Want to properly bridge the North-South divide in the UK? Look to Germany | Larry Elliott

B.Litang has struggled to find a solution to the north-south divide since textile and coal, the main industries of the First Industrial Revolution, began to decline in the early 20th century.

This is not a unique issue.Every country has rich and poor areas, from the Rust Belt of America to the former East Germanygeographic inequalities can be easily spotted.

However, England stands out. It is one of the most unequal industrial economies in the world as measured by per capita national income, productivity and disposable income, and the North-South divide has widened over the past 40 years.

The story is simple. Parts of the country that depended heavily on manufacturing and coal mining were hit hard after factories and pits closed. London The Southeast has benefited from growth in financial services and the city’s pivotal position as a global commercial hub. Our past failure to reduce inequality has meant that the UK has effectively become two countries. There is London in the southeast and the rest.

No wonder every prime minister, from Margaret Thatcher to Rishi Sunak, has tried to find ways to bridge this gap. Leveling up is just the latest iteration of this quest, and we recognize that all previous attempts have failed.

That applies not only to Labor governments, but also to Conservative governments. A regional policy under Tony Blair and Gordon Brown is to remove taxes from the booming financial services and housing sectors in London and the South East and recycle them for higher public spending in the rest of the country. became.

Some of this money was well spent. The Building Schools for the Future program, for example, was a much-needed investment to improve the learning environment for children in poor communities. However, under the new Labor Party, manufacturing job losses continued and private sector employment growth remained weak. It was when the coalition government halted public sector funding in his 2010 that the extent of the North-South divide really became apparent.

Former cabinet minister Ed Boles, one of the key figures in the new Labor Party, said: Papers on regional disparities With Anna Stansbury of Massachusetts Institute of Technology and Dan Turner of Harvard University. Boles said of the paper, frankly, that Labor could have done more to close the gap between the regions in which he had been in power for 13 years, and so much more. I admit I should have.

The improvements seen in some UK city centers might give the impression that inequality problems are merely a feature of underperforming towns, but this is not the case.Cities such as Manchester and Birmingham , is less productive for its size and performs worse than other European cities.

It’s also worth noting that London and the South East of England have areas of real poverty. Indeed, the gap between the capital’s wealthy and poor boroughs is striking. Measurement problems also mean that there is a large productivity gap between London and the countryside. almost certainly small than the official figures suggest.

That said, it would be absurd to suggest that there are no large regional disparities in the UK. The real question is, as a country, are we willing to accept division, or are we willing to do something about it?

A paper co-authored by Boles draws three main policy conclusions. The first is that once there weren’t enough alumni outside of London and the South East, that’s no longer the case. What they lack are enough graduates with degrees in Stem subjects such as science, technology, engineering, and mathematics.

Increasing the supply of STEM graduates will not do much for a region if there is insufficient demand for their skills. His second conclusion of the paper, therefore, is that much more needs to be done to correct the imbalance of public funding for R&D.

Skip past newsletter promotions

After newsletter promotion

Unlike Germany, where poorer regions receive a disproportionate share of government R&D funding, in the UK money tends to go to parts of the country that are already prosperous: the golden triangle of London, Cambridge and Oxford. If the government is serious about leveling up, it needs to change.

The third major handicap identified in the paper is similar to the share-out of infrastructure spending. The UK has spent relatively little on transport infrastructure in recent decades, lowest among OECD countries To spend on the road. “How much money has been spent, including the recent surge in rail spending, rests disproportionately on London and the South East.”

This is important because poor connectivity limits the effective size of urban areas. Making it easier for people to interact reduces costs and increases market size.

If the goal is to empower the regional metropolises, it makes more sense to invest in better connections between them rather than improving connections to London. The HS3 is better value for money than his HS2.

The message from this paper is that human capital, innovation and infrastructure all matter, and few would dispute that. However, there is a fourth element. it’s a demand. Skills, research and development, and reliable trains are all essential to remedying weaknesses on the supply side of the local economy, but it also suffers from insufficient purchasing power.

Germany acknowledged this. Thirty years after the economic shock of reunification, it is dispassionate to note that Germany’s east-west gap is now smaller than the gap between London and the south-east and the rest of the UK.Germany Over £2 trillion invested To bridge the gap between the eastern and western states that opened during 45 years of communism. Not just talking about it, it’s a real level up.