Coalition leaders warned that North must get to feel benefits of recovery

Lib Dems and Conservatives want Osborne to take action in the upcoming Budget

Nick Clegg gives his speech in York (Reuters)

Conservative MPs and activists have joined Liberal Democrats in warning Coalition ministers not to widen the North-South divide by allowing London and the South East to reap most of the benefit from the economic recovery.

Leading figures in both parties have appealed to the Chancellor, George Osborne, to take action in his Budget on 19 March to ensure a “fair recovery” that spreads to all parts of the UK.

Their move reflects fears that the two governing parties will do badly in crucial marginal seats in the North and the Midlands at next year’s general election if any “feelgood factor” is restricted to the Tory heartlands in the South.

Renewal, a pressure group set up to revive the Conservatives’ prospects in the North of England, will unveil proposals tonight for a “workers’ Budget” to help the Tories rebrand themselves as the “workers’ party” and ensure they are no longer seen as the party of the rich.

The plans include creating a “share-owning democracy” by helping working people buy shares in Lloyds when the state’s 33 per cent stake in the bank is sold – so that ordinary taxpayers recoup some of “their money” used to bail out the banks.

Other ideas include a pledge to build more than one million new homes over the 2015-2020 period, a significant rise in the national minimum wage next year, and raising the personal tax allowance to about £12,500 so that no one on the minimum wage would pay income tax – a demand already made by the Lib Dems.

David Skelton, a former Tory parliamentary candidate and the founder of Renewal, said: “It’s crucial that those who took the burden of the necessary work of deficit reduction can be part of a shared prosperity. Whereas the Blair boom only benefited financial services and the prosperous South East, it’s crucial that this recovery should spread prosperity to the low-paid, the squeezed middle, the North and the Midlands.”

He added: “With a recovering economy, now is the time to unveil more policies to show that the Conservative Party really is the workers’ party with a workers’ Budget.”

In a report sent to the Chancellor and Nick Clegg, a group of Lib Dem MPs, peers and council leaders from the North protest about the “fundamental unfairness” of the Government’s spending policies. They say local authorities in the region have suffered the biggest cut in funding from central government. Their document, entitled “Grim Up North?”, warns of a “gap between the Government’s aspiration and delivery” on the region.

Tim Farron, the Lib Dem president and MP for Westmoreland & Lonsdale, said: “There is a recovery. If we are not careful, it will end up being centred on London and the South East too much. That will be bad for London and the South East; it will cause huge housing and infrastructure problems.”

The criticism is a shot across the bows of Mr Clegg, who is MP for Sheffield Hallam and has fought inside the Coalition for measures to boost the regions.

Mr Clegg told the Lib Dems’ spring conference in York yesterday that the Government would not repeat the mistakes of the past. “Instead of fake booms and reckless consumption, we invest in growth that is balanced and sustainable, which stretches across every corner of Britain,” he said.

Growing Divide

10% Unemployment rate in the North-East (Oct-Dec 2013)

5.1% Corresponding figure for the South-East

£450k Average house price in London (December 2013) – a 12.3% rise

£168k Average house price in Yorkshire & The Humber (December 2013) – a 1.8% rise

source: ons