Regional differences

 

Labour likes to think of itself as the party of equality of outcomes, just as Conservatives like to think of themselves as the party of equality of opportunity.

Yet over the 13 years of recent Labour rule the gap between the richer and the poorer regions of the UK grew wider, not smaller. London, the largest region in 1997, expanded more rapidly than the rest. It rose from 20.5% to 21.9% of UK activity and income.  The South East also did well, reaching almost 15% of output. The North East, in contrast, fell to just 3.2% of UK output and income.

North Eastern household  income per head was £13,600, compared to London at £20,500 and the South East at £18,100.

This was not for want of public spending. There  were no cuts in overall public spending. Indeed for several years there was a very large increase in real public spending.  Public spending was much higher as a proportion of the total and per head in the poorer places than in the richer places. Labour’s strategy was to direct more public spending into the poorer areas to narrow the gap, but the more they did it the bigger the gap got.

By 2008 public spending  was a mighty 57% of the North East’s output compared to a modest 34% in the South East and 37% in London. From memory more recent figures shows the proportion in London falling further as the private sector recovery speeds up there.

By 2011/12 UK public spending was £8745 per head.  The South East had spending of just £7565 a head, compared to Northern Ireland at £10624.

Throughout the Labour years the regions with the lowest public spending per head grew the fastest. It looks as if the same is continuing to happen under the Coalition. Why doesn’t high public spending produce better answers, when so many urge it on us as an answer to poor economic performance?  Why have years of regional policies pursued by successive governments of differing political persuasions been so unsuccessful at lifting the growth rates and household income levels of the poorest regions? Is it coincidence, or is there any causal link between low public spending per head, high productivity, higher incomes and  a larger private sector?

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86 Comments

  1. Brian Taylor
    Posted August 21, 2013 at 5:28 am | Permalink

    Why not cut the size of both local and national government, Cut taxes both local and national and allow us to get on with the work that need to be done.

    On zero hours,is it not a fact that all self employed are on zero hours,until the phone ring or the email arrive!!!

    • Leslie Singleton
      Posted August 21, 2013 at 9:38 am | Permalink

      Brian–Comments the other day, especially from one usual suspect on Zero Committed Hours Contracts, as they should be called, were absolutely fatuous, if only because they certainly benefit at least some people, not to mention that some people would prefer them to the dreaded 9 to 5. They are NOT “zero hours” in any meaningful sense as regards average hours actually worked. It is a different thing altogether to say there is no commitment to more than zero hours. How much commitment would there be if they were abolished as the dopier amongst us seem to want? Then and only then would the position really be zero hours. How that would be an improvement is difficult to see.

      • uanime5
        Posted August 21, 2013 at 2:58 pm | Permalink

        If zero hour contracts were abolished people would have to be hired on temporary contracts, which give them more rights. So almost no jobs will be lost and the only people who will lose out are bad employers that abuse their staff.

        • alan jutson
          Posted August 21, 2013 at 5:33 pm | Permalink

          Uanime5

          “…..Will give them more rights….”

          Absolutely correct that is why fewer would be employed on the basis you suggest, It costs too much and reduces flexibility.

          I have no problem with zero hours contracts as long as they do not say you always have to be available, and cannot work elsewhere.

          Just remember all Self employed people have in effect a zero hours contract, because they are not guaranteed employment by anyone for any specific period.

          • uanime5
            Posted August 22, 2013 at 7:55 pm | Permalink

            The self employed can claim for many things as a business expense, those on zero hour contracts cannot. So the two are not the same.

        • Lindsay McDougall
          Posted August 22, 2013 at 2:42 pm | Permalink

          I can assure you that both zero hours and temporary project specific employment are attractive to the over 65s. If someone sends you a zero hours contract that says you can’t work for anybody else, you can always refuse to sign it.

    • uanime5
      Posted August 21, 2013 at 2:56 pm | Permalink

      The main reason why this is a bad idea is that the poor get more in benefits than they pay in taxes, so they will greater suffer because of your plans. Only the wealthy will benefit from it.

      Also Zero hour contracts are immoral because employers use them to avoid giving their employees holiday pay and other rights.

    • Bazman
      Posted August 21, 2013 at 4:21 pm | Permalink

      Zero hour contracts is not the same as self employed though it is often passed off as this as the poster below tries to do.

  2. lifelogic
    Posted August 21, 2013 at 5:39 am | Permalink

    “Why doesn’t high public spending produce better answers, when so many urge it on us as an answer to poor economic performance? ”

    Well it clearly distracts many capable people from doing something real & productive into doing something that is usually pointless (or worse counterproductive) as a government employee or just funded by misdirected tax payers money, yet in the private sector. In a similar way to how much overseas aid fails, it distracts the productive from being so and often makes thinks worse.

    The people spending tax payers money so often simply do not care what is done with it or if any public benefit actually arises. They are just happy being paid/pensioned. They are just as happy installing anti car traffic lights, road blocking islands and environmental areas as they will be removing them a few years later. Their main concern is will they get the funding for next years daft projects to keep the racket on the road?

    Stop paying people to be feckless and doing nothing of much use and they might well desist from being feckless and doing little of much use. It is the governments fault, trying to buy votes, causing huge harm and encouraging the feckless to remain so.

    • uanime5
      Posted August 21, 2013 at 3:00 pm | Permalink

      Unless you can magically create 2.5 million jobs for all the unemployed to work in they will continue to be “paid” to search for jobs. Your whining about the feckless will not change this.

      • alan jutson
        Posted August 21, 2013 at 5:39 pm | Permalink

        unanime5

        As I have posted many times before.

        Jobs can be created if you look hard enough.

        Not all work and employment has to come from a job advert.

        If you just want to sit at home and wait for a knock on the door and nopt be proactive in any way at all then you will be unemployed longer than someone who makes it a job to get work.

        I would certainly agree it is more difficult in some areas than others, and I would agree that the benefits system needs to be far more flexible with regard to temporary work so that constantly registering and de registering does not become a penalty, but is encouraged.

        • uanime5
          Posted August 22, 2013 at 7:58 pm | Permalink

          Unless people can magically develop the skills to run a business they cannot create a job.

          You’ve also failed to explain how spending more time looking for a job will somehow turn a job market with 45o,000 jobs into one with 2.5 million jobs.

      • lifelogic
        Posted August 21, 2013 at 9:36 pm | Permalink

        I am not whining about the feckless, merely suggesting that they will not learn how to work (and become self-reliant) through being paid to watch daytime TV. I do not even blame the feckless, they are behaving rationally given the idiotic system that this government presents to them.

        And millions of new real jobs will be created if the government stops paying people to do nothing, and reduces the parasitic size of government by 50% or so and get some cheap, non religious, energy.

        • uanime5
          Posted August 22, 2013 at 8:00 pm | Permalink

          Care to explain why during the Victorian times when people weren’t “paid to do nothing” society didn’t magically create enough jobs for everyone? Could it be because 100% employment is very difficult to achieve.

    • Bazman
      Posted August 21, 2013 at 5:21 pm | Permalink

      Specifically who are the feckless lifdogic? Are they some sort of mythical fairies or are they just your personal group think put there by right wing fantasies

    • Bazman
      Posted August 21, 2013 at 6:11 pm | Permalink

      High public spending to private landlords will of course be cost efficient, right and effective in your dream world?

  3. lifelogic
    Posted August 21, 2013 at 5:46 am | Permalink

    Indeed, well enforced equality of outcomes clearly distorts all the incentives needed to encourage productive work. If the outcome is to be the same anyway, why not stay in bed, why build up a pension or save? It will achieve nothing as the government will pinch it off you, for the enforced equality agenda. Needless to say the “enforced equality” will not apply to those in power in the state sector or the BBC.

    You ask:- “Why doesn’t high public spending produce better answers, when so many urge it on us as an answer to poor economic performance? ”

    Well it clearly distracts many capable people from doing something real & productive into doing something that is usually pointless (or worse counterproductive) as a government employee or just funded by misdirected tax payers money, yet in the private sector. In a similar way to how much overseas aid fails, it distracts the productive from being so and often makes thinks worse.

    The people spending tax payers money so often simply do not care what is done with it or if any public benefit actually arises. They are just happy being paid/pensioned. They are just as happy installing anti car traffic lights, road blocking islands and environmental areas as they will be removing them a few years later. Their main concern is will they get the funding for next years daft projects to keep the racket on the road?

    Stop paying people to be feckless and doing nothing of much use and they might well desist from being feckless and doing little of much use. It is the governments fault, trying to buy votes, causing huge harm and encouraging the feckless to remain so.

  4. Leslie Singleton
    Posted August 21, 2013 at 5:50 am | Permalink

    And now one reads that HS2 will help the capital and therefore the South East more than it will help the North. This rings very true.

  5. margaret brandreth-j
    Posted August 21, 2013 at 5:56 am | Permalink

    It may be a good idea to reverse the thought process. What happened in the NE to facilitate a need for more public spending? Lack of markets for our ships? Why does London’s weighting and expensive living raise overall income and activity and why do the mega rich collect there? Is it not the markets internal and external again who decide whether public spending is required or other?

  6. Mike Stallard
    Posted August 21, 2013 at 6:00 am | Permalink

    Yesterday on Radio 4 was a discussion on prosperity. The people from smart North Eastern towns (Malton) were saying that there simply was no employment except for what the State offered. I think that Labour were trying to offer some sort of employment – hospitals, schools PCSOs, librarians etc. to people who otherwise had none.

    Here at the very edge of London, in North Cambs, the prosperity is limited to outside the town centre which is, more and more derelict every day with plants growing out of derelict and burned out buildings.

    I don’t know why, but a verse from the psalms runs through my head: “A fertile land maketh he barren for the wickedness of those that are therein.”

  7. alan jutson
    Posted August 21, 2013 at 7:15 am | Permalink

    Never mind the percentages. what I find astonishing is that £8,745 per head figure for public expenditure.

    Surely if any figure should be published and highlighted it should be this.

    Quite simply anyone seeing this figure must surely say, how much, what on earth is it spent on.

    To put it in simple terms if you pay less tax than £8,745 per anum (all taxes) then it could be said that you are being subsidised by the government in some form or another, for the services they provide to you.

    Yes fully aware it is an average, some will get much more, many will get much less, but what is plain to see is the scale of spending, which simply cannot continue.

    John I have to ask, where did you get this figure from, and does it include state pension payments.

    Reply It is an official figure from ONS and includes all public spending. As I have puboished before, the country relies on very heavy tax bills on the high earners and on lots of state borrowing

    • lifelogic
      Posted August 21, 2013 at 2:33 pm | Permalink

      Indeed and most do pay far less than £8,745 PA, per member of their family certainly most of the imported manual workers coming in and often spending/sending it elsewhere.

      • Bazman
        Posted August 21, 2013 at 6:22 pm | Permalink

        Cheap labour for business lowering costs and increasing profits whilst providing work for the unemployed and service for customers. What is wrong with this? Really. What is your problem? Are you some sort of socialist? A wishy washy lefty with a PPE with a BBC job? If we cut all benefits and state support for such things a housing and food more of us would be winners.

        • Bazman
          Posted August 23, 2013 at 11:01 pm | Permalink

          Fundamental and basic Tory ideology without replies. Wot dus this tel uss. Raming it? You should.

    • uanime5
      Posted August 21, 2013 at 3:13 pm | Permalink

      Given that the personal allowance is £10,000 and the tax rate for low earners is 32% (20% rate and 12% NI) this means that to pay £8,745 in income taxes you’d need to earn about £37,328.13 a year. Though due to VAT, council tax, the 52% tax rate, etc you’ll probably pay £8,745 per annum in taxes if you earn a lower amount.

      Though if someone is earning minimum wage (about £12,000 per year) it’s unlikely that they’ll pay £8,745 per annum in taxes. So as long as average wages remain low no one should be surprised if the majority of the population pay little in taxes.

      • alan jutson
        Posted August 21, 2013 at 5:46 pm | Permalink

        uni5

        You make my point, as most do not pay £8,745 in taxes, so they are in effect being subsidised by those who pay more than the £8,745.

        So in your view is spending too high, or does it need to go higher ?

        If spending needs to go higher, then so do taxes in order to pay for it all.

        • uanime5
          Posted August 22, 2013 at 8:09 pm | Permalink

          In my view the difference in wages between the lowest and highest paid is too uneven and until they are made more even the UK will continue to have a large proportion of the population that is subsided.

          All lowering this spending will do is reduce the amount the majority of the population are able to spend in the economy, which will send it into a major decline.

          I’d say that taxing those on higher incomes (over £150,000) at a higher rate and giving those on lower incomes more subsidies would result in more money being spent in the real economy.

      • lifelogic
        Posted August 21, 2013 at 9:41 pm | Permalink

        You ignore employers NI and the income tax rate is now 45% +NI not 50% + NI as you indicate. Also the £8,745 is per “person” not per worker.

        • uanime5
          Posted August 22, 2013 at 8:39 pm | Permalink

          As far as I can tell employer’s NI is 13.8% on all earning over £7,696 per year. So including employer NI payments an employee would need a salary of £28,399.67 before employer NI is deducted to pay £8,745 per year in taxes.

          I was referring to someone in the 40% tax rate who has to pay 12% NI (52% total tax rate). The threshold for the 40% tax rate is £32,011 per year but the threshold for 2% NI is £41,444 per year so the person in my example would have to pay a tax rate of 52% on some of their earnings.

          My example was to show that how much a worker would have to earn a year to pay this much tax through income tax. For someone who was unemployed they’d need to spend £43,725 on products with VAT to pay £8,745 in VAT.

      • behindthefrogs
        Posted August 21, 2013 at 11:23 pm | Permalink

        Employees NI is payed on earnings over £7526 at a rate of 12%. It is about time that this level which only affects earned income. If necessary this could partly be offset by raising the upper limit of £42484 at which the rate reduces to 2% and/or raisng that rate above 2%.

        It is very wrong that earned income is taxed at a higher rate than unearned income and this differential is increasing each year.

        • lifelogic
          Posted August 24, 2013 at 4:12 am | Permalink

          People do not move as easily as capital, so it is easier to enslave them with high taxes on earned income.

  8. Richard1
    Posted August 21, 2013 at 7:19 am | Permalink

    The same is true around the world. The countries which have higher public spending and taxes grow slower than the countries where the private sector grows faster than the state and public spending is relatively low. The statistics are clear and repeated often here and elsewhere. But its a very unpopular fact with left-leaning media such as the BBC – so we don’t often hear it – and with many politicians who think their job is to agitate for more public spending to solve whatever is the problem of the day. The language which presents ‘cuts’ as bad news and spending (‘investment’ in left-speak) as good news must be challenged whenever it occurs.

    • uanime5
      Posted August 21, 2013 at 3:18 pm | Permalink

      Your comments just show that you are unable to interpret data. Most countries with high growth tend to have low taxes to GDP because they don’t provide healthcare or social security. As a result they have many negative factors such as high infant mortality rates and low life expectancy.

      So unless you believe that the majority of the UK will accept having third world living conditions so you can have a lower tax rate your plan will never work.

      • Richard1
        Posted August 22, 2013 at 3:54 pm | Permalink

        Your reply is absurd. Do countries such as Singapore, Switzerland, Hong Kong, Canada, Australia have high infant mortality & should they be regarded as ‘Third World’? You are in complete denial of the logical conclusions from the data. There is every reason to expect faster growth and higher living standards in the UK from better control of public spending and lower taxes.

        • uanime5
          Posted August 22, 2013 at 9:04 pm | Permalink

          Just because you cherry picked your data doesn’t make me wrong. Let’s examine all the countries you mentioned along with a few others.

          Tax revenues as a percentage of GDP (does not include borrowing):
          Australia: 30.8%
          Canada: 32.2%
          Hong Kong: 13.0%
          Norway: 43.6%
          Singapore: 14.2%
          Sweden: 45.8%
          Switzerland: 29.4%
          United Kingdom: 39.0%

          http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

          Now let’s examine the growth in these countries. If your claim is correct countries with lower tax rates should have higher growth.

          Australia: 3.6%
          Canada: 1.8%
          Hong Kong: 1.4%
          Norway: 3.0%
          Singapore: 1.3%
          Sweden: 1.2%
          Switzerland: 1.0%
          United Kingdom: 0.2%

          http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_growth_rate

          Despite having the lowest tax rates as a percentage of GDP Hong Kong and Singapore had less growth than some countries with double their tax rate. Thus it’s clear that your claim that low tax rates result in more growth is clearly wrong. Perhaps you should actually do real research rather than spout right wing delusions.

          Also infant mortality rate are much higher in Hong Kong and Singapore than any of the other countries you mentioned. Try to guess why.

          Reply Over longer time periods HK and Singapore have grown considerably faster than most EU countries.

          • Richard1
            Posted August 23, 2013 at 7:51 pm | Permalink

            JR’s reply shows the absurdity of yours. 50 years ago Singapore was malaria infested swamp with the population at subsistence levels. Now it has achieved western levels of GDP per head. Norway is an outlier as it is hugely oil rich. Sweden is an example of a formerly socialist and economy which has reformed through tax cuts, spending cuts, balanced budgets and labour market reforms. As ever the actual data completely contradict leftist propaganda.

          • Bazman
            Posted August 24, 2013 at 3:39 pm | Permalink

            Do you want Singapore and Hong Kong style democracy richard? What else would you sell just once And how do you think your style of government is going to be forced on British society with very different and more working class attitudes than many of the countries you name. High levels of poverty would not be tolerated nor should be, So the cost would be high.

  9. Martin
    Posted August 21, 2013 at 7:20 am | Permalink

    But your figures ignore hidden subsidies such as cheap money. The biggest mortgages are in London and the SE. Who gets the benefit from QE?

    Some of the spending you mention is things like administrative HQs such as DVLA Swansea or DWP Newcastle. These were put in those places to help the local economies and to stop London wage rates going into orbit.

    Trouble is much of the country hasn’t recovered from the collapse of steel, coal and textiles.

    • lifelogic
      Posted August 21, 2013 at 2:35 pm | Permalink

      Steel & coal, a collapsed much encouraged by the green religion and the EU.

      • Bazman
        Posted August 21, 2013 at 5:26 pm | Permalink

        Not to mention right wing fantasy and dogma.

  10. Stewart Knight
    Posted August 21, 2013 at 7:28 am | Permalink

    That’s a bit too generalised a question really John, because the central theme should be how the money is spent.

    Labour ploughed billions, tens of billions, into shoring up their voter base, paying for votes with or money, with benefits an per projects to keep locals quiet and foreign companies and their ‘special pals’ in tax payer subsidy; they didn’t try and make the regions productive except in terms of votes for them. The FIGURES and STATISTICS were all that mattered for the headlines, the TARGETS were to be met and the positive and pro Labour HEADLINE written by the BBC to reflect the largesse and altruistic nature of kind, lovely cuddly Labour reflected. If it resulted in death in a large scale, as in the largesse that resulted in Stafford, then who cares as long as the votes were forthcoming?

    That’s why Labour are, rhetorically,(wrong ed) and wasted thirteen years of the countries wealth and tens of millions of peoples time and effort.

    This is what the Tories should explain instead of asking navel gazing questions about why one region flourishes with less.

  11. Nina Andreeva
    Posted August 21, 2013 at 7:42 am | Permalink

    Howay man John! The NE mostly survives due to the people being dependent on the state either for a job or a handout. However I would like to see just how productive the City and the SE would be if the money printing were to stop? To me its equally repugnant for the tax payer to underwrite the bets of somebody in the city, as it is to also supply the gambling money for somebody to lie flat out on his settee in Sunderland and follow the ITV 7

    Reply I opposed the bank equity bail outs and think we would be in a better place if the city had paid its own losses in 2008.

    • Bazman
      Posted August 21, 2013 at 5:29 pm | Permalink

      The TV watcher is at least cheaper and less harmful.Less productive? No. Less destructive.

  12. Brian Tomkinson
    Posted August 21, 2013 at 8:15 am | Permalink

    More confirmation that there is no real difference with the three main parties in parliament. They all have the same economic policy – tax, borrow, spend and waste. What is it about being a Conservative MP that keeps you supporting a government whose policies are so alien to your own views?

  13. Mike Wilson
    Posted August 21, 2013 at 8:41 am | Permalink

    Those very pertinent figures, that growth in areas with low public spending outstrips areas with high public spending, should be committed to memory and thrown at Ed Ball, Miliband, Harman and co. at every opportunity.

  14. Iain Gill
    Posted August 21, 2013 at 8:47 am | Permalink

    Well you are talking about my specialist subject.

    Problems with the North East:

    Large amounts of state subsidised housing still in locations where the big employers left (ship building, mines, steel, glass, etc) and nothing replaced them. Because of the way state subsidy works the market rents of these houses does not drop (which would make the areas more competitive) and the people are basically forced to stay there as there are too few houses available where the potential employers are. That whole housing dynamic needs fixing, and some of these housing estates need to be allowed to fail as there is no real demand in those areas (without state manipulation) and free the people up to move where they would prefer to be.

    Large amounts of state money been thrown at things like “software city” in Sunderland which was a complete waste of money, as basically they didn’t have anyone who had really worked in the software industry involved, they were all public sector placemen, read a few theory books but no clue.

    Big state infrastructure spending like the Metro system was dominated by local rivalries, and stations were put where the politicians had the most clout rather than where the biggest impact on the economy would have been. Large parts of the network do nothing the buses were not doing beforehand except cost more.

    Concentration of spend on Newcastle rather than other parts of the region is a disgrace. Most of Metro spend went on Newcastle, etc. Its taken Grand Central to put main line trains into Sunderland rather than Newcastle, but still on the old track. Proper fast tracks from the East Coast mainline into Sunderland would be small potatoes but have a dramatic affect on the whole UK economy (more than HS2 etc).

    Sink schools in North East are much worse than the sink schools in the South East, you have to see them to believe them. They are worse than no schools at all. How exactly they are getting away with it is beyond me.

    I could go on…

    • uanime5
      Posted August 21, 2013 at 3:23 pm | Permalink

      People live in these housing estates because they want to live there. Even if the Government offered to move them somewhere else free of charge most people won’t leave. It’s a mistake to believe that people are in the wrong place because the employers are elsewhere, if you want people to work you have to bring the employers to them.

      • alan jutson
        Posted August 21, 2013 at 5:51 pm | Permalink

        “You have to bring the employers to them”

        So what if there is no natural resource for that business in that location ?.

        • uanime5
          Posted August 22, 2013 at 9:06 pm | Permalink

          What natural resources do companies that perform data entry need?

      • Iain Gill
        Posted August 21, 2013 at 10:30 pm | Permalink

        Nonsense people move gradually over time when the power to optimise the money they have versus housing choices in the housing market is really in their hands. People superficially look like they continue to live in many of these places through choice, but when you scratch the surface its mainly just because of the way the state is manipulating the housing market.

        The state has thrown mega bucks at trying to get new big employers to some of these places and it aint happened. Rather than waste money like that the state should make the housing market (all of it inc council houses, housing associations, owner occupier, and private rental) better able to support a more flexible workforce. And stop subsidising the most obvious housing estates far removed from where there is ever likely to be a ready jobs market again, just pull the plug and instead subsidise the people to move on.

        • uanime5
          Posted August 22, 2013 at 9:13 pm | Permalink

          While this may happen in the world of right wing fantasy it does not happen in reality. This may come as a shock to you but not everyone wants to be a slave to companies and forced to move to another location on a company’s whim.

          As I stated in my previous post the easiest way to prove which of us is correct is for the state to offer to pay people’s moving expenses if they want to move from somewhere with no jobs to somewhere with more jobs. If you’re right they’ll all chose to move, if I’m right the majority will chose to stay. Though I suspect that when you’re prove wrong you’ll still try to force these people from their homes.

  15. Gary
    Posted August 21, 2013 at 8:47 am | Permalink

    Some say it’s as plain as the nose on a face. Financialisation driven by artificially low rates fuelling an orgy of morgage borrowing made the banks rich and they sucked investment out of businesses in the regions, talented graduates turned to a career in casino finance instead of engineering and came to London. This is no mystery, yet this govt is so unbelievably stupid or malevolent that they cannot or will not see it. Help to buy is a morally bankrupt example of the govt sticking its oar into markets , distorting them and exacerbating the sucking of all investment into the south east. There are over 800,000 empty houses outside the south east, but not a job in sight near those houses. We don’t have a housing shortage, we have a govt distorted jobs market . The bankers own the politicians. We will reap the whirlwind.

    Reply How do you suggest we get the jobs we would all like to see outside London? Are you willing to set up a business to help create them?

    • handbags
      Posted August 21, 2013 at 9:11 am | Permalink

      Garry – John’s just given you the answer – get off your backside and start a business.

      Stop whinging and do something about it.

      • Mike Wilson
        Posted August 21, 2013 at 11:02 am | Permalink

        Not a chance. Running a business is bloody hard work – thanks to the government.

    • Mike Wilson
      Posted August 21, 2013 at 9:57 am | Permalink

      Re reply: I’m not willing to set up a business to help create them. I run a small family business. I have employed people before – never again. It is just too much hassle – thanks to government.

      If I could just employ someone on the basis that: ‘You turn up here Monday to Friday and work from 9.00 to 5.30 and I’ll pay you £x per week’ – I’d employ people tomorrow. But, no, I have to run a payroll. I have to collect and pay their tax and national insurance and pay employer’s NI. I have to administer Statutory Sickness Pay, Statutory Maternity Pay and a pension if I have more than a few employees. I have to have insurance and I have to pay someone to write me legal employment contracts. I have to pay them to go on holiday when I take just one week a year myself. Etc. Etc. Etc.

      If the government stopped using businesses as unpaid tax collectors, moved taxation much more on to spending and less on income – the economy would boom. As it is the government has the economy in a head lock and it is strangling the life out of it.

      • lifelogic
        Posted August 21, 2013 at 11:05 am | Permalink

        Indeed the obstacles placed in the way, by governments are absurd.

        • Bazman
          Posted August 21, 2013 at 5:34 pm | Permalink

          Such as expecting employer to pay wages?

      • alan jutson
        Posted August 21, 2013 at 1:38 pm | Permalink

        Mike

        You have just given the very reasons why I only used sub-contract labour, when I ran my own business for 30 years.

        It used to be so simple, you paid people in full what they invoiced you.
        You filled in your records every year on an annual return.
        Both the contractor and the subcontractor had Inland revenue Certification, and both parties kept a copy of any payments made.
        Certificates were sent in with your annual return as proof of payment and reciepts of payments (714 certification)..

        But.

        No Government likes self employed people, so they changed the rules so that any Company who employed such, had to be responsible for their claimed legal status, had to fill in monthly tax returns for them, and Deduct tax at source after agreeing what costs could be ignored from this sum for raw material costs.
        It was called the Construction industry Contractors monthly return. still in force today I think.

        It also meant that a contractor had to prove they were self employed and had multiple income sources, otherwise they would be regarded as PAYE for tax and employment purposes.

        Fines for late monthly returns were often made, if such returns were deemed late, but fines were refunded on appeal when proof of posting could be made.
        Five times I was fined, and five times I was refunded in full when proof of postig was supplied.

        Thus much time was wasted by all and the flexibility of people available for work was curtailed at a stroke.

        Then we had the wonderful IR 35/45 introduced again restricting available self employed labour if you only had a single source of income
        So people set up their own Limited Companies (more time wasted, more paperwork).

        Instead of allowing more flexibility of labour, successive Governments have restricted that fexibility and thus increased costs and overheads to all sorts of businesses.

        Pleased I have now retired and so have to have absolutely nothing whatsoever to do with the system in place, have none of the worry about employment legislation, and cannot be held responsible for both the tax and legal status of whom you employ.

        The Government absolutely needs to understand more the way businesses work, but they simply are not interested, they just want to make business owners responsible for everything, and simply act as tax collectors (under threat of fines and jail) for the Government.

        They wonder why we are not getting growth !!!!!!!!!!!!!!

      • uanime5
        Posted August 21, 2013 at 3:28 pm | Permalink

        Why don’t you hire an umbrella company to do this for you? When I was working for a company through an agency I had to register with an umbrella company that took care of the payroll. The payment method was company to agency, agency to umbrella company, umbrella company to me.

        • Bazman
          Posted August 21, 2013 at 5:34 pm | Permalink

          I work for an agency via an umbrella company and agree he could do this. My co workers apart from two are self employed sub contractors. The problem is he wants self employed at minimum pay rates. Not even offering a temporary contract or agency work. DIY and ram it.

          • alan jutson
            Posted August 22, 2013 at 8:48 am | Permalink

            Bazman

            Agree with you.

            The whole point of being self employed is to be in control of your own destiny, set your own wage rates, and work your own hours.

            If a company wants people to work full time for them, and them only, under the present rules they would be regarded as PAYE employees.

            No way would I work as Self Employed for minimum wage rates.
            I would tell them to ram it as well.

        • Mike Wilson
          Posted August 21, 2013 at 10:31 pm | Permalink

          Errr, because I can’t be bothered. Why should I work my nuts off to provide other people with jobs?

          • Bazman
            Posted August 23, 2013 at 5:28 am | Permalink

            The same reasons as why they should be bothered to work for you. Your own business is just that.

      • Handbags
        Posted August 22, 2013 at 10:22 am | Permalink

        Mike – you’re right, of course. Business is a lot like managing a football team – if you’re not allowed to drop a bad player then you’re not going to succeed.

        The solution is to use sub-contractors. Each task is quoted so you know the cost beforehand and if the freelancer wants to outsource to someone else then that’s fine by me.

        The creative sector has worked this way for decades – and so has the construction industry.

        I don’t employ anyone anymore – for the reasons you’ve outlined – everything is outsourced. And, because of the internet, If you can’t find what you want locally you can search world-wide.

        Obviously some businesses need bodies on the ground but I’m sure if you look around you’ll find self-employed people and freelancers locally who will jump at any opportunity.

    • ian wragg
      Posted August 21, 2013 at 10:06 am | Permalink

      John, you could stop this stupid green energy scam which has shut down coal, steel and aluminium in the north and midlands.
      The 3 main parties hidden agenda to de-industrialise the UK and turn it into a 19th century theme park is the reason there are no jobs up here.
      All government effort is to prop up the banks and finance industry when regional wage rates would do more to create private sector jobs than all the government meddling.

      • Mike Wilson
        Posted August 21, 2013 at 11:00 am | Permalink

        @Ian Wragg

        Spot on. For decades governments have been under the impression we can have a wonderful service driven, de-industrialised economy – instead of building on our heritage as a driver of the industrial revolution and making sure we had world beating steel and heavy engineering industries.

        When you think about it – in terms of central planning – our system of government is utterly useless with a bunch of half wits who have never had a proper job obsessed with spin and winning the next election.

    • Gary
      Posted August 21, 2013 at 2:37 pm | Permalink

      reply to John’s reply :

      I hate being a whinger who does not offer solutions. I hope I have offered solutions, and I will repeat my opinion.

      The premise of my contention is that the distortions in the market are caused by govt meddling of various forms. The solution therefore is for govt to get out of the market, get out of the way, stop rigging rates(prices) and let free market prices signal to investors and entrepreneurs the areas of real opportunity.

      Until this happens it is a massive gamble starting a business. The govt has stacked the deck against successful, rational investment.

  16. Roger Farmer
    Posted August 21, 2013 at 9:16 am | Permalink

    The North East has already proved itself capable of producing high quality cars in fact more efficiently than the Japanese. Any productive activity, properly managed, is capable of great success there.
    An idea, set up house production on an industrial scale as per Sweden, and use the redundant covered shipyards as a starting point. Properly controlled one should be able to knock large holes in the cost of providing much needed housing.

    • Mike Wilson
      Posted August 21, 2013 at 1:23 pm | Permalink

      Last time I was in Newcastle, the shipyards were long gone – replaced by pleasant riverside walks / with offices behind.

      • Mike Wilson
        Posted August 21, 2013 at 1:25 pm | Permalink

        Sorry, meant to add – but you are right. Government is always on about investment (but, useless at it) – but a big factory to produce industrial houses that can be erected in a few days … along with REAL planning reforms … maybe something could be done about the housing crisis.

        No, hold on, that would upset the bankers and that would never do. We can’t have a government that acts in the interests of the people.

  17. Acorn
    Posted August 21, 2013 at 9:17 am | Permalink

    Up north, anyone with a brain works for the public sector. For the same depth and breadth of knowledge and skill, you can get up to 30% more per hour than in the private sector. To be “middle class” up north, you have to have a government job at national pay rates; exactly the same outcome as across middle America.

    That’s why you won’t get local pay rates for NHS doctors; dentists and coppers to stop crowding out the private sector up north. They would all rush south and who would blame them with HS2 only twenty years away. How can you operate “local pay” (remember Cloe “hapless” Smith’s plan, before she got Paxoed), when everywhere is local, just up the motorway in fact.

    Britain is too small and too densely populated for high speed anything except broadband. It’s about time we realised that England is one sub-urban area and treated it as such with numerous standardised light elevated transport systems running up the middle of roads. Something like the Dubai Metro.

  18. Atlas
    Posted August 21, 2013 at 9:27 am | Permalink

    The quick answer to John’s question about Jobs in the North is to have cheap energy. This can come about if the claims concerning Shale gas reserves are correct.

    Sorry Greenies, your solutions are no solution at all as they are based upon wishful thinking. We could do with some senior civil-servants who can tell their Ministers the truth, but to do that they would have to have a technical education in order to talk from a position of knowledge – and they don’t seem to have that background… sigh.

    • lifelogic
      Posted August 21, 2013 at 11:16 am | Permalink

      One assumes that ministers, such Ed Davey/Cameron must know the truth about how inefficient, ungreen and useless “renewables” (as they like to call them) are, but just choose to ignore the facts as it suits their politics.

      The alternative is that they are very, very stupid indeed and have never asked a decent honest engineer on the issue.

      • lifelogic
        Posted August 21, 2013 at 11:32 am | Permalink

        After all they are clearly well aware of the huge and absurd tax payer subsidies for wind and pv as they fix them. Thus rigging the market against far cheaper and more reliable alternatives.

        • Bazman
          Posted August 22, 2013 at 5:25 pm | Permalink

          Nuclear subsidies are OK though and oil and gas receive no subsidy? Tax breaks are subsidy for an industry with ever high commodity prices and large profits. The taxpayer is adding to their profits by taking less for infrastructure which ultimately buys their products. All to complicated for your automated Orwellian announcements though

    • uanime5
      Posted August 21, 2013 at 3:31 pm | Permalink

      Why does the north need cheap energy? The south has many businesses despite not having cheap energy.

      • Edward2
        Posted August 21, 2013 at 5:09 pm | Permalink

        Because Uni, speaking generally the Northern half of the UK contains or contained most of the heavy industry such as steel, glass and ceramics, brick-making, foundries, heavy engineering etc which use huge amounts of energy in their production processes.
        In some of these companies their energy bills are greater than their wage bill

      • lifelogic
        Posted August 21, 2013 at 9:44 pm | Permalink

        Both north and south do but the north more so.

    • Mike Wilson
      Posted August 21, 2013 at 10:33 pm | Permalink

      I admire your optimism. I am of the opinion that no matter how cheap the gas might be coming out of the ground, by the time it enters my central heating boiler it will be the same price as gas from any other source.

      Remember all the cheap petrol when we were self sufficient in North Sea oil?

  19. forthurst
    Posted August 21, 2013 at 11:36 am | Permalink

    JR has recently asserted that Germany will have to continue to fund Club Med ad infinitum, being in a country called Europe with a common currency and framework of law, otherwise Club Med which is constitutionally less productive than Germany will become unacceptably poor and the Germans unacceptably rich. Now, on a smaller scale JR questions the benefit of taxing London to subsidise the NE ad infinitum in order to prevent it sinking into unacceptable poverty and decay, or whether such cross-subsidy is actually counter-productive.

    Could Europe’s problems be solved by Germany leaving the Eurozone, or even the breakup of the EU? Should London become a City state with its own local currency? Are Greece’s problems perhaps not so much a problem of being locked into the Eurozone, but because the public sector there has grown so large and lazy in comparison to the private sector that it is sucking the lifeblood out it? Would there have been such a boom before the bust in Greece with its banking system if public servants did not have so much borrowed money to spend on themselves?
    Can a local economy dependent on superior public sector pay and employment ever be a healthy one or will the oversized public sector capture too much of the available resources? How can a private sector grow industrially whilst being deliberately squeezed by a lunatic energy policy? What prospect of solving these difficult problems exists under a PM whose priority is promoting the LGBT agenda not only here but to every other country in the world?

  20. Denis Cooper
    Posted August 21, 2013 at 12:15 pm | Permalink

    The Labour government started out by saying that they were going to tackle what they described as the “north-south divide”, until after a few years Blair correctly said that the economic variations across the country were actually more complicated than suggested by that simple formulation, and then after a few more years they seemed to have given up on trying to do anything fundamental about it and instead fell back on the easier option of raising more tax revenue in the wealthier parts of the country and spending more in the poorer parts.

    So one of the notable features of the South East Plan was the stated intention to grow the economy in south east England faster than the national average, when clearly that would widen the gap with the lagging parts of the country rather than closing it.

    Clearly what is needed is private investment to set up new businesses in those areas, and while some extra public investment in infrastructure and education may be necessary to encourage that private investment it seems to me that the government should devise tax incentive schemes to attract new businesses where they are most needed.

    • Mike Wilson
      Posted August 21, 2013 at 3:01 pm | Permalink

      I seem to remember a certain Labour minister, now a LORD of the REALM, promising a 10 year transport plan …. that quietly slipped down the toilet.

  21. uanime5
    Posted August 21, 2013 at 3:35 pm | Permalink

    Given that income inequality rose by a larger amount when the Conservatives were in power, especially during the Thatcher years, those who dislike income inequality will still be better off voting for Labour because at least this inequality will rise at a slower rate.

    As there could be a hidden variable it’s not possible to determine whether the level of public spending produces better growth when at a high or low level. London has many advantages that other regions don’t possess, such as Parliament and a large concentration of businesses, so this may be the reason why it keeps growing while other regions are declining.

    Reply There is no evidence it rose more slowly under Labour – income inequality arte of change has gone down under the Coalition

    • uanime5
      Posted August 22, 2013 at 9:23 pm | Permalink

      Unless the income inequality rate of change is now negative all that’s happened is that income inequality is rising more slowly under the coalition.

  22. Mark
    Posted August 21, 2013 at 6:05 pm | Permalink

    The highest spending per head is in Northern Ireland £10,263, then Scotland £10,088 and Wales £9,740, and then LONDON £9,613. (PESA 2013 Chapter 9 Table 9.15)

    London benefits from outsize spending on transport subsidies, education, health, policing and housing. These outweigh the lower social protection budget – which is driven by the fact that most who retire move away from London, which has an abnormally low population proportion of those over 60.

    Very little spending is devoted to economic pump priming throughout England, though the slightly higher levels in the other nations don’t seem to produce more economic activity.

    Declining economies away from the South East have clearly been hit by de-industrialisation and expensive energy, as well as moving jobs offshore where employment taxes are lower. These factors won’t show in an analysis of spending limited to broad categories.

  23. Lindsay McDougall
    Posted August 21, 2013 at 7:58 pm | Permalink

    The strategy of both Governments has been to create or protect employment in the poorer regions. The trouble is that they have done this by transferring bureaucracies and public sector organisations to the regions, e.g. the DVLA in Swansea, the BBC to Manchester and HMRC all over the place. This has prevented social unrest but it doesn’t facilitate production.

    Another of the problems is that the ratio of the money you receive for not working to wages is higher in the poorer regions than in London and the South East. It really hurts to be unemployed in London and the South East. IDS missed a trick; the benefit cap should be lower in the regions.

    What might help the regions is to build better roads and railways to their ports. These ports would gain market share of imports and exports at the expense of the southern ports. Business relocation might follow. There would be strong lobbying by the ports of Felixstowe, Tilbury and Southampton to prevent this happening, and HS2 would have to be cancelled to make this investment affordable.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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