It is good news that the UK economy is growing again at a decent pace. It remains true that London and the South-east are growing faster than the rest of the country.
Labour complain about this. Reading the Guardian they seem to think success in London and the south-east is a bad thing. What they and Labour need to do is to study why and how London has done so much better than the rest of the country. They need to ask themselves why was this true when Labour was in power for 13 years, dedicated to spreading the growth and prosperity more widely around the country. They can of course also ask why hasn’t the Coalition succeeded in changing this trend so far, despite wanting to?
I start from the proposition that it is good news that a big part of the country is working better. I do not want to damage that by taxing it more or undermining it in other ways. We need to learn from it so the rest of the country can do as well or better. We need to see London’s success as a strength for the rest of the country, not a problem. London’s taxes are certainly needed to sustain the levels of state spending elsewhere.
London demonstrates that you can create a virtuous circle. London wages and salaries are on average higher than the rest of the country. London creates more and better paid private sector jobs than many other parts of the country. London attracts and retains a lot of talent, capital and business from around the world.
As the world ‘s growth is dominated by cities, the UK needs to have a similar success in some of its other cities to that experienced in London. Manchester or Leeds or Birmingham have the scope to be faster growing world class cities that can too attract their share of wealth, talent and business from overseas, and draw in more home grown talent and enterprise. They need bigger private sectors to reduce their reliance on the public sector.
The Guardian complains that London has received the Crossrail investment from the public sector. It was not the decision to build Crossrail that made London successful. It was a necessary catch up investment to cope with all the extra people and work journeys that London is generating. If other great cities in the UK are attracting similar volumes of additional travel, they too should have extra transport capacity. London is still a net contributor to the UK coffers, with a much lower public spend per head than that enjoyed by other regions.
Tomorrow I will look at what other changes to public policy could help other great UK cities to grow as quickly as London. The changes needed are ones that are friendly to the private sector. Building a bigger and more expensive public sector in these cities has been tried but has not achieved the results wanted.