We're too dependent on London and the city is to blame, warns Nick Clegg

Lib Dem leader to offer stark assessment of an unbalanced Britain in speech to be given today

Oliver Wright@oliver_wright
Monday 18 February 2013 01:00

Nick Clegg will today accuse the City of London and successive Governments of “emasculating” Britain’s economy outside the capital – and leaving it dependent on public-sector handouts.

In a stark assessment of the country’s predicament, Mr Clegg will warn that in contrast to our competitors the UK does not have cities outside London that meaningfully contribute to economic growth. He will call on the City to do much more to support the wider British economy and spend less time concentrating on being a global financial centre separate from the rest of the country.

Although Mr Clegg’s speech to financiers and leading City figures at Mansion House will be seen as a stinging rebuke, his comments appear to be short on specific new Government proposals to support growth outside London and redress decades of over-reliance on the Square Mile.

In the speech Mr Clegg points out that historically Britain’s Northern metropolises were the engine room of growth – and were far more equal with London than they are today.

But he will say that successive Governments have failed to redress the economic imbalances that emerged alongside the decline in manufacturing – preferring instead to subsidise the rest of the country with tax revenues from the South East.

“The previous government, in particular, recycled and redistributed City of London tax receipts to other parts of the country through the long arm of Whitehall,” he will say.

“And in doing so they took the easy route: expanding the public sector in the North, paid for by the private sector in the South. Emasculating the North and overburdening the South. Trying to prop up a nation of 100,000 square miles on the profits of just a single square mile.”

Mr Clegg will contrast this with Germany, the US and India – all of which have vibrant and successful “second-tier” cities.

“The most successful economies are driven not just by their capitals, but by multiple thriving centres,” he will say. “Take Germany: Munich is an economic powerhouse; Frankfurt a financial centre; the Rhur, a cluster of industrial cities; Berlin is the country’s creative heart.

“America is home to Washington, Chicago, New York, LA. India is driven by Delhi, Bangalore, Mumbai. These are strong economies, built on independent international cities; each with their own USP.

“[But] over recent decades, the debate on the UK’s economy has been cast too narrowly. The focus has been almost exclusively on London-based services as the principal source of UK growth.

“An orthodoxy has emerged which assumes that the profoundly centralised nature of our economy. Where one city – containing just 13 per cent of the country’s population – is responsible for over a fifth of its total output is somehow the natural order of things: fixed, inevitable, irreversible.”

Mr Clegg will call on the City to do more to support the rest of the country – and pledge Government support to transfer “financial freedoms” to cities and regions to support new industries. “Growth outside the capital strengthens London too,” he will say. “Their burgeoning private sectors are your customers. The regions are your trading partners and their breakthroughs are your gains.

“Successful cities draw on each others’ innovations. When you take the best from each city and put it all together, you create an economy that is greater than the sum of its parts.”

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