The United Kingdom, England in particular, has a massive problem of regional inequality. It is growing and though there is a political consensus that “something must be done”, what is being done is incoherent, underfunded and does not yet match the scale of the challenge. We saw this in two government reports published this week. The industrial strategy document highlighted in one of its tables the enormous productivity gap between London and the south-east and some of the other regions in the country. On Tuesday, the State of the Nation report from the Social Mobility Commission, chaired by my good friend Alan Milburn—I wish he was still in politics—painted an extraordinarily bleak picture. The commission’s report said:
“The UK now has greater regional disparities in economic performance than any other European country”.
Just reflect on that for a moment: greater disparity than that between northern Italy and the Mezzogiorno and greater disparity than there is between prosperous southern Germany and the eastern Länder. If I may add my own aside on that, this is before Brexit and the disappearance of the European structural funds that have, over the years, been one of the few consistently reliable sources of money for physical and economic regeneration. We still have no guarantee of what will happen to this vital source of regional investment in the longer term. I do not know whether the Minister has news for us today. I doubt it, but it is something that the Government will have to speak about.
Since the great depression of the 1930s, our prosperity has been overwhelmingly driven by London and the south-east. There are also big differences in public spending per head between northern and southern regions. The estimate of the Social Mobility Commission is that this comes to £6 billion a year. Even where public spending is relatively generous per head, as it is in the north-east, it is important to look at the composition: almost half of public spending in the north-east goes on welfare payments and only 6% on stimulating the regional economy through investment in science, employment and transport. In London, despite pockets of great inner-city deprivation, only a third of public spending goes on welfare and 12% is spent on economic regeneration.
Of course, there is a more variegated picture than the regional picture: coastal towns in the south have done badly, as well as other parts of the country. There is one interesting fact that the commission brings out: in thinking today of Kensington and Chelsea, we think of the awful tragedy of Grenfell Tower. But in K&C borough, 50% of disadvantaged youngsters get to university. Do you know what the figure is for Barnsley, Eastbourne and Hastings? It is less than 10%. Therefore, on the creation of social mobility, as well as on inequality, the regional picture is pretty gloomy. It is a matter of great concern to me as a Carlisle lad that Carlisle is fifth worst blackspot in Britain for social mobility, while the area I represent on Cumbria County Council—Wigton in Allerdale district—is the sixth worst. We need something to be done. It is not good enough to say that we are anti society’s ills, particularly if you are on the progressive left. We win only when we offer solutions.
As for the past, Labour can say that it helped invent regional policy. My grandfather was a miner in west Cumbria. His pit closed in 1926 and no one worked in the area until the Second World War. It was the Distribution of Industry Act 1945, passed under the wartime coalition when Hugh Dalton was president of the Board of Trade that started the process of development areas, the building of advanced factories on new estates, and the putting in place of a system of licences, grants and aids that helped transform these depressed areas. That achievement was built on with great success by the Wilson Governments of the 1960s with investment grants, regional employment premia and all of that.
We have to find a way to devise a credible regional policy for modern economic conditions. What we did then will not work. Britain is unlikely to attract major new manufacturing plants. Small firms are the major source of employment growth. Services are Britain’s major competitive strength. It is a new generation of innovation and high-tech entrepreneurs who are likely to deliver the best jobs for the future.
What needs to be prioritised? For me, connectivity, both digital and rail, is very important. I remain a committed supporter of HS2 as potentially a great uniter of the divided north and south economies. He is not here, but I greatly admired my noble friend Lord Adonis’s lecture on the future of London, in which he talked about HS2 facilitating a great golden arrow of economic integration between the north, the Midlands and the south. I am with him on this, but with an important qualification: I would like the golden arrow to point north rather than south. For instance, I want it to be feasible as a result of HS2 to shift whole government departments out of London, with fast connectivity to the capital to attend occasional ministerial meetings. In fact, to be cheeky, I suggest that we relocate Defra to my native Cumbria, where the civil servants could hop out of their office and look at the practical consequences of policies on farming, fishing, environmental management and flooding.
In research and innovation, better connectivity will stretch the golden triangle of our university research north-west, I hope to the excellent Lancaster University, which I chair, and, in the north-east, to Durham and Newcastle. I greatly applaud the Government’s commitment to expand the nation’s research and innovation budget. However, at present, 46% of that goes to Oxbridge and the top London institutions. A modern regional policy would set a target for the new UK Research and Innovation to reduce their share to, say, 30% of a greatly expanded budget. The way to do this is with the science and innovation audits presently being conducted area by area. Risky decisions have to be taken to back job creation and innovation outside the present golden triangle, because the north has to become a magnet. The Government have to help design that magnet for this new generation of entrepreneurs, scientists and engineers. Here, it is important that we continue to encourage overseas academics to work in Britain and that we have a generous policy towards refugees—often brilliant people whose countries deny them basic freedoms, who want to come and work in Britain. They should be encouraged to work in the regions.
The north needs more investment than HS2. I am disappointed that the Government have not made a commitment to getting on with HS3. We need modern transport hubs at every level. Again to quote a local example, the journey time from Carlisle to Manchester Airport is getting on for two and a half hours. It takes only three and a quarter hours to get to London. We have to improve services within the regions. When you get to Carlisle, if you are going to Sellafield, the greatest nuclear site, it takes an hour and a half on the train to get there westwards. If you are going to Newcastle, it takes you more than an hour and a half to cover 60 miles to the east. We have to improve that connectivity.
How is all this to be paid for? I am not in favour of robbing London to pay for investment in the north. I support Crossrail 2—I see the economic case for it—but London is a very rich place with a huge tax base. I would like the Government to give London’s mayor expanded powers to raise revenues from that rich tax base. I would start by putting additional council tax bands at the top end on expensive properties. That would release more national funds for the north.
In the 1960s, Labour used to self-confidently make the argument for regional policy on the grounds that it was in the interests of London as well as the north to have a better-balanced distribution of growth across the whole country. That was relevant then and is even more relevant now in taking the pressure off house prices and creating exciting new opportunities for dynamic young people in other parts of the country, where their expectations of the good life can be somewhat better than renting an affordable bed-sitting room.
It is in the interests of the whole country, non-Londoners and Londoners alike, that we have a kind of British Marshall plan for the regions. I would put two other elements in it. First would be an attack on our decaying town centres in the north: tackling empty properties, not allowing heritage to decay, creating attractive units at affordable rents and business rates, and bringing back housing to town centres. Secondly, it is important that we try to transform the quality of public services in the north, particularly teaching in the too many low-performing schools, which have been tolerated for far too long, but also doctors and nurses, who are in short supply, to deal with the brunt of an ageing population. That means incentives for young professionals, particularly for youngsters to come back home from university—their parents would dearly love that. Why not try to devise a scheme where the burden of tuition fees is lifted from students who commit to working for five or 10 years in the regions whence they came?
There has to be a new political framework for a revived regional policy. Again, to compliment the Government, I greatly welcomed George Osborne’s commitment to the northern powerhouse, devo deals and city regional mayors. It showed commitment that something needed to change. Given the presence of the noble Lord, Lord Heseltine, in the House, I say how much I admired his effort in trying to make that policy work. It was an outstanding performance. I am very sorry the Government took the opportunity for it to continue away from him. However, it was too piecemeal an approach and the devo deals depended on establishing local consensus. I know from bitter experience in Cumbria how difficult local consensus is to establish. In our case, there is frankly no sense in adding the third tier of an elected mayor to an already dysfunctional two-tier local government structure.
It is a shame that Osborne is no longer in the Cabinet to advocate these policies, although he is a brilliant editor of the Evening Standard. His policy now seems to suffer from the “not invented here” syndrome of the present Government. We have an industrial strategy that seems to prioritise sectoral deals over regional deals. We have to find a way of meshing the two together. In another Cumbrian example, it is self-evident that it is the Government who have to make a decision about whether we have new nuclear power stations. They will require some form of public equity stake, but if they are to go ahead the preparations for them—the working out of the planning, housing, skills and local supply chains—has to be done by some powerful devolved body.
I am coming to the conclusion of my remarks. We need a comprehensive new political structure of devolution based on city regions. This should form part of a constitutional convention that looks at the future of England and the United Kingdom. We need that political change to go alongside the renewed regional policy of which I have spoken. I look forward to the rest of our debate this afternoon.