12 thoughts on “Re-heating regional policy: flaws in the ‘Northern Powerhouse’”

  1. Posted 04/06/2015 at 16:25 | Permalink

    At last, common sense. No longer should we hold onto the coal mining areas of Wales for example when the people of Wales deserve a lot more.

    Let us move on, without redistribution of income to a system of regional economic activity that is sustainable without subsidies.

    It can be done if the politicians let hold their grip on the belief that change is to be resisted at all cost

  2. Posted 04/06/2015 at 21:56 | Permalink

    Cogent analysis. Delivered like a laser guided weapon at hypersonic speed.

    I particularly like the closing broadside… “There may well be a revival of the North, but if it happens it will be despite government intervention, not because of it. Unless successful cities are allowed to grow and unsuccessful ones to decline, the UK’s economic geography will become increasingly maladapted to current conditions, with ‘zombie cities’ dependent on state handouts draining the life out of the more productive areas of the economy.”
    .

    Kaboom.

  3. Posted 05/06/2015 at 08:08 | Permalink

    I would like to provide a counter-analysis, which I think is equally plausible. Government subsidies to ‘the North’ and national wage bargaining in the public sector have meant that these areas have higher costs, e.g. housing and private sector wage costs (because the private sector is trying to attract the same workers) than they otherwise would, and this has hindered their ability to compete on cost grounds This nips growth in the bud in these areas and keeps them dependent on subsidy.

  4. Posted 05/06/2015 at 10:06 | Permalink

    @HJ – I’m not quite sure why you describe it as a counter-analysis, as it’s another aspect of the ‘crowding out’ hypothesis mentioned briefly in the post. Nonetheless, this is clearly a major problem, with the North suffering from an unhelpful combination of high costs and mediocre human capital. Obviously state regulation also contributes to the former.

  5. Posted 05/06/2015 at 10:28 | Permalink

    Richard – I was thinking that at the time I posted it. It’s not mutually exclusive with your analysis. I’m just saying that it might be a more significant factor, perhaps very significantly so, hence my description of it as a counter-analysis of the the main cause. They could both be significant causes, in any proportion, of course..

  6. Posted 07/06/2015 at 21:36 | Permalink

    All very well allowing the SE to grow. But hard to see the area’s creaking infrastructure keeping pace. Transport, water, schools will only be expanded with central funding, which brings us full circle. Market forces acting alone will create shanty towns.

  7. Posted 10/06/2015 at 13:22 | Permalink

    Why would market forces create shanty towns? This didn’t happen in the late 19th century or the 1930s, when vast private-sector suburbs were built on the edge of British cities. And providing the state gets out of the way, there is no reason why the private sector cannot also provide infrastructure, perhaps funded by a combination of property development and ongoing revenues such as fare receipts. There are numerous historical examples of this in the UK, before the state-planning era, and in other countries today.

  8. Posted 10/06/2015 at 21:14 | Permalink

    In a fair and thus optimally efficient economic system, wealth creation wouldn’t be taxed and Land rent would be used for public revenue instead. Under such a system, simple calculations show that regions outside London and the SE would be paying around £100bn per year less than they are now. A real boon for investment into those areas. Or to put it more bluntly, landowners in London and the SE are parasitizing £100bn per year of wealth and welfare from the rest of the UK. End that, and regional inequality, among numerous other negative symptoms take care of themselves. Good things happen when incentives are aligned. All without the need for any State intervention.

  9. Posted 11/06/2015 at 12:38 | Permalink

    @Benji – Do you have a source for that figure? It would be interesting to know more about how it was calculated.

  10. Posted 11/06/2015 at 19:10 | Permalink

    http://www.standard.co.uk/news/london/london-property-prices-citys-property-worth-1000000000000-perhaps-they-ought-to-redraw-the-monopoly-board-7819766.html. Location values weighted for London and the SE (75%) gives them around 60% of total land(rental) values. Here are the tax tables. http://markwadsworth.blogspot.co.uk/2014/03/regional-inequality-lvt-will-sort-it-out.html
    Under the ATCOR principle (all taxes come out of rent) liabilities go from 35% to 60%, or around £100bn per year when taxes on income/capital are substituted and eliminated(as rental values rise) by shared land rent and other monopoly fees.

  11. Posted 11/06/2015 at 20:58 | Permalink

    Shanty towns develop whenever there is migration from poor to richer areas. A mini example was ex miners sleeping in their cars and working building the channel tunnel.

    In a totally free market, with no planning restrictions, I would predict a great deal of low quality housing for people working on London building sites earning less that what is now the minimum wage. In fact just like those farms employing mainly immigrants today.

    There will be better quality housing too, but probably not affordable by those sleeping in cars, tents and old containers.

  12. Posted 19/06/2015 at 11:36 | Permalink

    @Benji – Do have data on the current spatial tax distribution if public sector employees (widely defined) are taken out? I suspect the pattern would be closer to the projected LVT distribution.

    @Adrian – Transaction costs and regulations on landlords help explain the temporary accommodation issue. Deregulation would dramatically lower the cost of providing good quality housing. Once again, I point you to the huge construction before the 1947 Town and Country Planning Act.

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