The ‘northern powerhouse’ remains an important emblem of the government’s commitment to rebalancing the economy and businesses remain enthusiastic about its potential for unlocking northern prosperity. IPPR North research has shown that just halving the output gap between the north and the national average would increase national economic output by £41bn. The northern economy is twice the size of Scotland and, if it were a nation, it would rank as the eighth-largest in the European Union, ahead of Sweden, Denmark and Belgium. But growing northern prosperity must be founded upon high productivity and good quality jobs for all.
The changes to tax, benefits and wages announced today will have a very different impact to the incomes of families across the country, and by extension to the local economy in which they live. For example, London households on average receive more in child benefit, tax credits and housing benefit, and tend to pay more in income and inheritance tax due to the concentration of high-wage jobs and wealth in the capital. At the same time, on average, northern households tend to rely again on tax credits, but also on employment and support allowance and student support.
As things stand, taking all households’ income, taxes benefits and benefits-in-kind into account, a household in the north of England is on average £9,639 poorer than one in London. Neither the introduction of George Osborne’s ‘national living wage’, nor cuts to tax credits are likely to narrow this gap and so it is important to make sure the fundamentals of thriving regional economies are in place – and once again, there seems insufficient substance behind the spin.
Transport is a key driver of growth and so a further £30m for scheme appraisal is welcome but businesses are still looking for the government to commit real cash to its infrastructure plans before they will themselves invest. Once again the chancellor has missed an opportunity. The secretary of state for transport has placed northern rail electrification on an indefinite pause and plans for a northern ‘Oystercard’ offer scant consolation whilst London and the south-east motor away with as much as 92 per cent of planned infrastructure spending in the coming years. The spending review at the end of the year represents a ‘last chance saloon’ for investment which is looking more and more flaky with each new government announcement.
Announcements about an apprenticeships levy and on going progress on skills devolution is also to be welcomed, but there needs to be a step change in our approach to how apprenticeships are delivered. Recent research shows that two-thirds of apprentices at level two or level three are people who were already employed by their company, rather than new recruits. Since 2010, 42 per cent of starting apprentices have been over the age of 25, rather than being young people finding their way into work.
It is good news that progress is being made on further devolution deals with Sheffield, Leeds and Liverpool city regions. Furthermore, new powers over fire services, children’s services and a land commission for Greater Manchester show further commitment to Osborne’s devolutionary push. Smaller towns and cities, as well as rural areas, are a crucial part of the United Kingdom economy. In addition, it is encouraging news that today Osborne announced that the government was ‘making progress’ on a new devolution deal for Cornwall. Northern counties will be looking on with interest.
But the gap that is opening in the progress being made in different parts of the country will be cause for concern for many. Although it is right to create a permissive context in which different areas can bring forward their own proposals for devolution, the government should set out in greater clarity the procedure for new and emerging combined authorities to follow to bid for greater powers in order to avoid bottlenecks and intransigence in Whitehall.
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Ed Cox is director of IPPR North. He tweets @edcox_ippr
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On apprenticeships… Why do they pay these people less than £3:00 an hour? It is farcical that they expect anyone, even 18 year olds, to accept this. It hardly pays public transport and clothing costs… Shocking exploitation of people.
We do need to be honest and concede that previous Labour administrations have been insufficiently bold both in the development of the North and with enforcing skills development.
It was a Labour administration that privatised (and that later saw the abolition) of the effective but very effective local authority careers services and capitulated with the demise of the (again) very efficient and effective Industrial training boards. It was also such administrations that weakened local authority responses to local training needs.
In respect of the northern power house, the Labour establishment did not even acknowledge the need until the Tory trap was set. The adherence to a Conservative status quo and lack of radical ambition which so characterises the Labour’s Progress party sets us on a course of continuing electoral decline or as they might prefer it a regional attachment to outdated, unaccountable and increasingly ineffective FIFA style self – serving EU cabals masquerading as an advancing force for economic growth and humanity. The acknowledgement of the timidity of former labour years would at least be a start for radical Labour administration in 2025.