Why does London’s economy perform so much better than the rest of the UK?

 

         When I wrote the Economic Policy Review with colleagues before the last election, one of the most striking findings we highlighted was the persistent outperformance of the London economy compared to the rest of the UK. 

          Indeed, we discovered that the further from London you went the slower the growth. We also reported that the regional economies in the UK that received the largest subsidies and the most government  assistance and intervention performed the worst.

           Some of you are ready to leap to your keyboards to say that you should not claim cause and effect when of course government spends more and intervenes more in parts of the country with poor prospects. Let me spare you the anger. Part of the reason the poorer parts of the country receive more government help is that they are poor to start with. That’s why governments of all persuasions send them more money. They are locked into a single currency with London, so they need transfer payments to survive.

            The poorer places receive tax revenues from the succesful parts to pay the extra benefit bills for the higher levels of unemployment and disability. They receive larger grants per person for their local authorities, schools and health services, as the payments nationally are weighted to give more to disadvantaged areas per head. They are the main beneficiaries of regional policy, with a wide range of grants and public capital spending. Conservative governments treated them more favourably than richer areas. Labour then did it on an even grander scale, with large increases in public funding.

              So one of the questions I wish to ask today, is why didn’t it work? Why didn’t thirteen years of large increases in public spending, with the poor areas the main beneficiaries, lift them into success? Why didn’t the preceeding twenty years of favoured treatment establish the ground work for the success of the last Labour government’s big bazooka approach to spending?

              The left wing myth makers think Margaret Thatcher had a downer on Northern industry, deliberately closing heavy industry in the 1980s and leaving the communities without jobs and hope. As so often , this good story is ruined by a few facts. Much of the  industry – steel, shipbuilding, aerospace engineering, car manufacture, railways  and energy – was nationalised. In the 1960s and 1970s under Labour all these industries sacked a large number of people, confirming a trend which continued under both the last Conservative and the  more recent Labour governments. Neither party intended to do that.  It just happened. The industries were not competitive, and foreign competition stole the jobs. Monopoly or oligopoly nationalised businesses regarded politicians as their main customers, seeking subsidies, instead of concentrating on selling good quality affordable product at a profit making price.

          As examples, the National Coal Board had over 700,000 employees in the early 1950s. This had fallen to 400,000 in1967 and to 235,000 by 1979, on the eve of Margaret Thatcher in Downing Street. British Rail shed more than 300,000 jobs between 1950 and1967 . The Electricity industry fell from 220,000 employees to 160,000 employees between 1968 and 1979.

        The collapse of steel making and shipbuilding was pronounced in the 1960s and 1970s as well as in the 1980s. It was a progressive collapse, despite or because these industries were heavily subsidised and centrally directed for much of the time. Labour like to forget that much of the decline occurred on their watch between 1964 and 1970 and again between 1974 and 1979. Industry continued to fall as a proportion of the total  between 1997 and 2010.

          Labour and Conservative governments have tried a variety of responses to this de-industrialisation. Neither so far have succeeded in arresting the downwards movement. There have been Enterprise Zones, various tax incentive schemes for investment, inward investment promotions and subsidies, regional aid, EU programmes for the worst hit regions, and the large injections of public money for a wide range of programmes. They have tried education and training, apprenticeships, the construction of infrastructure, environmental improvements, direct subsidies and offers of public sector land.

          Some companies have proved that you can make things in the UK to the highest world standards at a competitive price. Several leading motor manufacturers have come to the UK and set up world class factories. Aerospace engineering, pharmaceuticals , food manufacturing and a number of other areas show that the UK can combine excellence with innovation. Despite this, unemployment and lower incomes have remained obstinately persistent in some parts of the country where industry used to be central to employment.

           London has pulled away from the rest, especially by concentrating on fianncial and business services, media and lesiure and other newer areas of activity. London’s industry has declined with the rest of the country’s. London’s  landscape includes the husks of old power stations, the remains of old docks and wharves, and the reshaped profiles of old factories and warehouses. In London now they usually house people in new flats or smart offices, carved out of the remains of a former industrial heritage. London does  not regret the passing of these old lifestyles. It moves rapidly on to a better tomorrow. One of my grandfathers made his living shoeing horses for the brewery trade. It was not a skill which could even see him out, and not something I ever wanted to do or thought I had a right to inherit as a way of life.

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129 Comments

  1. lifelogic
    Posted April 29, 2012 at 6:38 am | Permalink

    Why does London’s economy perform so much better than the rest of the UK? Mainly I suspect because many Londoners are nondoms and have private wealth and so do not have to pay absurd UK taxes. Many are enterprising individuals from all around the world drawn to the UK as it is a good safe-ish base for certain financial and some service businesses and a fairly pleasant place for rich non doms to live.

    An advantage Cameron and the EU seem very keen to get rid of with his 30K -50K nondom taxes and his 52%-47% tax rates and his anti business approach to everything he can tax.

    I still wonder why HSBC is still here the maths says they clearly should go why do the shareholders not insist on it and perhaps double the share price?

    If you live in the north (where I was brought up and worked in engineering for a time) the best jobs are mainly in the state sector say a tax or benefits office or the local authority – so that generally kills innovation and initiative. We need regional pay to reflect the cheaper housing and lower benefits so northerners start to pull their own weight and stop the endless whinge that is now so common.

    In most manufacturing you need to compete with much lower wage, lower tax, less over regulated economies or have huge capital investments like a car manufacturer plant. Employers in the UK are seen a milk cows by the state and expected to be part of the social security systems for the elderly, disadvantaged and disabled – how can they compete given this in world terms? Cameron has made it even worse since he took office.

    • lifelogic
      Posted April 29, 2012 at 6:51 am | Permalink

      I see Cardinal O’Brien accuses David Cameron of ‘immoral’ tax stance. I agree Cameron’s 50% income tax, 40% IHT and 28% CGT are indeed very immoral as they only inflicts economic damage and a loss of jobs and growth. But it seems he is referring to an absurd proposed turnover tax marketed as a Robin Hood tax by some dubious charities, a few actor lovies, the BBC, bishops, the EU and lefty PR & advertising agents.

      Given that he is a representative of a very, very rich organisation based in a tax haven and one that does huge damage and causes (DAMAGE-ED) in Africa and elsewhere with its absurd stance on birth control this is perhaps a bit rich.

      Needless to say he makes no rational argument to defend his position. I assume he just found it in some old dusty scroll along with many other (WORD LEFT OUT-ED) Bishops.

      http://m.bbc.co.uk/news/uk-scotland-17878806

      • rose
        Posted April 29, 2012 at 8:40 pm | Permalink

        This mania for the FTT can still be encountered all over the place – among teenagers, lovies, teachers, clergy, young professional people. It is the latest version of the “drop the debt” movement and Fair Trade.

        And Evan Davis is now talking gaily about a version for us: “scrubbing out the debt”.

    • lifelogic
      Posted April 29, 2012 at 7:00 am | Permalink

      The transfer payments you refer to from London to the poorer part of the country are a large part of the problem. Diverting enterprise with transfer from the dead hand of the state – usually spend on something daft and pointless like a new Edinburgh tram system, green energy, a train track more traffic lights or similar insanity.

      The regions need to find and exploit a real competitive advantage where they can compete such as fracking in Blackpool or Football in Manchester.

      • lifelogic
        Posted April 29, 2012 at 7:25 am | Permalink

        Perhaps a competitive advantage in being a gritty, northern, lefty, dubious pop music band too it seems.

        Good to see Clark doing something on the Whiplash and the no win no fee scam let us hope he actually does it well.

        I see Boris Johnson cites freedom, democracy and low government spending as his key beliefs, and vows to crack down further on crime.
        He does not mention the green tosh environmental nonsense what is there not to like? But will he actually do it when elected? Will Cameron copy him in time to get back in?

        • Bazman
          Posted April 29, 2012 at 10:10 am | Permalink

          Shaun rider helping David Cameron is conclusive proof that drugs are bad for you and not cool. This story was published on April 1st though.

      • David John Wilson
        Posted April 29, 2012 at 1:13 pm | Permalink

        Over the last few decades it has been recognised that overseas aid needs to provide a basis for poor areas becoming more self supporting. We need the transfers within the UK to have the same objectives.

        Thus for example local transport initiatives need to concentrate on connecting the high unemployment areas with those short of labour.

        • lifelogic
          Posted April 29, 2012 at 6:54 pm | Permalink

          Most of the local transport initiatives I have seem seem to be about blocking roads, empty bus lanes, hugely expensive trams, “environmental” area road blocks, large islands and traffic lights set mainly to red – for cars anyway.

          • stred
            Posted April 30, 2012 at 11:19 am | Permalink

            Dundee has an amazing solution to traffic. No traffic lights. The traffic flows without congestion, and is not bunched into clumps of closely spaces vehicles. Drivers take care at junctions, otherwise they would crash. I hope the system has survived and could be an example for elsewhere.

    • lifelogic
      Posted April 29, 2012 at 7:06 am | Permalink

      Also many of the brightest and the best often leave the north as soon as they can for the bright lights of London. This too does not help the regions. The Labour devolution to Wales and Scotland (for what they foolishly thought would be a political advantage to Labour) has also tended to ignore and bypass the North of England.

      • Bazman
        Posted April 29, 2012 at 10:05 am | Permalink

        That is exactly what will happen if regional pay is implemented a system rejected by most companies. If you are young fleet footed proud and greedy you are going to move where there is higher pay. Those motivated by other factors would not. It’s interesting in the NHS scheme proposed managers will be excluded from this. Now if I was involved in some sort of accident I would not want a good manager to help me instead of a good paramedic, nurse or in a hospital a cleaner or cook given my now weak state of health.
        Your fantasy of making everyone more desperate helping the economy is a false god. If you where to make your hire and fire at will fantasy true you would also have to put in place more generous help when between jobs. You would say that there would be more jobs, but all evidence point to this being untrue. This then takes us back to your and many others assumption that desperation will produce results for all. A person on benefits will somehow be employed as he is starving. It is as foolish as the bonus culture and look where that has got us. An increasingly divided society relying on the other false god of the Trickle down effect.
        What you really want is a Chinese style system of government where there is a large and willing underclass to do cheap work for you. What you really want is servants not workers to use the old anti Tory phrase. Working for food money I would add. Society would never accept this and quite rightly so. Ram it.

        • lifelogic
          Posted April 29, 2012 at 6:56 pm | Permalink

          I want them to be better paid and better trained the best way to get this is more jobs now fewer as you seem to want.

          • Bazman
            Posted April 30, 2012 at 4:58 pm | Permalink

            Some jobs like the ones you propose are of no use to anybody except the employer.

      • Posted April 29, 2012 at 1:59 pm | Permalink

        The north east voted and rejected elected regional assemblies.

        • Martyn
          Posted April 29, 2012 at 9:04 pm | Permalink

          And were then, as is common in the EU fantasy-world sponsored by Labour at the time, completely ignored and the assemblies sprang into being. So far as I can see they are still there, of course, but now under another name and even more expensive to maintain.

      • Chris Bowley
        Posted April 29, 2012 at 4:41 pm | Permalink

        I’m surprised there aren’t more comments about this issue. To me it seems obvious that this is a large part of the problem. Maybe the long term, slowly changing nature of the problem causes it to go unnoticed. Maybe it isn’t noticed in London and its environs where it is likely that most of the commentariat live.

        There is an obvious difference in the number of personal opportunities between the London/South East region (and to a lesser extent other large conurbations such as Edinburgh, Manchester, etc.) and the more distant regions. The brightest and best migrate towards these opportunities. It only takes a small proportion to move each year but if the direction remains consistent, the number migrating exceeds the locally generated replacements and you multiply over the decades then you end up with a substantial change. If opportunities remain constant you would expect an equilibrium to be reached but the brightest and best, especially when they get together, are more likely to generate new opportunities. Conversely, in areas with decreasing concentrations of the brightest and best the number of opportunities probably decrease. This results in a classic positive feedback loop. Positive feedback loops are fundamentally unstable with a tendency to accelerate to extremes.

        There are additional factors causing this trend to accelerate such as:
        1. University is a major trigger for migration since many graduates move away from their home areas. As the proportion of the population going to University rises expect migration towards opportunities to rise.
        2. Increasing skill and job specialisation results in geographic clusters of skills and matching opportunities.
        3. In as much as “brightest and best”-ness are passed from parents to children or picked up from the local environment these qualities in the following generations will also be biased towards London/South East unless there are substantial differences in family size in the different areas.

        I don’t see simple subsidies, unless taken to massive levels, solving this problem of opportunity. I am sceptical of the extent to which such subsidies remain in the target area rather than being sucked back to the centre through taxation, savings, spending with national chain stores, etc.

        I am also sceptical of the national will to change the situation. With political power residing within commuting distance of London, the prevailing view that London is a major benefit to the country wins out easily over the view that London is a major problem for the country. The fuss over movement of part of the BBC to Manchester illustrates this. Devolution/independence may change things a little but may just result in replication of the problem at a smaller scale in each country. Ironically, if there had been no devolution we might have had all areas outside London/South East unite in common cause to demand redistribution of opportunity. For the future, expect to see growing resentment at the perceived difference in opportunities, especially as London becomes increasingly seen as a foreign country to the indigenous population outside it.

        • uanime5
          Posted April 29, 2012 at 5:18 pm | Permalink

          So there will continue to be a brain drain from the rest of the UK to London as long as London pays the most money, which will result in the rest of the UK continuing to decline.

          • Susan
            Posted April 30, 2012 at 2:01 pm | Permalink

            uanime5

            Social mobility has gone down over the years so there is no brain drain from other parts of the UK to London.

            I would imagine many of the jobs you have in mind have gone to foreign born workers who have the necessary skills.

        • Winston Smith
          Posted April 30, 2012 at 9:45 am | Permalink

          #1 is a good point. Often students develop a bond with the area where they study and then try to find work in th area when they graduate. Bristol, for example, has a glut of high calibre graduates. Many remain in the City because they like living there. If I was an entrepreneur looking for cheap graduates I would look to set-up my business in such areas.

    • JimF
      Posted April 29, 2012 at 9:01 am | Permalink

      “In most manufacturing you need to compete with much lower wage, lower tax, less over regulated economies or have huge capital investments like a car manufacturer plant. Employers in the UK are seen a milk cows by the state and expected to be part of the social security systems for the elderly, disadvantaged and disabled – how can they compete given this in world terms? ”

      The answer in a nutshell, and not only for manufacturing. In any “non-fluffy” occupation (i.e. NOT commercial property, estate agents, banks, mortgage brokers, beauticians, nannies to the same etc.) where you need to compete in the real world this is the case.

      • David John Wilson
        Posted April 29, 2012 at 1:35 pm | Permalink

        The government needs to look a lot more closely at why jobs are being exported from the UK. In some cases it is partly due lower wages paid abroad but the government has a lot more control over many of the other costs that influence this movement.
        Many of the jobs exported pay little more than the minimum wage. The fact employers’ NICs start well below the minimum wage needs to be adjusted. The money lost could be retrieved by charging a higher rate starting at minimum wage level. However it would have been much more sensible to have used the money given away in the recent budget to reduce corporation tax.
        Employers’ NICs are a tax that sends jobs abroad, decrease the competitiveness of our exports and home produced products against imports, and increase unemployment levels.

        • uanime5
          Posted April 29, 2012 at 5:20 pm | Permalink

          “The fact employers’ NICs start well below the minimum wage needs to be adjusted. The money lost could be retrieved by charging a higher rate starting at minimum wage level.”

          How exactly are employers legally paying people below minimum wage?

          Also Osborne did plan to reduce corporation tax in the recent budget.

    • Duyfken
      Posted April 29, 2012 at 10:54 am | Permalink

      @lifelogic: Your comments consistently exceed the length of the original posts by JR and you appear to have a propensity for monopolising the comment board. Not critical of the content, but I do suggest you might consider the maxim of “less is more”. More precis than periphrasis!

      No offence taken, I hope.

      • lifelogic
        Posted April 29, 2012 at 7:39 pm | Permalink

        It takes a lot more than that to offend me. I am away on business for a few days anyway so this will limit my contributions somewhat.

    • Timaction
      Posted April 29, 2012 at 11:01 am | Permalink

      I was talking with my wife this morning about a young woman who through choice is about to have her third child by different fathers who is dependent for all her needs through the state. Her lack of responsibility means that I and other tax payers will pay her rent, Council tax and all her families needs (education, health, food, clothing etc) through the benefit system. The fathers of the children make no contribution.
      In the meantime the Government is increasing direct and indirect taxation for the rest of us in order to support those individuals who choose to make us pay for their irresponsible behaviour. It’s welfarism/socialism that needs root and branch reform to make us a dynamic society where we have to work to support ourselves. Benefits should be time limited as in the USA and elsewhere or paid in other methods to encourage work and make welfare unacceptable and shameful as it was only a generation ago. The people would innovate to support themselves instead of having the state to support their every need. Welfare should not pay. How can a £26,000 benefit cap be fair on anyone who earns less than £35,000? It’s all to easy and politicians need to make radical reform. A hand up for those in genuine need NOT a handout. Tax payers should not have to subsidise the feckless and idle who make welfare their lifestyle of choice. We are told that 1oo’s of 1000’s have never worked and this is now across three generations of families.

      • uanime5
        Posted April 29, 2012 at 5:25 pm | Permalink

        If we copy the US benefit system expect US levels of poverty, homelessness, and crime (innovation to support themselves).

        Also some benefits are paid for working, such as tax credits. Unfortunately the Government has decided to cut them unless you work 24 hours per week.

        Most people who earn under £35,000 get benefits so it’s not unfair from their perspective.

        Finally if you want everyone to work you need to create over 2 million jobs to fill the gap between the number of unemployed people and the number of jobs available.

    • uanime5
      Posted April 29, 2012 at 5:10 pm | Permalink

      So you claim that London is successful because it’s full of wealthy non doms, yet your plan to make the north of England more successful is to reduce the amount these people are paid. Surely lower salaries will reduce local investment and keep this region poor.

      Also Germany has shown that in manufacture you can compete with high wages as long as you make high quality products.

  2. Mick Anderson
    Posted April 29, 2012 at 6:47 am | Permalink

    When negotiating pay deals, Union spokespeople seem to like the phrase “race to the bottom”. They perpetuate the idea that every employer is a “fat cat” whos only aim is to exploit “hard working families” by paying less than the bare minimum, purely for personal greed.

    They have failed to notice that on a global scale, their efforts have helped to win a “race to the bottom” of National competitiveness. As a result, there is little heavy industry left, and lots of goods are manufactured abroad.

    The manufacturing success stories they hold up (Nissan and Toyota) have come here because it was the least bad of the European options, and they need to be in the European market. Without that base, EU protectionism could be used to freeze them out completely. Effectively two “wrongs” looking like a “right”.

    In practice you do better by designing the “wrongs” out of the system, rather than trying to cancel them out.

    Regarding why the “poor Northerners” have not been raised up by all the subsidies – when you pay people to be poor, you’ll never run short of poor people.

    It’s not that I’m anti-Unions, more that they have exceeded their brief to everybodies detrement,. Their actions have had unfortunate consequences that should have been predictable.

    • lifelogic
      Posted April 29, 2012 at 10:17 am | Permalink

      Indeed several lefties the BBC and Union spokespeople seem to like the phrase “race to the bottom” they seem to get excited by it. They they usually go on to suggest policies that would certainly ensure we ended up at the bottom and espouse the destructive politics of envy. Then they criticise any sensible policies that would provide a ladder to the top and encourage people to climb it and enable companies to compete.

      I can never follow their arguments in the slightest and just assume they lack a logical gene or two.

      I also see the BBC has dragged up some more “I like paying taxes and would like to pay more tax” people again. Do they have an endless supply of these people for political discussion programs? Can they really not think of anything at all better to do with their money than give it to the state and watch them waste?

      Anyway nothing is stopping them pay more to HMRC anyway if they wanted too can they not shup up and do this if they want to.

      • uanime5
        Posted April 29, 2012 at 5:29 pm | Permalink

        As you’re always calling for people to work for less money, using the politics of envy to criticise taxing the rich, and promoting the discredited trickle-down effect it’s clear why you hate unions; they support the average workers, rather than the employers and their bloated salaries.

        • lifelogic
          Posted April 29, 2012 at 7:36 pm | Permalink

          Unions are largely a self interested business main looking after themselves I find.

          • uanime5
            Posted April 30, 2012 at 2:31 pm | Permalink

            They why are they always calling for better working conditions for the union members?

          • APL
            Posted May 2, 2012 at 10:54 am | Permalink

            uanime5: “They why are they always calling for better working conditions for the union members?”

            The union members that get the best working conditions seem to be those at the top, brother.

            Christine Blower, leader of the National Union of Teachers, earns £103,003 with annual pension contributions of £26,007 and £11,157 in national insurance.

            Your average teacher £21 – £27K starting salary.

            Public and Commercial Services Union Mr Serwotka’s £89,000 salary is topped up with a pension contribution of £26,159 and another £9,410 in national insurance. Overall, his pay package is worth £125,000.

            I would guess Mr Serwotka’s pension contribution is much the same as many of his members yearly salary.

            Maybe the Union Members they are looking after are a bit closer to home than the average union member?

      • Bob
        Posted April 29, 2012 at 6:33 pm | Permalink

        @LL

        ““…”I like paying taxes and would like to pay more tax” people… “

        I wish Dimbleby or one if the other panellists or someone in the studio audience would suggest that they send a cheque to HMRC for all of their surplus cash. But it never happens.

    • uanime5
      Posted April 29, 2012 at 5:30 pm | Permalink

      Care to explain why unions haven’t destroyed German manufacture, even though half the board of nearly every German company is made up of union representatives?

      • lifelogic
        Posted April 30, 2012 at 3:36 am | Permalink

        Half? Is it not “a” union representative usually?

        • uanime5
          Posted April 30, 2012 at 2:30 pm | Permalink

          By law all the Boards of Directors for German companied have to be half shareholders and half employee representatives (usually unions). The CEO and senior managers form another board called the Board of Managers which controls the day-to-day running of the company but the Board of Managers is subordinate to the Boards of Directors.

        • Sebastian Weetabix
          Posted April 30, 2012 at 2:33 pm | Permalink

          That’s right. One person. And in a huge multinational based in Germany that single representative is about as representative of the workers as the typical Labour Peer, i.e. not much.

    • Susan
      Posted April 30, 2012 at 2:59 pm | Permalink

      Mike Anderson,

      I am sorry Mike but that is just wrong. I don’t like this assumption that Northerners are just people who rely on subsidies from the South. There are many people in the North of England who work hard, who have small business ventures and are struggling to keep going, earning very little money.

      They are not union mad people living on handouts wanting to bring the UK to its knees. There are many parts of the South which are benefit trap areas not just the North. London earns much more than the North because it has many more advantages which can be exploited.

      Unions were not the only reason why the UK became uncompetitive. Poor management of companies in the UK was also a factor. Old methods and lack of investment mean’t Britain remained in the past while other Countries moved on and overtook the UK.

  3. Caterpillar
    Posted April 29, 2012 at 7:02 am | Permalink

    Presumably the answer looked for will have to have some component of a long history of cumulative success to the successful, path lock-in (>300 years of London Stock Exchange), network economies, historic train and road network, scale (including population), university golden triangle, international attractions, the only hub airport … it will be interesting to read the answers.

    But areas I’d like to see considered (all said before) are, (i) speeding up construction of HS2, (ii) reversing study and salary requirements for visas (at least outside the golden triangle), (iii) moving the subsidised galleries, museums etc to another city (too late to relocate the national football stadium), (iv) freeing up planning everwhere else.

    Is the question then really aimed to move thinking from Coalition ‘rebalancing’ policy to … (how) can the UK create another global city?

  4. colliemum
    Posted April 29, 2012 at 7:20 am | Permalink

    Firstly, thanks for the fascinating numbers in regard to the shedding of jobs in heavy industries prior to 1979. Did these workers, from the 1950s onwards, form the stock of the unemployed which has been with us since then, I wonder?

    But to your main questions: “So one of the questions I wish to ask today, is why didn’t it work? Why didn’t thirteen years of large increases in public spending, with the poor areas the main beneficiaries, lift them into success? Why didn’t the preceeding twenty years of favoured treatment establish the ground work for the success of the last Labour government’s big bazooka approach to spending?”

    I suggest one of the reasons could be that this ‘largesse’ has and is open-ended, i.e. there’s apparently no fixed point in time set when the money will stop rolling in. Obviously, public servants’ jobs, once created, will be there in perpetuity, as in all bureaucracies anywhere at any time. That is something which needs to be addressed at government level.
    The same applies to the benefits being paid out to those who don’t work. As long as certain sectors of our society encourage people to think of work as ‘slave labour’, to expect a life style of comfort like those who work and earn above the mean income as their due, then state largesse is expected to keep rolling in.
    I think this attitude will remain, as long as they regard ‘state money’ as something which happens to be there, and not as something which other citizens pay for with their taxes.
    Decades of removing local charities from helping the poor on a local level, of ‘the state’ taking over the distribution of locally available money in the name of equality, have led to this.
    Add to this the recent definition of poverty as being relative – and you have the open-ended situation where any amount of taxes spent on keeping people not working won’t be sufficient.
    We often hear about how many people in work are needed to keep paying for state pensions. I wonder how many tax payers (because pensioners also pay taxes) are needed in addition, to keep paying for the jobless and for the public servants administering to them.

    • lifelogic
      Posted April 29, 2012 at 10:20 am | Permalink

      If you pay people not to work and to be poor there will always be a good ready supply of them.

  5. Antisthenes
    Posted April 29, 2012 at 7:26 am | Permalink

    The short answer is too much government intervention particularly of the social democratic kind. If the EU gets its way and UK taxes and regulations are not made more economically friendly then the future for London may not be too rosy either. There are a raft of other reasons of course but it boils down to the economic, social and political models that are currently in use that are so heavily influenced by socialist doctrine. If you want prosperity throw these models into the skip and replace them with ones based on free market capitalist and libertarian ones. They have flaws but then they are worth the price if it leads to prosperity for the greater number.

    • uanime5
      Posted April 29, 2012 at 5:35 pm | Permalink

      Given that socialism had worked in Germany and Scandinavia there’s no reason to follow free market capitalist or libertarian ideals.

      Also why is the EU trying to destroy the economies of EU countries? Surely Germany, France, and every other EU country would object. Could it be that your blind hatred of socialism and the EU is causing you to misrepresent everything.

      • Lindsay McDougall
        Posted April 30, 2012 at 8:26 pm | Permalink

        Germany doesn’t run under Socialism. It runs what is known as Rheinish Capitalism, when banks virtually get into bed with businesses who borrow from them, so thorough is their probing. It is – or at least was – a difficult environment for start up businesses. The British attitude to lending is – or at least was – more callous but simpler: if you put up 100% collateral you can borrow as much as you want; otherwise you pay a high rate of interest.

        You should also remember that Ludwig Erhard, the Finance Minister during the post-war German reconstruction, went for a free market economy and was under siege for several years by Socialists who wanted to mirror East Germany’s economy. Germans are ever so glad that Erhard prevailed.

        Scandanavia is less Socialist than it was. If you want a really socialist country in Europe, try France – it has high taxes AND toll roads, is dominated by trade unions and is protectionist in spirit. No matter how many treaties they sign promising freer trade and reducing subsidies to farmers, they always find a way to rat on them.

      • Lindsay McDougall
        Posted April 30, 2012 at 8:28 pm | Permalink

        By the way, I am rooting for a Hollande victory in France. If he does what he says he will do, the Euro will come crashing down in ruins.

  6. Posted April 29, 2012 at 7:50 am | Permalink

    This article makes the excellent case for localism – i.e. strong local government and weaker national government.

    The left wing hystericals need to get off the wings of the free-market capitalists.

    • Kevin Dabson
      Posted May 1, 2012 at 6:24 pm | Permalink

      Hello,

      I do not see how the case is made for stronger local govt and that it is better than national (central) govt.

      The fundumental problem is what task it is set and the type of people running these orginisations.

      PS. Due to americanizations I can barely spell anymore!

  7. Iain Gill
    Posted April 29, 2012 at 7:56 am | Permalink

    the car factories that came were all given tax perks, allowed to break through quotas imposed on cars from some parts of the world, and big planning perks, and special roads were built for them with agreed speed limits and such… try getting any of that as a native british business

  8. Damien
    Posted April 29, 2012 at 8:21 am | Permalink

    Journalists labour politicians and academics with their green lefty agenda connived to spend £hundreds of billions hell bent on creating their eco utopia that they never hesitated to ensure that the high skilled well paid jobs were to be in the UK. That is why there are no wind turbine manufacturers in the UK still.

    The welfare system condemns millions to a life of waste. What have they been teaching their youth that they have lost respect motivation ambition and the work ethic. Yes there are changes in the benefits system but this is a drag on the economy and mass immigration from the EU and beyond is adding to the welfare bill. What bit of ‘economic crisis’ do our government not understand? I disagree with IDS when he says no to cutting £10 billion from welfare.

  9. Alex
    Posted April 29, 2012 at 8:24 am | Permalink

    As so often, much of the problem that the government wants to solve was caused by government policies in the first place.
    We have a large national government that concentrates it’s activities in London. This tends to draw in other non-gonvernmental organisations. As the concentration of people in the SE pushes up living costs, the government simply taxes the whole country to fund London weighting, higher expenses and higher pay for those in the SE. In order to compete for skills other organisations then need to do the same. This is essentially a tax transfer from the restof the coutry into London. If we didnt have such a centralised system of power in this country (compare with many Nordic countries for example) there wouldn’t be so much of a problem. It also results in most of the expensive ‘vanity projects’ being in London, drawing in even more money (Millennium Dome, Olympics …….).
    Secondly, there is a net flow of working-age people into London and a flow of older people out of London as many people want to live there for career reasons. This subsidises London (because they are net contributers to the Treasury when in London but net beneficiarieswhen elsewhere). It also looks like London people are wealthier and more productive, but it actually means that the same people live in London when they are earning more and outside it when earning less; not the same thing. And not really anything to worry about.

  10. Steve Cox
    Posted April 29, 2012 at 8:28 am | Permalink

    It’s the same question that is constantly asked in Germany: why, after two decades of massive fiscal transfers from West to East, does the old East Germany still fail, for the most part at least, to prosper? Can anyone answer that, it may shed some light on John’s question?

  11. Andy Man
    Posted April 29, 2012 at 8:36 am | Permalink

    “Monopoly or oligopoly nationalised businesses regarded politicians as their main customers, seeking subsidies, instead of concentrating on selling good quality affordable product at a profit making price.”
    Nothings changed apart from the recipients of the subsidies then? Perhaps the best idea would be to stop all bail outs and political interference?

  12. alan jutson
    Posted April 29, 2012 at 8:45 am | Permalink

    Your first couple of paragraphs sum it up John, as have a number of comments already.

    If you continually pay people to do absolutely nothing, then that is what you get until you stop.

    One of the examples of this type of action in failure, is surely parts of Africa.

    For decades billions and billions have been spent, millions of tons of food has been delivered, and the result is still poverty, corruption and more need.

    The additional problem is, we are now attacking those very people who provide all of this givaway wealth, by loading them with more and more taxes to pay for it all.

    In short, you are now slowly killing the goose, and when it eventually dies, there will be no more golden eggs to re distribute.

    Yes life is tough, yes some people who cannot work due to some sort of illness or disability need help, but to continue to pay perfectly able people to do absolutely nothing, simply cannot continue for ever, as it is simply un affordable.

    • uanime5
      Posted April 29, 2012 at 5:38 pm | Permalink

      Perhaps the state should create some minimum wage jobs for these people, rather than pay them to do nothing. Strange that no one ever promotes this.

      • davidb
        Posted April 29, 2012 at 9:25 pm | Permalink

        Or workfare you may call it. I agree. No money, but provide paid work. No work, no money. Im glad you are beginning to get the idea Uanime5.

        • uanime5
          Posted April 30, 2012 at 2:27 pm | Permalink

          Workfare isn’t a minimum wage job, it’s slave labour. Under workfare the state pays benefits to the ‘volunteer’ and the private company gets a free employee, so it removed any incentive for companies to create jobs and costs the tax payer the same amount of money.

        • Sebastian Weetabix
          Posted April 30, 2012 at 2:35 pm | Permalink

          Yes. Beveridge would have found our system whereby you get something for nothing completely incomprehensible, on the grounds that idleness is just as bad as want, ignorance and squalor.

  13. oap
    Posted April 29, 2012 at 9:10 am | Permalink

    Thank you for reminding us of the long, slow and painful transition experienced by so many industries post WW2. It is a truism that businesses and industries must try to reinvent themselves in response to competition and technological change. Technology can and does impact on both the products made and the processes that make them, often with dramatic effect. On top of that governments will influence how easily it is for businesses to respond by their tax, subsidy and regulatory policies.

    For London, and the City in particular, I would cite two events that demonstrate the effect of government actions on its fortunes. The first was a tax change in the USA, c1975, which encouraged FX traders to relocate to London to trade dollars, resulting in the creation of the euro-dollar market. The second was the Big Bang a decade later and the deregulation that went with it. A whole host of other businesses then evolved to serve the city, turbo-charged by the IT revolution.

    Outside London similar dramatic changes were often only possible for businesses able to startup on greenfield sites with new, carefully selected workforces. I would put the new manufacturing operations of Nissan, Toyota and Honda in that category.

    The lessons from this are clear. Taxes and regulations have a profound influence on the ability and willingness of businesses to invest. It is unfortunate for the UK that many in the political class fail to understand this. Certainly this coalition government, by its words and deeds, does not understand it. Nor does the opposition. On present policies there will be no recovery, only stagnation and decline.

  14. JimF
    Posted April 29, 2012 at 9:22 am | Permalink

    Good to see Princess Beatrice adding to our GDP by starting up a high-tech Company on a shoestring in a northern Enterprise Zone

    Oh, I misread that, it says “working behind the desk of a City asset management company.” Can’t believe that!

  15. Posted April 29, 2012 at 9:55 am | Permalink

    Yet the provinces weren’t always poorer. Think of East Anglia during the wool-boom and northern England when we had industry there. Those areas lost their competitive edge but can’t just keep on excusing themselves and expecting subsidy. They need to pull their weight and stop relying on hard-working London, where housing is expensive and the environment brutal. We Londoners deserve our wealth, but provincial people don’t.

    • BernieInPipewell
      Posted April 29, 2012 at 1:16 pm | Permalink

      Incoming

  16. Lindsay McDougall
    Posted April 29, 2012 at 9:58 am | Permalink

    You haven’t discussed the fear factor, presumably because it is not a “nice thing” to do. In London and the Home Counties you cannot survive on benefits because of the cost of accommodation. In many other parts of the country you can. There is another thing – because most public sector wage and salary scales are negotiated nationally rather than regionally, some of the best standards of living in the country are experienced by doctors and by Social Services employees above a certain level.

    So what has emerged in these poorer areas is this symbiotic relationship between those who are ‘caring’ and those who are being ‘cared for’. As far as we in the south east are concerned though, the net effect is parasitic because we have to fund the circus and it doesn’t produce economic output. The secret to getting the poorer areas to produce more useful output (and don’t forget that we are talking about most of the UK north west of the line from the Severn to the Wash) is to pitch public sector salaries and benefits at lower levels than in London and the Home Counties.

    • uanime5
      Posted April 29, 2012 at 5:46 pm | Permalink

      You haven’t though this through.

      Lower public sector salaries in these regions will just encourage the best people to move to London and the Home Counties. This brain drain will condemn everywhere outside London and the Home Counties to substandard services, resulting in worse education and fewer jobs. In short your plan will cause everywhere outside of London and the Home Counties to decline, increasing how much these regions cost London and the Home Counties.

      Also reducing benefits will just lead to more people moving to London and the Home Counties to claim benefits. It won’t encourage them to work.

      • Sebastian Weetabix
        Posted April 30, 2012 at 2:38 pm | Permalink

        Rubbish. Being on a “national” wage but living in (say) West Yorkshire gives you a very nice standard of living, much higher than the same salary gets you in the home counties, because housing costs are so high. The London weighting applied by the civil service is a rather piss-poor joke.

        • Bazman
          Posted April 30, 2012 at 5:04 pm | Permalink

          The problem being in finding a job that pays ‘national wage’ or a job for that matter in West Yorkshire or the North East and many parts of the North West. Have a little think as to why house prices are higher in many parts of the country and then get back to us Sebastian. It’s not because of the nice views.

      • Lindsay McDougall
        Posted April 30, 2012 at 7:41 pm | Permalink

        It is you who hasn’t thought it through. They won’t be able to move to London and the Home Counties since property prices are prohibitive to them. The differential is huge. And because people can’t get finance to buy in London, they have to rent; London rents are through the roof.

        Even now, some 4 to 5 years after the peak of the boom, national average house prices are higher relative to national average earnings than is healthy. If we really want growth in the UK’s productive economy and social mobility WITHIN the UK, then a continuing decline in real house prices will help. Don’t worry about the builders; if property prices decline, land prices will follow them down.

  17. Bazman
    Posted April 29, 2012 at 10:28 am | Permalink

    The government seems to be constantly building something in London so this helps London and the surrounding towns. It’s amazing the amount of people and resources required to build some thing like the Olympic park. Jobs for everyone. The roads and trains tend to be a lot better than the north and it is easy and fast to move around if you travel at off peak times. I experience this quite often as I drive a van or lorry 2-3 time a week. Living in the geographical centre of the country has many advantages with the cities and towns being quite near and many routes available. Clever use of a sat nav and paper map is the key. If you live in a geographically isolated town on the end of a peninsula then you will never be in such an employable position, work is easy to find around here because of this. Housing cheaper than London but the pay is the same. Getting much more expensive now the secrets out.
    Another advantage is that some of the Towns like the one I live in have been mysteriously ignored for man years by government and private business and are now being developed as London gets to big and expensive. I often puzzled why large areas near to the A1 where wasteland. Not now. It can take longer to cross London than get to London from here and if anyone thinks I am buying a coffee and a croissant for the thick end tenner as I do they are dreaming. Lidl energy drink. 35p. Same taste and effect. Ram it.
    .

    • stred
      Posted April 30, 2012 at 11:32 am | Permalink

      Is it something to do with sheep?

      • Bazman
        Posted April 30, 2012 at 5:05 pm | Permalink

        I saw a sheep with a black face once.

        • stred
          Posted May 1, 2012 at 12:01 pm | Permalink

          It’s always nice when you can see their face.

  18. Nick
    Posted April 29, 2012 at 10:57 am | Permalink

    It’s alright John. We’ve got the message. You don’t want successful businesses in the UK.

    High axes on smoking, drink and fuel are there to stop us smoking, drinking and driving.

    We’ve worked out that high taxes are there to stop us working

  19. Nick
    Posted April 29, 2012 at 11:00 am | Permalink

    There is a simple solution.

    Ever region gets the same pro-rata share of the tax take. That’s it. Easy to administer. Look up in the census the number of people. Get the tax revenue. Send a cheque to each region for the per head allowance.

    No borrowing. Cut your cloth to meet the cash. If you want to do more, become more efficient.

    However, you don’t get that. You just rack up the price, and force people with threats, or just take the money. Where is our vote on taxation?

  20. NickW
    Posted April 29, 2012 at 11:13 am | Permalink

    It is a global problem that quantum leaps in consumer technology and the technology of manufacturing, combined with competitive pressures, have destroyed millions of unskilled jobs and will continue to leave huge swathes of the global population without work.

    The challenge for politicians is to find a way to incorporate ALL the levels of skill and ability into the productive employment sector.

    Even if those at the lower skill levels succeed in only supporting themselves, (rather than making a net contribution to society), it will be a huge improvement on the current dependency.

    A little bit of blue sky thinking is needed.

    Like for example giving those on benefits small responsibilities for the maintenance of infrastructure; giving them the personal responsibility for maintaining, (e.g) their local bus shelter, telephone box, car park, park, playground or whatever. The allocation of personal responsibility will ensure the maintenance of self esteem, self confidence and pride and provide a reference structure to enable re-entry to the work place.

    Those currently employed in infrastructure maintenance will continue to be employed but their workload would change to assume managerial responsibility for their many helpers.

    Labour and the the BBC would undoubtedly oppose any such attempt to find a solution to a very obvious problem. We will wait until the end of time for them to provide their own practicable suggestions.

    • NickW
      Posted April 29, 2012 at 11:47 am | Permalink

      On the subject of benefit dependency; the obvious question about incapacity benefit is this.

      “To what extent is the rise in Incapacity Benefit costs due to failings in the NHS?”

      As a monopoly provider the NHS is responsible for the Nation’s health. Disease processes are ALWAYS progressive, meaning that delays in diagnosis and treatment very often result in permanent damage to tissues and eventual incapacity.

      Untreated retinal detachment or glaucoma will always result in blindness.

      Untreated joint problems will more often than not lead to permanent joint damage and incapacity.

      If Independent assessors are being employed to review incapacity claimants, they should also be asked to identify those cases where incapacity has been caused by “sub-optimal” health care. ( I have been careful in my choice of words).

      Ministers need information as a starting point. It may be that the NHS needs to pay greater attention to prioritising those who need prompt treatment to keep them in the workplace, and part of that process might require the transfer of the cost of Incapacity benefit incurred due to NHS failures to the health budget at the appropriate level.

      • uanime5
        Posted April 29, 2012 at 5:57 pm | Permalink

        What happens if the person didn’t seek medical help or there wasn’t any treatment the NHS could offer to prevent the person becoming incapacitated? Will the NHS still be blamed?

        What happens if a GP misdiagnoses a patient’s illness, then moves to another practice? Should the original practice have their budget docked or the new practice?

    • uanime5
      Posted April 29, 2012 at 5:53 pm | Permalink

      Slave labour isn’t the solution to any problem. If you want people to maintenance the infrastructure you need to train them and give them a minimum wage job. People won’t make the extra effort without extra payment.

      Also your belief that maintaining a bus shelter will make people more employable shows you lack even a basic understanding of why people are unemployed. If a person lacks the skills to do the job they won’t get employed and they only acquire these skills by being trained, not by looking after a bus shelter. Free re-training would be far more useful than the menial labour you’re proposing.

  21. Denis Cooper
    Posted April 29, 2012 at 12:04 pm | Permalink

    I’ve remarked in the past that if you look at the distribution of Tory-held seats across the UK then they more or less fit into Roman Britain, with London as a most notable exception.

    Reflecting this historical parallel the Conservative party could even rename itself the Roman Party, not in the religious sense but because its strength now lies primarily in the heartlands of Roman Britain, those areas of the country once most securely dominated by the Roman Empire and most Romanised, with the effective frontier for the present Roman Party very roughly marked out by joining the three permanent legionary bases at York, Chester and Caerleon.

    http://www.associationromanarchaeology.org/militarysites.htm

    And of course that would not be entirely inappropriate, insofar as it was the Conservative party which forced the country into what its founders hoped would be the modern equivalent of the Roman Empire when they drew up the 1957 Treaty of Rome.

    Obviously this broad brush analogy can’t be pushed too far, but whereas not so long ago the United Kingdom was the centre of a worldwide British Empire, and parts of the country which had never been thoroughly absorbed into the Roman Empire could and did participate in that sea-linked global Empire just as fully and profitably as the parts which had been Romanised, now we have been dragged into a newly arisen continental empire, albeit a “non-imperial empire” according to Barroso:

    http://www.youtube.com/watch?v=c2Ralocq9uE

    All roads now lead to Brussels, rather than to Rome, but the same geographical factors which worked against absorption into the Roman Empire of those parts of the country most remote from the continent still operate against restoring them to self-sustaining prosperity within the new continental empire.

    • APL
      Posted April 30, 2012 at 11:36 am | Permalink

      Denis Cooper: “Tory-held seats across the UK then they more or less fit into Roman Britain ..”

      Equally, Norman England. Which would explain the determination of the English ruling class to merge with ‘EUrope’.

  22. Bill
    Posted April 29, 2012 at 12:25 pm | Permalink

    Because if your business does not do well in this economy there is a good chance you may have a SAM fired at you from some rooftop in East London .

  23. Mactheknife
    Posted April 29, 2012 at 12:33 pm | Permalink

    Firstly as a Conservative voting midlander, which I guess for this blog would constitute a northerner as I’m north of Watford, lets set one thing straight. John, your comments on northern indutries and the Thatcher government are disingenuous to say the least. Thatcher set our to destroy the unions and targeted the NUM and Scargill. The Met police were used as a blunt force instrument to do this. (Allegations about police behaviour and Ministerial intentions not backed up by evidence-ed)
    Now to the central point. I live in what was a “blue collar” town with industry and manufacturing as its core (mining, chemicals, steel, light and heavy engineering industry). As recent local authority report stated that over 25,000 direct and indirect jobs had been lost in those industries since the mid eighties. As a consequence we have a highly skilled engineering workforce many of whom are now shelf stackers and trolley attendants at local supermarkets. As an economist what would you make of this waste of resources ?

    These industries didn’t just close down in many cases they were bought out by foreign competitor companies and then closed down, whilst governments of all pursuasions just sat there and let it happen.

    The myth is that we are all paid high salaries as those in the south and this is preventing manufacturing returning. This is not true. The wage costs (even fully burdened rates) would be far less than the south. Operational costs such as office / factory rents, local services etc would be far less than the south. Costs for empolyees would be lower such as housing, transport, cost of living etc. So why do business start ups or expansions still head south ?

    For me the answer has to be government policy. We dashed head long into services, mainly financial services in London and the south, and let manufacturing die in the regions. Governments of all pursuaions did this and now look where we are as a country. This was so shortsighted its unbelievable. Current “green” commitments are killing any sort of attemp to bring manufacturing back as our energy costs are significantly higher than our EU counterparts and the US. Despite claiming they want to bring manaufacturing back to the UK, we have a situation of Bombardier in Derby which lost a major government contract which was given to the Germans. Do you think Germany , France or Italy would have done that ? Absolutely not I can tell you because I now work in international business and I see everyday the little dodges other governements make around EU laws to enable their country to be successful. Do you think Germany’s economy is strong just because of the Euro ? If you do you are so out of touch with whats going on.

    Secondly if you look major infrastructure investment it always happens around London and the South – hell you’re even talking about putting an airport in the middle of the Thames estuary. If this was suggested for any other region in the UK it would be laughed at and “uneconomic”, “not viable”, “pipe dream” etc by politicians. But hey…this is for London so no problem !

    Liebour tried to outsource civil service jobs to the regions, but there is no economic product of this work. Plus most jobs went to specific areas of the north and the vast majority of areas never saw any of these jobs. Another myth exploded.

    If we look at whats happening in the US, the Shale Gas finds are driving low energy costs and manufacturing is returning to the US from low cost centres in Asia-Pac and Latin America. I was talking recently with one US CEO and his next decision was whether to close his Thailand factory and re-open his Ohio one !!

    Will our government take note – not on you life they will !

    In the meantime investment will pour into London and the south, the midlands and north will be marginalised and evermore dependent on the state for subsidies. If you want an example of this think Olympics – outside London who gives a toss ?

    It needs massive change in priorities from the government in all areas to even come close to addressing this divide.

    • NickW
      Posted April 29, 2012 at 5:17 pm | Permalink

      Government action has helped establish Nissan factories in Sunderland and Toyota in Derbyshire.

      Honda successfully manufactures North of Watford, Jaguar Land Rover are doing very well under Tata in the midlands. The business is thriving under a new and more competent management.

      JCB is a world class manufacturer based in the midlands.

      I thought that it was Scargill who was determined to pick a fight with Thatcher, and not the other way round. The Union was never even properly balloted over strike action.

      The Unions start plotting how to destroy a Conservative Government the minute it is elected.

      Perhaps we need to look closer at our successes and better understand what has made them successful.

      Many thousands of steel and shipbuilding jobs have disappeared from Europe, none of which can be blamed on Thatcher.

      • Mactheknife
        Posted April 29, 2012 at 9:21 pm | Permalink

        John

        I was there and I saw events with my own eyes. Or maybe I can introduce you a friend who still bears the scars. Please DO NOT delete comments you don’t like.

        Reply: I do not delete comments I dislike! I do delete comments making allegations about the Met when there is no evidence given to support the allegations.

      • Mactheknife
        Posted April 29, 2012 at 9:27 pm | Permalink

        I’m not defending Scargill, and I told him what I think of him to his face last year.

        Yes there is manufacturing still in the UK, but you pick out some examples, when my point is that it is a fraction of what it used to be and unlike our EU partners we don’t protect what little we have left.

        Did Germany let is manufacturing industries go ? No they didn’t. Here’s the irononic part – they kept their mines open and now are building 20 new coal fired power stations – They drive “green” policies but junk them when they want to, yet we are still full of this greenwash nonense and we are sat on billions of tonnes of coal.

        • APL
          Posted April 30, 2012 at 11:25 am | Permalink

          Macktheknife: “unlike our EU partners we don’t protect what little we have left. ”

          The EU always has been a protectionist racket for France. The Maginot line was the first attempt, the second is to bind France and Germany. To do that the French have to neutralize the English as our historical role in Europe has been to hold the balance of power.

          Problem with protectionism is, that it assumes the Politicians, for it is they that implement the protectionist policies, know best.

          The cardinal lesson of the last sixty years if nothing else, is that the politicians and their civil service know ‘Jack S**t’.

          They have taken us down the blind alley of high taxes, high subsidies and big state and all encompassing Welfare.

          What we need to be a competitive modern economy is good education, low taxes and small state. It is almost impossible to get there from here.

      • Lindsay McDougall
        Posted April 30, 2012 at 8:06 pm | Permalink

        The miner’s strike was very cleverly orchestrated by Nigel Lawson in his time as Energy Minister. Throughout the winter he paid huge bonuses to miners to produce coal for which there was no market; it was stockpiled at the pithead. Then he deliberately provoked the miners into calling a strike in the Spring, the worst possible time from the NUM’s point of view; anybody with less of an ego than Scargill would have waited until the next winter. I was perfectly happy with Nigel Lawson’s conduct, no doubt supported by She Who Must Be Obeyed. Scargill had twice humiliated a UK government; it wasn’t going to happen a third time.

        I can well remember the time. I had just returned from working for two and a half years in South Africa and in May 1984 was enjoying my first pub lunch in a while. Some asked “What do you think about the miners’ strike?” Immediately afterwards came one of those co-incidences that occasionally happen in social gatherings: when I replied (words to teh effect that Scargill had to be defeated-ed) no-one else was talking. After that, you could have heard a pin drop.

        Reply: No, it was not orchestrated. The government did not want a miners’ strike. It was Mr Scargill’s strange decision to call one in the spring rathe than the autumn, which made winning it more difficult for him.

    • oap
      Posted April 29, 2012 at 5:48 pm | Permalink

      The coalition`s energy policy, with its carbon taxes, will kill any possibility of an industrial renaissance. The Energy Minister was on the BBC`s world at one spouting the usual nonsense – even though he had been preceded by a spokeswoman from the RS of Engineering who stated that the plan to “decarbonise” the economy was not a practical, engineering proposition. It was pointed out that those MPs who had voted the Climate Change Act did not have a clue how it was to be achieved, and they still do not have a clue.

      On the sell out of businesses, look no further than the tax policies of successive governments which penalise success. For many owners the sensible option was to sell up, emigrate and enjoy the proceeds free of excessive UK taxation. If you do the sums it will show that a foreign owner is in a better position than a UK owner to make the most of investing in the UK.

      The “led by donkeys” jibe could well be applied the UK electorate.

    • uanime5
      Posted April 29, 2012 at 6:03 pm | Permalink

      So are the labour and energy costs in Ohio cheaper than in Thailand? If not then this CEO is setting up his factory in Ohio for some other reason.

      • Mactheknife
        Posted April 29, 2012 at 9:19 pm | Permalink

        There are many factors, but his infrastructure was still there mothballed and with Shales gas bringing his energy costs down its one of the factors that made him rethink at least.

      • Winston Smith
        Posted April 30, 2012 at 10:47 am | Permalink

        Wages are rising in Thailand. It is not now the cheap place it once was. It also lacks infrastructure. Ohio is in the centre of the World’s richest and largest market.

  24. Gary
    Posted April 29, 2012 at 12:42 pm | Permalink

    Because the fractional reserve banking system sucks all the money out of the rest of the economy. This system is centred in London.

  25. David Saunders
    Posted April 29, 2012 at 12:53 pm | Permalink

    This is an interesting analysis of fiscal tranfers and, if the euro is to survicve, is what will need to happen in the EU with Germany and others making fiscal transfers to the poorer southern countries. I cannot see national interests within the EU will permit this to happen, unlike in the UK where there is a common acceptance of fiscal transfers to Scotland, Wales and the regions from London and the South East.

  26. Alte Fritz
    Posted April 29, 2012 at 1:02 pm | Permalink

    Those of us with longer memories bear in mind that even before Britannia joined the Roman Empire, common currency and all, (pursuant to the Lex civitatium Romae) the area around London, especially Sussex and Kent were well ahead of the rest of the country in wealth. Dare even a committed Eurosceptic think this has anything to do with proximity to Europe?

    Historically, the north, or, at least, my bit of it did comparatively best when it had no governmental regulation, and combined enterprise and innovation.

  27. Denis Cooper
    Posted April 29, 2012 at 1:25 pm | Permalink

    My second historical meandering involves looking at the geological map of Britain and the distribution of mineral resources, above all else coal.

    The industrial revolution and the overall upsurge in British prosperity and economic power was of course fuelled by coal, as the energy source to replace diminishing supplies of wood; the development of the coal-fired steam engine was driven originally by the need to pump out mines, not only but primarily coal mines; refined coal-fired steam engines could then be used for the transport of freight by railways as a better alternative to road transport and canals; the growth of the iron and steel industry depended on the increased and cheaper supplies of coal thus made available; iron and steel was the foundation of the heavy engineering industries including the building of ships and bridges, and looping back to the construction of railways, firstly in Britain but then across the Empire; coal-fired steam engines powered the textile industries among many others, including the chemical industry, once again looping back in this case to the needs of the textile industries, and so on.

    By an unfortunate coincidence of geology and geography, almost all of the useful coal deposits were (and are) in parts of the country which are remote from the continent, and which are therefore less well placed to prosper in the context of a continental rather than a global empire.

    It’s something of an uphill struggle for the government to persuade companies to set up or expand outside London and its immediate environs, for example the Thames Valley, and as far as I can see the Labour party which had had so much to say about the “north south divide” before the 1997 general election more or less gave up that struggle after a few years in government.

    Obviously you don’t narrow that “north south divide” by approving a plan for the economy of the South East euro-region to continue to grow more quickly than the average for the country as a whole, as the Labour government did; what you might do is increase tax revenues from the Tory dominated south east so that you can maintain and increase your subsidies to Labour dominated parts of the country, parts which are being allowed to lag further and further behind in terms of their private sector economies.

  28. malcolm whitmore
    Posted April 29, 2012 at 1:43 pm | Permalink

    I am surprised that the cause of our current loss of business confidence is not mentioned. This country suffered the world’s biggest financial loss in per head of population because of the City of London gambling our money on illegal and risky lending practices. For years these activities have sustained the bubble of London’s wealth enabling London to appear to be successful in relation to the failing provinces. A further effect is that the value of the pound has been kept at an unsustainably high value to suit the City at the expense of any business needing to export competitive goods. Inevitably as the financial world eliminates tax avoidance and evasion the City will lose its illusory aura of superiority and we will need to invest in education and infrastructure like our friends in Germany and Kores. One thing that the Government must do is to ensure that quantitive easing is directed to long term UK projects not to propping up our failed financial giants of UK banks with their phony asset lists.

  29. outsider
    Posted April 29, 2012 at 2:14 pm | Permalink

    Dear Mr Redwood, You make some very important points.
    When I was 4, we moved five miles West from one of the established London suburbs down one of the interwar arterial roads. The space between was largely occupied by a series of then-modern factories: I immediately recall the Macfarlane Laing biscuit works, Gillette razor blades, Macleans toothpaste, Pyrene fire extinguishers, Coty cosmetics, Parke Davis pharmaceuticals, a big Reed corrugated cardboard plant on the canal and the enormous Firestone tyre factory with its beautiful art deco facade. They are all long gone and demolished, albeit the toothpaste factory has been replaced by Glaxo’s world headquarters. But the area is much more prosperous (judging by relative house prices) rather than less.
    Nothing to do with banking or financial services, more to do with Heathrow a few miles further down the road. It is not the closure of old industries that hurts but the lack of replacements and particularly the lack of new growth points that create magnets for new jobs and added value.
    This is where we need an “industrial strategy”, however much you may loathe the term. It is now much harder because City investment banks casually sold so much of British industry over two decades to foreign companies whose main interests naturally lie elsewhere. So we are unduly dependent on attracting foreign investment. There are very few British industrial companies of any scale to do the job. We cannot even build a power station, let alone an atomic one.
    Many parts of the North and Midlands have made the continuing transition from old to new but others have not, particularly the smaller mill, mining and one factory towns. Some of the worst problems are where immigrants were recruited as cheap labour to shore up dying industries and left stranded when they closed a few years later anyway.
    I am also glad that you address the myth over coal. I followed the Scargill battle closely and it was clear to me that Mrs Thatcher’s government and particularly Mr MacGregor were trying to save the British coal industry, not to destroy it. It was during the Major government, ironically under Lord Heseltine, that so much of the industry was shut down under irresponsible and foolish short-term perspectives.

    • alan jutson
      Posted April 29, 2012 at 5:36 pm | Permalink

      Outsider

      The industrial area you describe on the Great West Road was called the golden mile at the time (although much nearter to 3 miles long) it employed tens of thousands of workers, including my parents, and indeed myself when serving my engineering apprenticeship.

      It also had Sperry Gyroscope, Janzen, Smiths crisps, Lucozade, Rank Pullen, Booths Gin, and Beechams.

      Now it is nearly all offices, other than some major car sales showrooms, the area being almost devoid of any manufacturing.

      Many of the huge industrial manufacturing businesses moved out of this area to pastures anew decades ago, not sure if it was to government assisted areas, as I was much younger, and politics held no real interest at the time.

      Can only comment that government assisted areas do not automatically create NEW jobs when Companies move into them, as those that were employed in original areas, lost theirs.

      House prices are high because of its excellent transport links to London (only 8 miles) as well as Heathrow.

      Shame the old football club is not in the Premier League !.

      • outsider
        Posted April 30, 2012 at 12:30 am | Permalink

        Dear Alan Jutson,
        Ah yes, I should not have forgotten the very distinctive Smiths Crisps or Sperry.

        The same story could be told of many other places. New industries come in, they get old, they die or move on to be replaced by other businesses. It helps to be the capital. So far as I can tell, the prime regional centres of Birmingham, Manchester, Leeds, Newcastle and Bristol also have sufficient importance and diversity to be able to constantly regenerate their economies, albeit sometimes with a hiatus.

        But there are some great English cities such as Sheffield, Stoke and Bradford, along with many more big towns, that seem to have lost their raisons d’etre and not acquired new ones. That is where voters, civic leaders and central government need to get together to ask themselves why this place would exist if it were not already there and see if they can attract businesses and infrastructure projects that will form future growth hubs. And it will now usually have to be foreign investment. Could one even build a house today with materials made by British companies?

        Sadly, Brentford FC has not moved on like the area in the past 50 years. Unless Griffin Park is a lot less dismal than when I attended, it is not hard to see why. Merger with QPR on a new ground perhaps?

        • alan jutson
          Posted April 30, 2012 at 7:23 am | Permalink

          Outsider

          Last time I visited Griffin Park, about 5 years ago, it was very grim indeed.

          Talk of joining with QPR with a “new ground” share scheme has been going on for about 40 years.
          Not much chance I would suggest whilst QPR are flying high in the Premiership, although for how much longer ?

          Agree with you comment about other cities, visited the potteries a couple of years ago !!!!!!!
          All that talent (nearly all) now gone abroad.

  30. James Reade
    Posted April 29, 2012 at 2:18 pm | Permalink

    Generally spot on John, you address the causality issue which is good, and mention the single currency, and seem happy to accept there aren’t simple answers – shame many of the commenters on here don’t share that approach and launch into ideological attacks on the left as soon as they can.

    I don’t think that the single currency thing ought to be an issue though. If you don’t allow devaluation, then what must happen is that individual prices ought to adjust to relative levels of demand and supply in various regions – if they are allowed to vary. Taking a very simple, neo-classical economic approach, the question is then why prices haven’t fully adjusted? Setting up production in the North West still doesn’t seem to be economically viable without political sweeteners like Enterprise Zones (which themselves must be distortionary).

    Hopefully allowing a bit more flexibility in the education system in the regions (my suspicion is that the University of Manchester vs the two that previously existed will help in generating a more internationally renowned university which ought to start delivering benefits in time) will help enable the region to produce the kind of workers that attract industry to locate there.

  31. merlin
    Posted April 29, 2012 at 2:19 pm | Permalink

    The whole culture of Uk society is a something for nothing culture and the state will provide so all we have to do is sit back and receive everything for free. I honestly believe that this starts at a young age and continues into old age. The average Uk cictizen has been brainwashed to believe that the state will continue to look after them throughout their whole life and they only have to do the minimum to survive. The phrase that I have continually heard repeated in the last few years which had its origin under Bliar was “It’s not me guv, in other words people do not take resposibility for their own actions and it is always somebody else’s fault.This is what happens when all facilities such as health and education are free, it creates a mentality of us and them which is very difficult to break. If parents and children made an actual physical contribution to their education or health they would then realize that these services actualy cost money. Obviously I realize that you pay for these services through your taxes but I would guess the majority of people do think they are free.The only way to make the provinces more competitive with London is foster a more individualistic attitude in people or to put it another way a more entrereneurial mind set in children. Unfortunately we live in a socialist country where the dead hand of the state numbs individuals brains and will power, but ultimately the welfare state will die, it will not be affordable, and this will hopefully release the very best in people and many more small and medium sized businesses will be created. Necessity is the mother of invention.

  32. Posted April 29, 2012 at 2:27 pm | Permalink

    If transfer payments are necessary I suggest that they should go directly into cutting business costs. Cutting business rates in below average areas would be easy; cutting employer’s national insurance in such areas almost equally so; regional corporation tax rates would require more finessing but are not impossible. These would work.

    Transfer payments which go to paying for more overgovernment than the area can really afford does not work. The net effect of government on the economy is negative, because regulation is so destructive. thus the net efect of transfer payments made to government is likely to be negative. In the short term it may help buy off “socialist” councils but in the long term, as with paying any Danegeld, it merely encourages such a dependency culture.

    While you are being pleased at the success of London may I point out that virtually every country in the world has a capital city wealthier than its hinterland. We can possibly exclude Berlin, because it relatively recently became capital/;Rome may be poorer than Italy as a whole because it is in the south but is certainly richer than its nearby hinterland/ the same applies to Bejing which is not on the wealthy coast like Shanghai, but these partial exceptions merely prove the general trend. This merely suggests that having the top bureaucrats there tends to draw spending there and certainly draws the HQs of large companies, who find a close relationship with government profitable. That London fits the trend does not make them more entrepreneurial than the trend.

    • Winston Smith
      Posted April 30, 2012 at 10:54 am | Permalink

      I can think of no other major nation with a so large and centralised City as the UK.

  33. Andrew
    Posted April 29, 2012 at 2:46 pm | Permalink

    JR-There is the point that though that while with the coming of the 1979 Thatcher government everyone knew that many “supported ” or “subsidised ” (by various means) industries and businesses of all sorts would have to sink or swim in the face of competition, -on that occasion there was some idea as to where the new jobs could, –and did , –come from. The arrival “Silicon Chips”, word processors, etc, –were at the time feared almost as much as Mrs Thatcher, (!) — but the UK economy did restructure, rebuild, and modernise. Your own Thames Valley /M4 Corridor constituency is testimony to this.

    Where are the new jobs coming from today ?

    The Government seem clueless, or at best silent on this.

    This not asking , as the refrain goes , “Politicians and Civil Servants to second guess business”, or even asking for an Industrial Strategy, –merely some indication , and some sense of hope for the future.

    • Posted April 30, 2012 at 10:31 am | Permalink

      The government are worse than silent on this question. All the westminster parties repeat the mantra that future employment will depend on “green” jobs. Since they in turn depend on subsidy and a recent report showed the necessary subsidy destroys 3.7 jobs for every one creates the imbecility of those in charge is obvious.

      Most politicians did not see the dot.com tevolutionn coming ahead of time either. If the market is allowed to operate the jobs will be produced. I would suggest that shale gas, nuclear power, space industrialisation, GM are all industries poised to create jobs and wealth – and all industries the government is, to a greater or lesser extent, preventing here.

  34. Acorn
    Posted April 29, 2012 at 3:28 pm | Permalink

    JR; would you please stop blocking lifelogic’s comments. At my time of posting there are only five, no, sorry six, make that seven posts to day. You are obviously deleting many more. Stop it.

    • Jim J
      Posted April 29, 2012 at 5:37 pm | Permalink

      LL honestly if you have so much to say please go off and start your own blog, you know your readership cannot wait for you to do so!

  35. Matthew
    Posted April 29, 2012 at 4:02 pm | Permalink

    London houses most of the UK‘s financial services industry. It further benefits from all of the other service industries and infrastructure that supports it.

    Many of the outlying regions of the UK were decimated during the Thatcher years as the old loss making subsidised industries were closed down. Many areas in the North resemble a wasteland and survive on subsidy from the prosperous south east.
    Compare to Germany that has a fine infrastructure of world class engineering and development throughout the country. The foreign car plants here are good news for the UK economy, but as the late John Harvey Jones said, they are not comparable to the German car plants, where all the clever design and development is done within the country.
    Mr Cameron has made the comment about how the UK exports more to Eire than to China, India and Brazil combined – the answer is that, with a few notable exceptions, we don’t have the products that they want.
    Why do so many of the top engineering graduates in the UK make careers in the city or in accountancy?
    We don’t have enough high class engineering, Germany, and Italy even the expensive Finland have a prosperous ship building industry.
    It’s all very well training apprentices, but then the problem comes when you don’t have an infrastructure to place them in.
    It needs government intervention on several levels to generate a growth in our infrastructure.

    Reply: As I have shown, de-industrialisation went on for years before Thatcher, and continued a pace under Borwn and Blair. The new car plants are a bgi help, and include design and engineering work as well as assembly. The UK holds many of the best designers of fast cars for Formula 1.

    • Barry
      Posted April 29, 2012 at 5:50 pm | Permalink

      Unlike other successful industrial nations our industrial policy from both parties has been to have no policy.

    • Matthew
      Posted April 29, 2012 at 10:07 pm | Permalink

      Agree that the diminution in the base has happened through all governments and Mrs Thatcher took some hard decisions. Agree that the UK has some top class engineers, top class companies and some of the best engineering faculties in the world.
      The foreign car plants in the UK do employ designers, but not on the scale or the calibre of the German car plants. (BMW – their design centre is as big as the Nissan site, packed with PHDs)The design here is not generally, research and conceptualisation, but more industrial engineering design, programming production machinery, feasibility assessments and value engineering. (Not many PhDs there)
      The problem is not one of excellence but one of scale, in the north the base industrial is depleted, the huge negative balance of payments and unemployment are a function of the base being lost.
      As usual we wait until problems are unfixable before tackling them.

  36. Barry
    Posted April 29, 2012 at 4:52 pm | Permalink

    This is not a recent phenomenon. In my experience, over the past 40 years the pace of life (including work) in London has been greater than all points north, south, west and east. Reasons are difficult to nail down other than people who live away from the hectic life of London want a less hectic life. Our operation in Dorset was called the treacle factory. In Liverpool it was best to be well clear of the exit at 4.59pm to avoid being crushed in the race to leave work.

    The London buzz for work has exceptions. Not unusual to see the start of the day in Public Sector buildings with lights going on well after 9 am. 4 pm has Waterloo station with Public Sector employees avoiding the later rush. One aspect of the Government departments move out of London will be the danger of the increase the difference in work ethic between London and the rest.

    Injecting cash into the less productive parts of the country will not improve work ethic nor achieve sustainable growth. There needs to be a reason for investment rather than dishing out “aid”. Accept for the moment that there are differences between London and the rest rather like there are regional differences in all nations.

    It may not always be London that is so different. The development of information based industries and the lack of development and increasing cost of the transport infrastructure will lead to more distributed workplaces in order to survive. But this distribution will not know national boundaries. The trick is to spend our investment wisely (not “aid”) to enable maximal development in the UK and engender the London pace of life and work ethic to all regions. A key challenge in this is having a workforce with the education and skills and therein lies our major problem.

  37. uanime5
    Posted April 29, 2012 at 5:06 pm | Permalink

    I suspect that having a large population, the UK Parliament, good infrastructure, and a long history of wealthy people living in this city has encouraged business to set up in London rather than other parts of the UK.

    Given that in most countries the largest city is also the nation’s capital it should be no surprise that London follows this trend.

  38. Electro-Kevin
    Posted April 29, 2012 at 5:11 pm | Permalink

    Quite clearly we’ve put all of our eggs in one basket in London.

    Privatisations did not factor in the true cost to the taxpayer of their ‘cheaper’ alternatives because the unemployment and social costs weren’t taken into account on customers’ (taxpayers) utility bills. Now we’re dependent on suppliers which are – ironically – NATIONALISED but under foreign flags.

    We were told that it was OK that British companies were being bought by foreign investors and outsourced but it wasn’t, was it. Off went the jobs. Off went the factories. Off went the revenues.

    We were told that, because of globalisation, it was right to outsources jobs that school leavers with GCSEs could take but it wasn’t, was it. Now they need degrees to take office jobs – some unpaid, of course.

    One might deduce (from the fact that our regions need to be carried) that the country is over-populated. So why do we import more people ?

    So what of the banks ? Our unionised industries needed sorting out for sure, but contrast the difference in treatment of the miners with the bankers who are nationalised and bailed out. The mega bonuses continue to role in at Barclays.

    Now we have the benefit of hindsight we can see that Britain has been dreadfully mismanaged over the past 40 years.

    Nothing exemplifies our unique problem better than the utter contempt with which our troops are treated by contrast to those of the Americans, the Canadians and the Autralians.

    There’s only one conclusion:

    For some unkown reason the ruling upper-middle class loathes its own working class.

  39. AJAX
    Posted April 29, 2012 at 6:14 pm | Permalink

    London outperforms the rest of England, & more widely the UK, because it houses the Square Mile, & also London has been the governing, mercantile centre of the globe since the 17th Century, & in consequence there’s a deep matrix of business & political cultural influence in place there that it takes many years to construct & these points don’t move easily once they’re established. Washington & New York are comparative new comers upon the scene & haven’t managed to replace it, and appear to be fading now a little

    With the English regions lacking this they’ve suffered in the way that Joseph Chamberlain (the son of a shoe manufacturer, & apprencticed in manufacturing & subsequently based in Birmingham, not the global city of London) warned they would if England didn’t adopt a Mercantilist policy economically & pursued Free Tradism instead

    England’s workers were continually over-powered in scale of production by the USA in the 1st half of the 20th Century, or under-cut in wage labor costs by competitor nations in the 2nd half thru the USA’s self-destructive policy of the industrialisation of the Orient, assisted in the process by its political class willingly standing by watching the off shoring its productive capacity (i.e. jobs) & the purchase in return of the lower cost created goods in imports by way of return traffic, thereby creating a 2nd export along with its jobs of its wealth

    Chamberlain warned England what would happen if it contiuned to pursue a Free Tradist policy at this point in history & not Mercantilism, his analysis has been proved right still stands as a sign post for England to heed

    As for all the Socialist spending programmes which this post ably details, if governments spending taxes & civil servants & politicians directing it created the Wealth of Nations, the Soviet Union would still be around & we’d all be trying to emigrate there to live in the land of plenty.

    • Barry
      Posted April 29, 2012 at 7:42 pm | Permalink

      Ajax

      I’m afraid your argument does not explain the German, French and even Italian industrial successes. These countries that have had strategies and policies that have protected and developed their industries. Many of their success have taken our lead technologies and succeeded with government backing on the world market. The list of such British failures is very long but just a couple of examples to illustrate. The French lead in space rocketry and nuclear energy are complete lift of British technology which we abandoned. In other areas a number of British high technology companies that successfully sold throughout the world were restricted to UK sales when being acquired by the French. The French part of the company solely exports.

      I have travelled the world on business and there is universal bewilderment with the “British giving it all to the Germans, French and Italians”. The selling of British companies on some foolish notion of obtaining best intentioned investment and that all markets are “free” particularly French and German would be laughable if one were to ignore the consequential tragic decline of British Industry.

      John

      One of the major difference between the British and our Industrial competitors is our unique lack of an Industrial Strategy. I would suggest that you ask for such a strategy. Unfortunately, I don’t think we can do to the French, Germans and Italians what they have done to us…they are not that stupid and from past experience we are not that smart…

      • outsider
        Posted April 30, 2012 at 7:13 pm | Permalink

        Agreed. The difference is that we had, and still have, delusions of grandeur. They knew they were up against it and have to look after their own.

  40. Daniel McKean
    Posted April 29, 2012 at 7:18 pm | Permalink

    Thanks, John Redwood, for your insightful blogging.

    On the slightly (but not entirely) unrelated topic of Thatcher, it is good that you have pointed out that such a decline in British industry existed before she came into office. I would add that many of her reforms were good. Trade union reforms were hugely successful; for saving the country a lot of bother, allowing democracy within unions and liberty for workers on the shop floor, who otherwise would have remained obliged to join a union. Lowering taxes was similarly successful. I’m undecided on the right to buy policy. I suspect it did a lot of good but also some bad.

    Nevertheless, there are two or three things – that spring immediately to mind – which Thatcher has to answer for. Firstly, the taking over of a lot of British industry by foreign companies, which admitedly increased substantially during Blair, but has its roots in the 1979 removal of regulations on overseas investment. Secondly, what used to be nationalised utilities and still behave like it – the so-called privatized utilities have not created the competition they were supposed to. Finally, the problematic unemployment figures since 1979. As soon as unemployment was as low as 1.5 million towards the late 80s, it climbed up again along with inflation. Of course, statistics are a vague way of painting the full picture, but is it not worth asking if the private sector can pull unemployment down as low as it was in the 60s and most of the 70s?

  41. Arunas Ruksnaitis
    Posted April 29, 2012 at 7:44 pm | Permalink

    If history has to teach us anything, it is that you cannot “lift” anyone from poverty. Giving people money makes them poorer, not richer – because it takes away the incentives to develop, it makes them buy things created by other, more efficient people who, incidentally, are the source of the money. Giving money is a sure way to trap communities and nations in a dependent position from which they cannot escape.
    If you want to help them, teach them. Send experts, leaders, academics who can help people to formulate their goals and then reach them. Don’t do it for them, don’t provide goods and services, teach them to produce goods and services they need themselves. This is the only way to get the local economies off the ground. Even then, don’t overdo the help; they need to learn to help themselves. Unless there is motivation, for as long as they will expect “someone” to do it for them, there is no hope.

    • uanime5
      Posted April 30, 2012 at 2:17 pm | Permalink

      You do realise that buying things from more efficient people encourages these people to continue making new products.

      Also your idea is flawed because any products made by a new company will always be inferior quality to those made by people with experience. So if you teach people how to make mobile phones in Leeds these phones will be massively inferior to those produced by Apple simple because Apple has a larger research budget, better equipment, and more experienced staff. Unless these people are given massive amounts of help (technical and financial) and protection from more experienced competitor the result will be failure.

  42. forthurst
    Posted April 29, 2012 at 10:43 pm | Permalink

    Of course we will be paying for the success of London for many years to come since there is nobody to match a bankster on a roll for his capacity for losing billions or for subsequently presenting his begging bowl for refreshment by the taxpayer.

    The disastrous performance of our engineering industries since the last war can quite legitimately be laid at the door of politicians. As allies of the Bolsheviks, our rulling classes bought an expurgated version of their system of governance: whole industries were nationalised, others were subjecte to state reorganisations and directions, with no understanding whatsoever of the wealth creation process and how easily wealth creation can be subverted into wealth distruction. The result was a decline in our existing industries and a failure to innovate successfully in the newer technologies such as electronics, substantially aggravated by a failure to bring trade unions within the law until Thatcher’s time.

    In comparison with German, this country has always been at a potential disadvantage industrially, since the Germans were very quick to understand the vital importance of scientific education and to afford it at least equal status with the humanities and in creating the scholastic infrastructure to achieve this. By comparison, the ruling class in this country has always regarded science as plebian and unsuitable for them. It is this attitude and its concomitant crass ignorance, which has led to so many disastrous errors in industrial policy and continues to do so. If instead of the Conservative party selecting people based upon their ‘minority’ credentials, they selected based upon an equality as between science and the humanities, surely we would not be reading about an aluminium plant being shut down because it cannot effectively be powered by windmills?

    Our universities are churning out graduates of history and english on the premise that a generalist can do anything but someone with a potentially useful skill can only follow that skill: this is wide of the mark. We can afford to overproduce scientists because with their training in the scientific method, potentially, they are better at analysing and solving problems as opposed to generalists who seem to think that ‘spinning’ will cause them to go away.

    Northern universities should be encouraged to specialise and develop science parks. High technology is the route to high added value which brings prosperity in its wake. The government needs to prioritise science education and deprecate the humanities which have been heavily infiltrated by Marxist propagandists and are now largely grooming exercises. Let’s start teaching core science subjects and stop squabbling over who get’s to Oxbridge. My own grandfather from the north had to go to Germany to learn aniline dye manufacture; our problems are of very long standing.

    To exist, a technological business now has to be world class and competition intensifies continuously. Let’s stop being ruled by cretins who believe that we can succeed despite being hamstrung by artificially high energy costs. We simply aren’t that good.

  43. julian
    Posted April 29, 2012 at 11:20 pm | Permalink

    Depressing thought that nowhere outside London can be a dynamic centre of economic activity without government help.

  44. David Langley
    Posted April 30, 2012 at 9:12 am | Permalink

    I learned that the destructive power of Innovation would tear down monolithic industries. The
    collapse of them could not be stopped by subsidies, relocation, or any other ploy. Therefore the continual flight of capital supporting innovation to cheaper sources of production is irresistible and continous.
    Planners years ago predicted that populations would eventually live in massive conurbations and the countryside would be given up to automated food production and National Parks. If our major cities other than London had the infrastructure and financial clout of London, we would see the future differently perhaps. The last 100 years has seen massive urges to do this but central government spends billions on trying to stop the tide, and prevent this natural movement to take place. Hence the pleas for localisation, lowering support for feckless citizens etc.

  45. RDM
    Posted April 30, 2012 at 10:05 am | Permalink

    JR,
    You missed out [I Believe] the Political differences between the Regions and London, now made worse with Devolution. For example; Any central government spending tends to come, top-down, to government departments or local councils, and tends not to support Free Enterprise and Risk taking.

    Also; any discussion of our performance over the last twenty years must include huge concentrations of markets, areas like Banking, Energy, Financial, etc …
    And it’s effect on the Economy, hoarding of cash, and so, restricting GB Business Investment. If I had such a cash pile, I’d be investing it within the Growth areas. The BRIC countries.

    Regards,

    RDM.

  46. Conrad Jones (Cheam)
    Posted April 30, 2012 at 4:34 pm | Permalink

    “Labour and Conservative governments have tried a variety of responses to this de-industrialisation.”

    That’s because both Labour and Conservative (+Liberal) Governments have both ignored that Banks only lend 8% of their total loans to Productive Businesses. 92% of Bank created debt money goes to non-productive speculation – like the Property Market.

    Have you factored in the 100 billion pounds of tax payer subsidies into the London Economy? Perhaps if you had, you may not see London through such Rose Tinted Glasses.

    The Banking Industry is a Privately controlled Public Sector Entity. Tax Payer Subsidies go in – Profits evaporate into Private Hands, and the Productive Side of the Economy suffers while Housing Costs jump beyond the reach of irst Time Buyers.

    Mr Redwood, you seem to be turning into Gordon Brown – praising the successes (or excesses) of the City of London (loosely disguised as London).

    Why is London so Profitable (Bailouts)? Why do so many Financial Scams originate from the City of London (lack of regulations)? Why do so many Politicians get Jobs with Banks after leaving office (Ask Tony Blair – Tel: J P Morgan + extension number)?

    Is your next article to be titled “No more Boom and Bust” ?

  47. Conrad Jones (Cheam)
    Posted April 30, 2012 at 5:09 pm | Permalink

    “We also reported that the regional economies in the UK that received the largest subsidies and the most government assistance and intervention performed the worst.”

    You are absolutely correct – It’s called “Moral Hazzard”.

    Presumably you were thinking of the City of London which recieved over £133 billion of subsidies and only paid £26 billion in taxes (Corporation and Income Tax). They performed so badly that the World Economy is heading towards a Global Depression unless money is brought back under the Control of Elected Policy makers. 97% of our money is privately controlled. Just depositing money in a Bank means that the Bank owns the money as we have legally “lent” it to them so they can spend it how they wish.

    The Credit Expansion became an epidemic in 1997 – when Tony Blair’s New Labour go into power. Gordon Brown quickly handed over control of the Economy to Private Banking Interests and – hay presto; One Housing Boom and Bust later the Conservative Party takes over and slaps Austerity Measures on everyone (which will not work as they will reduce the currency suply).

    Stephanie Flanders still continues to spread this Fairy Story about QE which states that “only the Bank of England can create money at the press of a button”. When the BBC turns to deception then something is seriously wrong with the Nation. Banks create and control our money supply and they create most of it out of thin air.
    Just look at the M4 Data:
    http://www.bankofengland.co.uk/boeapps/iadb/index.asp?M4 makes up the majority of our money – Bank Deposits. Robert Peel must be turing in his Grave and the sham that currently are masquerading as Conservatives.

    Do you know what the purpose of the 1844 Bank Charter Act was ? It’s primary purpose was to prevent excessive Credit Expansion by Private Banks as there had been a number of Banking Crisis prior to 1844.

    Your praise of the London Economy is sickening. Your rhetoric is clever but misleading. Of course we don’t like subsidies to Failing Businesses but you ignore the ones going to the City of London – why is that ? There appears little difference in content to what you say and what Gordon Brown said regarding the London Success Story.

    Complete Fairy Stories.

    Reply: I opposed bail outs of RBS and HBOS. The rest of the financial and business services of London did not receive subsidies and do pay substantial taxes.

    • Conrad Jones (Cheam)
      Posted April 30, 2012 at 9:46 pm | Permalink

      Mr Redwood, I know you opposed the bailouts but you apparently do not understand the scale of subsidies that Banks receive. You do not seem very concerned that they are not lending to SMEs and are continuing on a path which will cause another crisis which tax payers will have to pay for.
      8% of Lending goes to Productive Enterprises
      92% goes to Speculative investments causing massive inflation.
      Remember Inflation ? That hits disposable income. What do you think a reduction in disposable income will do to an already fragile economy with a delclining money (Credit Money) supply? (hint: It won’t improve it).

      The Bank of England calculated that Bank Subsidies amounted to over £100 billion in 2009.

      Chart 5.9 of BoE Financial Stability Report
      http://www.bankofengland.co.uk/publications/Documents/fsr/2010/fsrfull1012.pdf
      Note (c) states:
      “(c) The ‘large’ category includes Barclays, HSBC, Lloyds TSB and RBS. The ‘medium’ category
      includes Nationwide and Northern Rock (until 2008). The ‘small’ category includes Chelsea,
      Coventry, Leeds, Principality, Skipton, West Bromwich and Yorkshire Building Societies.”

      “The rest of the financial and business services of London did not receive subsidies and do pay substantial taxes.”

      Unfortunately, you are not correct – the ‘Bank of England’ – who presumably you have some faith in, has stated that Banks such as Barclays and HSBC (not regarded as having received bailouts), received implicit subsidies paid for by tax payers.

      They receive a subsidy as tax payers lose the seiniorage that would be paid if the Banks had to pay for Government Created Money. Banks do create money out of thin air – and Politicians let them get away with it. The Uk Government pays interest on this money (which cost the Bank very little to produce) – and happily draws Income Tax to pay the interest payments.

      “The distress or failure of a systemically important financial
      institution (SIFI) is likely to entail large-scale economic costs.
      These costs engender expectations of government support and
      so allow SIFIs to benefit from an implicit funding subsidy from
      taxpayers (Chart 5.9). This subsidy encourages SIFIs to rely
      more heavily on debt finance (Chart 5.10) and to take on
      additional risk to maximise the value of the subsidy.”

      RBS And HBOS are just the tip of the Iceberg.

      Corporation and Income Taxes paid by Banks and their Employees are well below this subsiby making an outright loss, a deficit of investment to the tax payer and the Nation.

      Here’s something else for the Government to think about. While they expect the Private Sector to fuel the recovery with increased investment leading to Jobs, how are they expected to do that when the Trend of Bank Lending to UK SMEs is at a fifty year low:
      “Chart A Lending to UK businesses”
      http://www.bankofengland.co.uk/publications/Documents/other/monetary/TrendsApril12.pdf

      As money is debt and Banks are not lending (despite the subsidies), where is this money coming from ? We’re all doing what David Cameron asked us to do – pay off our debts – as a result M4 is collapsing. Labour incompetence is understandable – but the Conservatives are supposed to know what they are doing.

      Please can you explain to Mr Cameron and Mr Osborne “Where money comes from”.
      http://www.positivemoney.org.uk/where-does-money-come-from-book/
      At least it might be a start to understanding the missed opportunity they once had.

  48. Kenneth R Moore
    Posted April 30, 2012 at 7:40 pm | Permalink

    I think a better question is why the rest of the Uk is doing so badly that it needs to be propped up by London ?.

    Having recently worked for several years in one of the last few large automotive manufacturing plants left in the Midlands, I think my views are relevant. Many of my co- workers were ex employees of well known carmakers that had either moved overseas or gone bust.

    I formed a view that the ingrained bad attitude and inflexibility of the British worker is an impediment to us being able to make or compete on world markets. It’s been passed down from father to son and is very hard to irradicate. It could be with the right leadership but sadly many British Managers aren’t up to the job.
    Modern management practices such as employing supervisors to ‘supervise’ processes that they have no previous experience of has been a disaster . For example an air hostess cannot supervise a group of men assembling diesel engines but I know many British managers that think she can.

    It’s a real shame as we still (just) can hold our own in terms of engineering innovation.

    The experience of working in this environment was like stepping back into the 1970’s – the ‘them and us’ culture is still very much alive.
    Part of the blame lay with poor management -Nissan have shown what can be done. But the workers themselves need to realise the world doesn’t owe us or them a living.

    I found that the average worker:-

    – was typically lazy and did the bare minimum amount of work necessary. Going ‘the extra mile’ was generally frowned upon.

    – Despite having what could be be considered generous pay and pension entitlements, they always felt hard done by and had a misplaced perception of injustice.

    – Little pride was shown in their work. Some took satisfaction when problems occured because they were so hostile to the company and management.

    -Many harboured unjustified grievances for events that occured many years ago and this was reflected in their work.

    For this both Labour and Conservative governments must take their share of the blame. If better informed people had been in charge (rather than professional politicians without industrial experience) , wiser strategic decisions could have been made and much of Britains industry could have been saved.

    BMW used Rover expertise (and some say money) to develop the BMW X5 4×4 and the new Mini ….. sold Rovers technical development centre before passing on a crippled company. A cynic might suggest that all along BMW’s intention was to take Rovers expertise and then remove it as a competitor.

    The French or Germans would never have allowed this to happen to their national carmaker. We had the potential, now we have nothing to blame but our defeatist attitude, lazyness and lack of desire to protect national self interest. We needed lions but donkeys made all the important decisions.

    Reply: I have found and worked with some excellent workforces in the past in the UK, and have visited some very successful factories. Of course good leadership is necessary, but it’s not all bad in the way you describe.

  49. Steven Whitfield
    Posted May 2, 2012 at 8:44 pm | Permalink

    Reply: I have found and worked with some excellent workforces in the past in the UK, and have visited some very successful factories. Of course good leadership is necessary, but it’s not all bad in the way you describe.

    Thanks for taking the time to reply Mr Redwood it’s much appreciated.

    Appearances can be deceptive though – the company I worked for won a Queen’s award for export excellence quite recently and had a longish waiting list for it’s products. To a visitor the factory would be seen as successful. However the parent company were already building new plants in China and India which everyone assumed would eventually lead to the closure of the British facility. Who could blame them – having a full order book and working in a niche market had promoted gross complacency.

    If you scratched beneath the surface and spent time on the shop floor you would witness chronic quality problems caused by the poor attitude and skills of a large number of workers. That is if you didn’t get knocked down by Karl Marx in the stampede to get to the canteen or clocking off machine… always a few minutes before the appropriate time.

    It is often assumed that the head in the sand attitude and unwilligness to change with the times was something that dies out in the 70’s. I’m afraid these traits are alive and well in Britain.

    We need to restore the status of Engineering in the Uk and stop viewing people who want to learn and make things as ‘fat cat’s’ grinding the noses of the poor etc.
    Proper apprentiship’s need to be set up and schools should go back to teaching practical skills for a start. Benefits need to be reduced or replaced with food stamps to make work really pay and restore the status and dignity of work.

    Reply: The factories in companies I have chaired have always made quality and safety central aims.

    • Conrad Jones (Cheam)
      Posted May 3, 2012 at 10:30 pm | Permalink

      Mr Redwood,

      Have you ever worked on the factory floor? Have these factories you have “chaired” really made quality and safety central aims? They sound like holiday camps.

      Reply: Yes, they did make quality and safety central, measured it, ensured it was properly reported. We went over to small team working, with leadership of teams from individuals working as part of that team promoted from line jobs.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

    Promoted by David Edmonds on behalf of John Redwood both of 30 Rose Street Wokingham RG40 1XU

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