Tax and mend: Fiscal policy can help bridge the divide between North and South


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The British North-South divide has been with us for so long that, shamefully, we have almost come to accept it as being something normal, unremarkable, natural even. The latest data on comparatively weak job creation across the North in the past decade is hardly an enormous shock. It is, though, another nagging reminder that the British economy is extraordinarily unbalanced. While the South-east enjoys – and suffers from – a jobs and property boom, congestion on the roads and on public transport and huge strain on schools and hospitals, much of the rest of the country has depressingly large margins of spare capacity, including unemployed human talent that results in much misery in thousands of families.

While Manchester, say, has had some success in reinventing itself, smaller Northern towns in particular, such as Rochdale and Grimsby, have been badly let down. Economic decline exacerbates existing problems of crime and drug and drink dependence, poor health and education outcomes and community integration. In jobless towns immigrants have always been an easy scapegoat; nowadays can be added the risk of religious radicalisation.

It need not be this way.

Certainly politicians, usually with a general election on the horizon, occasionally make the right noises about regeneration. The latest is the Chancellor’s mission to create a ‘Northern Powerhouse’ with waves of fresh investment in transport. Nothing wrong with that, provided it bears some relation to economic sense and will yield a long term-benefit – and the pledges are honoured. They should be. There are plenty of proven centres of excellence in the North that would benefit from greater public investment – universities, teaching hospitals, national parks and so on.

Yet it is the lack of private investment that stands out, and here a real boost to entrepreneurism is needed – looser planning rules, lower taxes and relaxed labour laws to encourage vital investment. Distasteful as some of that may be, not least to dogmatic local councils, it is better than watching proud municipalities slide into Detroit-style decay. Radical measures are needed to tackle such deep-seated, apparently  intractable problems.

There is something else too, which is that our habits of work have hardly been altered by the revolution in IT and the internet. Quite simply, many service jobs no longer require staff to physically attend an office, at least not for five days a week, and much work can be done from home. If more work was location-neutral we would no longer have quite so many people crowding into London from the suburbs and Home Counties every morning. It is a pattern of working life that goes back at least a century, and it is time for us to stop hanging from the straps of overloaded train carriages. Twenty-first century workers can be based just as easily in Grimsby as Guildford. Millions of ex-commuters would win an immediate gain in time spent with family, and savings on exorbitant rail fares. Companies would share in the increase in productivity and the taxpayer would no longer have to subsidise southern rail and Tube networks. Market forces would ease the housing crisis in the South by reducing demand as people moved north; property values and prosperity would rise in the North. The whole economy would become more balanced and capable of growth. That is only the most powerful of the many reasons to make the whole of the UK, including remote rural communities, a fast broadband economy. Tax breaks for firms decanting staff out of the North might help boost a process that will probably one day be inevitable. Before very long people will wonder why on earth they wasted so much of their lives sitting (if they’re lucky) on trains or stuck in traffic jams instead of working from a laptop in their kitchen.

So the answers to the problems of the city lie in traditional prescriptions from the right as well as the left, as well as the great bounty the web continues to bestow. They grew in the Victorian era from substantial public investment in sanitation, communications and education as well as business people building railways, docks and mills. If we replicate the best of those approaches today, we have a chance to rescue some places from apparent terminal decline.