential at the same time as northern regions pursue their own regeneration agendas.
Bill Brisbane is a partner in Roger Tym & Partners