The Spending Review will widen the north-south divide

Squeezing disproportionate amounts of public spending out of the regions will leave the country fiscally unbalanced and with regional disparities on the scale of most developing nations.

At Budget time we are now familiar with tables setting out the impact of announcements – particularly tax and benefit changes – on different household types. The Treasury Green Book now publishes a familiar bar chart showing the net effect of each Budget on different household deciles in order that we can judge how progressive its measures have been.

But what is less common is any analysis of how big fiscal decisions affect different areas of the country. At the last Budget, the Financial Times created an ‘Austerity Map’ of Britain showing how benefit changes were affecting different local authority areas but it is possible to go further than this and to map how changes across nearly all aspects of government spending affect different regions.

As part of a wider piece of work on government spending, IPPR North has carried out an analysis of yesterday's Spending Round announcements. Assuming that broad spending patterns in 2015/16 are similar to those today, in aggregate, departmental cuts will reduce public expenditure in the North East by £57 per person and in the North West and Yorkshire and Humber by £50 per person, compared with £43 per person in London and £39 per person in the South East.

Perhaps most significantly, though, when we look at the impact of departmental cuts as a proportion of the size of the regional economy (as measured by gross value added) the Northern regions are – once again - hardest hit with the North East suffering three times as much as London. 

Consider this alongside announcements concerning capital spending and the picture is compounded further with spending in London more than ten times that of the North East. As a nation we are already spending more than 500 times as much on transport infrastructure in London than we are in the North East, 25 times more than in the North West, but with the announcement of a government commitment to a further £9bn for Crossrail 2, it is likely that the capital city will swallow up more than 90% of all regional transport infrastructure investment in the coming decade.

Government will argue that its commitment to local growth comes in the form of the Single Local Growth Fund – the pot of unringfenced funding which will be bid for by business-led Local Enterprise Partnerships (LEPs). But given that Michael Heseltine proposed a £49bn fund over four years, the announcement is less than one-fifth of what LEPs might have hoped for, only going to prove once again how hard Whitehall finds putting the rhetoric of decentralisation into practice.

If government is serious about rebalanced growth then it must recognise that national prosperity depends upon regional prosperity. Squeezing disproportionate amounts of public spending out of the regions may well have a political and ideological logic to it, but it will leave the country fiscally unbalanced and with regional disparities on the scale of most developing nations. Mercifully, this is only a single year Spending Round, but it is beholden upon any incoming government to reverse this shocking pattern of public expenditure and ensure that northern prosperity is national prosperity once again.

Ed Cox is Director of IPPR North

@edcox_ippr

The Angel of the North sculpture overlooks the match between Gateshead and Esh Winning on May 2, 2013 in Gateshead. Photograph: Getty Images.

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

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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