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?