Leading Article: There is inequality, but hand-outs will not solve the North's problems

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THE PRIME Minister was always on a hiding to nothing if he thought he could convince the nation there is no North-South economic divide. Inequality is pervasive in capitalist economies and one of the varieties of inequality is regional. Britain is not very different from the US or France or Italy, or any other country, in this respect. Each has regions that seem unable to cast off their heritage of decline and failure. In the case of the UK it is the industrial North, some of the once-mighty cities that generated the national wealth at the end of the last century but are economic no-go zones at the turn of the 21st century.

Mr Blair is right to point out that London has the country's worst pockets of poverty and deprivation, cheek by jowl with its most ostentatious wealth; and some measures of the regional divide, such as unemployment rates, have indeed narrowed. Of course, government policies must tackle these problems, no matter where they occur. An anti-poverty policy makes sense in the way that a "pro-North" policy would not.

Even so, London and the South-east form the engine-room of the British economy. The UK is centralised in the capital to a much greater degree than in any other advanced economy. This is not the fault of public policy, however. Public spending is now firmly weighted towards other regions. The North has a higher per capita share of the nation's teachers, nurses and administrators. Nor are high interest rates due to the London housing market to blame; lower borrowing costs might help alleviate the symptoms but they would not cure the northern ailment.

The solution must take the form of businesses and cities in the North finding ways to generate their own wealth once again. Some have already had success. Birmingham, Cardiff, Edinburgh, Glasgow, Manchester and Leeds have made great strides in putting themselves at the centre of transport hubs, making better use of excellent universities and thriving arts communities, developing partnerships between private sector businesses, voluntary agencies and local authorities. These are successes that could not have been generated by Whitehall or Westminster. The solution to the North-South economic divide must be developed in the North, not handed out by the South.

There is a political question, too. Economic revival will require a devolution of political power so that local partnerships can take decisions. Those cities outside London that are thriving have achieved it in the face of bureaucratic interference and inefficiency at the centre. The options of elected mayors or regional assemblies are no longer looking so attractive to the Prime Minister, with the London contest and the Welsh and Scottish assemblies proving more troublesome than expected, but electoral politics are not everything. The devolution of administrative powers is also crucial.

City authorities should have the power to approve a road scheme or spend more of their budget on further education without having to refer the decision to a super-ministry in London SW1. Nowhere else in the developed world are local authorities as much in thrall to the national bureaucracy. Mr Blair will not be able to meet the grievances of the folks up North with a two-day walkabout and a collection of economic facts and figures. Instead, he will have to tackle this imbalance of power.