Everyone’s in favour of regional economic rebalancing for the UK – until someone suggests actually doing something about it

Why is the Bank of England's physical distance from manufacturers in the North-west, Midlands and North-east, not a disadvantage for its policymakers?

Ben Chu
Economics editor
Tuesday 12 December 2017 15:46
Comments
Labour suggested moving ‘some functions’ of the Bank of England out of London to Birmingham
Labour suggested moving ‘some functions’ of the Bank of England out of London to Birmingham

We’re all familiar with nimbys: people who are in favour of new housing developments so long as it’s “not in my back yard”. But now they have some competition in the disingenuousness stakes from the “YBNTs”.

Almost everyone claims to support regional economic rebalancing in the grossly over-centralised UK. And it’s pretty plain that this is unlikely to be achieved without moving some operations out of the over-stuffed capital city of London, with the onus on central government to take a lead.

But propose transferring specific resources and one immediately starts hearing: “Yes, but not that.” What the YBNTs seem to envisage is a form of immaculate rebalancing, which involves no disruption whatsoever to the capital and its workers. They were out in force this week after Labour suggested moving “some functions” of the Bank of England out of London to Birmingham.

The first thing to note is that Labour’s “some functions” proposals were misleadingly written up by the (London-based) media as Jeremy Corbyn wanting to move the entire Bank, wholesale, to Birmingham.

We had the same kind of hysterical media reaction when the BBC moved its sports and children’s TV operations to Greater Manchester in 2004. There were similar wails when the Government said this year it wants to shift “part” of Channel 4 out of London. And don’t even mention the idea of migrating Parliament up north while the asbestos-ridden Palace of Westminster is extensively repaired. In the end MPs refused even to move across the road, never mind decamping to the Bull Ring.

It’s amusing to see how business journalists and political commentators, who can usually be relied upon to preach the abstract economic ideal of mobile workforces and invigorating commercial churn, suddenly turn into Mick Cash on a bad day when the possibility emerges they might have to move themselves.

It’s true that regional relocations can fail. The transplant of most of the Office for National Statistics out of London to Newport a decade ago has not been a success and the agency plainly lost some valuable expertise in the transition.

Yet, as a relocation prospect for staff, the third largest city in Wales is very different from Manchester and Birmingham, the second and third most important urban hubs in the country.

As regards the Bank, one of the objections to Labour’s suggestion is that the regulator-cum-policymaker’s current berth in the heart of the City of London represents an intangible benefit that must not be jeopardised. But have they ever considered that this proximity might actually be a source of weakness, opening up the Bank to excessive lobbying and regulatory capture by the hundreds of firms surrounding its Threadneedle Street fortress?

Conversely, following the complainants’ proximity logic, why is the Bank’s physical distance from manufacturers in the North-west, Midlands and North-east, not a disadvantage for its policymakers? As the Bank of England itself frequently tells us, its job is to set interest rates for the whole country, not for one sectional or regional interest.

And the history of the Bank and the Government in this regard is hardly unblemished. The strong pound in the 1980s onward reflected the boom of the City of London in the Thatcher era of deregulation. But the overvalued currency was harrowing for UK manufacturing. And in the post-1997 era of operational independence, even the former Governor, Mervyn King, has openly wondered whether the Bank might have got it wrong in tolerating a super-charged currency, and all its associated distortions, in the years leading up to the financial crisis.

This is not a clinching argument for relocation. It’s facile to claim that if the Bank’s HQ had been historically based in Birmingham we would have avoided the financial crisis. But it supports the case for keeping an open mind.

Each relocation proposal should be scrutinised carefully and judged on its merits. The tone matters. And the tone reveals. The suggestion of a shift of some resources to one of our major regional economic hubs should really not be provoking the pearl-clutching reaction we have seen in recent days. And the fact that it does merely underscores our inordinate national over-centralisation problem.

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