Yet again, the budget pushes the North a little further from the South

It's two nation Britain.

With growth forecasts halved to 0.6 per cent this year, and unemployment rising again in the north of England, this needed to be a budget for growth across the UK. Instead, the headline measures will do more to further inflate house prices and childcare costs in London and very little to boost regional economic opportunities. Meanwhile, further public spending cuts – not least in pay and benefits - will have a continued deflationary impact on many Northern towns and cities.

The budget has come on a day when unemployment figures show the North-South divide widening further – up by 10,000 people across the north of England in the past quarter compared with a 17,000 fall in London.

Measures such as the increase in the income tax threshold and the National Insurance allowance for small businesses will be welcomed by many but won’t have the effect of rebalancing the economy – rather, they will tend to benefit those areas where wages are higher and the business base is broader.

More significantly, measures to increase new house building are to be welcomed but there is a significant risk that making it easier for borrowers will simply prop up prices – indeed, inflate prices – rather than getting additional homes built. It is not clear that Help to Buy will generate additional new housing starts, beyond what would have been undertaken anyway (which will certainly not be the case for mortgage subsidies that are not linked to new-build) and the 15,000 new homes promised in the budget go nowhere near most estimates which suggest we need to build an extra 250,000 new homes a year to meet rising demand. Similarly, childcare changes will soon be wiped out as providers inflate costs with little additional provision.

Of those measures that will stimulate growth it is too little too late. It is encouraging news that the Chancellor has broadly endorsed the Heseltine report but with government sources suggesting that resources going into the "single pot" will be in the “lower billions” rather than the £49 billion Heseltine recommended – and even then not until April 2015 – this will hardly be a short-term stimulus.

The £3bn boost in infrastructure spending is something that IPPR North and many others have been calling for many months but will do little to help us catch the levels of capital investment spent in other nations and once again won’t land until 2015/16. Furthermore, we cannot hope this will boost regional growth when we currently plan to spend £2,595 per person on transport in London compared to just £115 per person in the north. Transport spending must be devolved more fairly to have a real impact.

With much evidence pointing towards the critical role regional economic development is playing in stimulating national economies across the developed world, this budget – however populist – will do little to restore the economic health of the nation and will ultimately be regarded as a missed opportunity.

But perhaps the bigger tragedy than this missed opportunity is the fact that regional prosperity hangs so much on central government decision-making at all. With greater fiscal decentralisation economic growth could be better tailored to the particular needs of local and regional economies and less dependent upon the big levers so clumsily wielded by chancellor after chancellor. Such reform is long overdue.  

Photograph: Getty Images

Ed Cox is Director at IPPR North. He tweets @edcox_ippr.

Photo: Getty
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Cabinet audit: what does the appointment of Liam Fox as International Trade Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for International Trade.

Only Nixon, it is said, could have gone to China. Only a politician with the impeccable Commie-bashing credentials of the 37th President had the political capital necessary to strike a deal with the People’s Republic of China.

Theresa May’s great hope is that only Liam Fox, the newly-installed Secretary of State for International Trade, has the Euro-bashing credentials to break the news to the Brexiteers that a deal between a post-Leave United Kingdom and China might be somewhat harder to negotiate than Vote Leave suggested.

The biggest item on the agenda: striking a deal that allows Britain to stay in the single market. Elsewhere, Fox should use his political capital with the Conservative right to wait longer to sign deals than a Remainer would have to, to avoid the United Kingdom being caught in a series of bad deals. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.