London and the south-east will see more than half of the UK’s future job growth if the government does not address the massive gulf between the capital and everywhere else, an independent inquiry into the UK’s deep–rooted inequalities has warned.
Bob Kerslake, the former head of the civil service and chair of the UK2070 commission on regional inequality, said the UK was going “materially in the wrong direction”. He urged the government to take lessons from Germany in reunifying the country by setting up a £250bn “national renewal fund”.
Londoners as well as people elsewhere will suffer if the imbalance is not addressed, the commission warned, as housing becomes ever more unaffordable and a growing population puts pressure on transport infrastructure, with increasing need for long-distance commuting.
The capital’s taps could also run dry as water supplies come under pressure from the climate crisis. The Environment Agency estimates there will be serious water shortages by 2050, particularly in the south, as the amount of water available is reduced by 10%-15%, with some rivers having 50%-80% less water duringsummer.
It will also become even more expensive to build in the capital, which is already costly by international standards because of the challenge of engineering through the crowded urban fabric. Despite this, researchers for the 2070 commission estimated that London and the south-east would gain 2.26m extra jobs by 2015, 55% of the UK whole.
Lord Kerslake, who ran the civil service until 2014 and was permanent secretary at the Department for Communities and Local Government from 2010 to 2015, said London was “decoupling” from the rest of the UK. Citing the example of reunified Germany, which invested €1.5tn in regenerating and renewing the east in order to create one coherent nation, he suggested the UK was going in the other direction.
“From an extraordinarily big gap between East and West Germany, they seem to have made serious efforts and progress on taking two countries and turning them into one. Here it feels like we started with one country and are turning it into many,” he said. “In the UK we have gone in the other direction and it feels as though we are becoming more fragmented, both economically and socially, than it was when I started my career.”
Kerslake said the policy orthodoxy that London’s success would “trickle down” to benefit the rest of the country had not materialised, with the economies of the UK becoming more divergent over the past 40 years. “This decoupling of regional economies has been reflected in the slowdown in internal migration to London and its wider region from the rest of the UK,” the UK2070 report read.
The commission, which began work in July 2018 and will run to January 2020, proposes a “national renewal fund” like Germany’s Aufbau Ost, in which about €500bn was spent on infrastructure and regeneration, and €40bn on a german unification transport project. “It is hard to define precisely the level of funding needed but we believe that it should be at least £10bn per annum above and beyond existing spending plans and this should be sustained for at least 25 years – a total of £250bn,” the report suggested.
To tackle regional inequality, the UK2070 commission also proposes:
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Much greater devolution of powers and funding, including the creation of four new “super regional” economic development agencies.
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A spatial plan to guide the future development of the whole of the UK.
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Action to harness new technologies and strengthen local economies.
The report also contrasts an unstated bias towards large-scale investment in London and the south-east with a “peashooter/sticking plaster approach” to the regions, where policies and delivery bodies coordinate poorly and never last. A large part of government spending on infrastructure per head goes to London, as seen in major capital investment projects such as Crossrail.
Regional inequalities also affect health, the commission warned, with life expectancy 19 years lower in the UK’s poorest regions, and a lack of access to opportunity leading to a growing benefits bill and a £4.8bn annual cost for the NHS.
Kerslake, who worked closely with the Tory-Liberal Democrat coalition government in which George Osborne invented the “northern powerhouse” to rebalance the economy away from London, said: “There hasn’t been a really serious and explicit view that, a) you must tackle these imbalances, and b) it will require effort across successive governments. Deep down I wonder if some people simply believe it’s undoable.
“We know from Germany that with concerted effort a government can make a difference. This is not mission impossible.”
