The arrogance of these capital cities! London claims that it subsidises the rest of the UK, that it creates the lion’s share of the wealth, and the North of England and Scotland, Wales and Northern Ireland are sick and are only sustained by massive injections of cash (see City View on MoneyWeek).
This map (used with permission and attributed) shows where the money goes – how many people in each country earn more than $200 per day – see how bloated UK becomes!
If you assume we’re powerless to make a difference, then you’re right. There is no doubt that many parts of the UK are heavily dependent on government “handouts”, whether this is an economy heavily (69% in the case of Wales) dependent on public sector jobs, or because of high unemployment. But it wasn’t always like this – a thousand years ago, Northumberland was the richest part of Britain, and 300 years ago, Manchester, Lancashire and Cumbria drove the economy. This implosion towards London (and the crisis that we’re in now) seems to be related to two things – speed of communications, and the financial sector. Let me explain.
The money goes where the power is. If I want to build a road in the North, then I have to present my proposal to the Government Offices (and their advisors) in London. I have to build relationships through dialogue, so I have to keep a permanent office in London.
If I want to influence policy (e.g. to build roads instead of rail Beeching-style), or to gain tax breaks for my industry, then my most senior (and influential) people need to be based near government, since government spends most of the money (yes, in every country).
The same applies to small companies – they might not influence government directly, but they lobby larger companies. For example, the Nissan factory is in the North East of England employs 4,000 workers. But revenue is attributed to Maidenhead because that’s where the Head Office is. Regardless of my personal preference, I have to balance up the increased cost of being in London, with the potential for extra business.
In olden times, your market town and regional city were the centres of government decision-making. Since the ears and wallets (bags of gold) were spread around, so was the wealth. As power collapsed into London, so did the wealth, and everywhere else got poorer.
You can’t reverse progress, can you? We’ve got high speed transport and communications, so this is the way it’s going to stay? I don’t think it has to.
For example, our public and personal transportation is nowhere near as good as Germany’s. Their trains run on time and are popular, and they have high speed autobahns all over the country. And yet Germany consists of regional governments in major cities throughout Germany, and a far better spread of wealth. And Germany isn’t the only example, Spain is also heavily regionalised, and so is its wealth. Supermarkets sell LOCAL produce.
What’s wrong with the Financial Sector? Warren Buffet said “if 50 people were stranded on a desert island in need of food, they wouldn’t take the brightest and best of their members to go and trade in rice futures.” The financial sector was heavily supported under Margaret Thatcher as prime minister, and has been ever since (nothing to do with the financial sector making up 50% of all political donations, I’m sure). As it got richer, it started to pay higher salaries. The best and brightest graduates went into the financial sector instead of industry and commerce. Growth of the financial sector has mirrored the decline of commerce, and the cause is likely to be this brain drain. Under Margaret Thatcher, I said “if you give the flea too many breaks, it will kill the dog”. Well the dog is now pretty much dead, and the flea is looking for someone else’s blood to suck (and has its “teeth” firmly into the tax payer).
Can I prove any of either of the above assertions? Well, next time you are idly browsing the Office of National Statistics, take a look at the population profiles for the different regions. You will note that London has fewer school age children and fewer old people – most of the population is in the working age bracket. London sucks in everyone able to do a day’s work, and spits them out when it has used them. Government spends 40% of GDP and all of the decisions are made in London, wherever in the country they relate to.
What’s the solution? To spread out decision-making (not just government jobs, but real decisions), and to support industry and commerce not the speculative trading of the financial sector. It isn’t as though Financial Sector even contributes much to UK tax take, since these great minds spend a large amount of effort on minimising the tax they pay.