The Economic Necessity of a Whole Nation Approach to Growth

Co-founder of Whole Nation Conservatives Miranda Jupp is a longstanding North East Conservative activist and former council candidate. Prior to the 2024 General Election she was Chief of Staff to Sir Simon Clarke.

The UK economy is unusually dependent by international standards on its most productive city, London: removing London from our GDP figures would result in a 14 per cent fall in GDP per capita. In contrast, the equivalent impact of removing Munich from German GDP figures is just 1 per cent (1). Whilst post unification Germany has successfully reduced the productivity differences between her most and least productive regions, the UK has seen this gap increase further over the same period, with London’s productivity in 2023 reaching 170% of the UK average, compared to 125-128% in the 1980s (2). In 2022, London’s GDP per capita was £57,338, well above the UK wide figure of £33,593. But the figure for the North East was just £24,172 and Yorkshire & the Humber, West Midlands, East Midlands, Northern Ireland and Wales all had GDP per capita levels less than half of the London figure (3).

This situation is reflected in significant disparities in average household incomes across different parts of the UK: the ONS have produced a fantastic interactive map covering the spatial distribution of income and productivity (https://www.ons.gov.uk/visualisations/dvc1370/) which allows you to explore this in detail. There is a stark difference between the average earnings of those in London’s commuter belt and most other parts of the UK, with particularly low incomes being apparent in the North East and a belt across the centre of the UK from the Humber Estuary to the Mersey.

As Boris Johnson repeatedly stated throughout his time as Prime Minister, from the 2019 campaign to his speech outside Number 10 in July 2022 when he was forced to step down as leader (4) “genius and talent and enthusiasm and imagination are evenly distributed throughout the population but opportunity is not”. Where you are born should not dictate your opportunity to succeed in life, but for too many communities, succeeding close to home is a struggle. There are multiple reasons why for some people moving to London in pursuit of success is not a practical or attractive option, from the value of family and community links to the enormous housing costs around the capital. If people are unable to stay local and go far, some will not fulfil their potential to contribute to our economy. But there are also huge social consequences for communities when top talent leaves an area: lack of disposable income limits the opportunity for local businesses to grow; lack of role models and examples hard work being rewarded limits aspiration amongst younger generations; working age people struggling to make ends meet limits their capacity for civic engagement.

Given the success with which Germany has reduced regional inequality post unification, it is clear that policy choices can reduce disparities. Many of the communities which currently suffer from limited opportunity have prospered in the past, but whereas until the mid-20th Century it was common for significant internal migration to reflect the location of economic opportunities, post-war planning rules have acted as a significant barrier to labour mobility. As covered well in the highly recommended Foundations report (5), this restriction on labour market mobility also means areas where industries have declined retain a larger population than they would have historically, depressing wages. 

The combination of rapid deindustrialisation (not unconnected to the lack of investment and innovation in uncompetitive nationalised industries in the post war period) and the distortion caused by the planning system following the introduction of the Town & Country Planning Act 1947 has created a situation where many communities have been trapped in a vicious circle of low opportunity. 

This presents a significant barrier to the meaningful meritocracy which must lie at the heart of any Conservative offer with broad appeal. Most people want to build a better life for themselves and their families. They believe that hard work should be rewarded. But if they can’t see a way that doing the right thing will make life better in their own situation, it is all too easy to see how a more interventionist state becomes appealing (even though state intervention has at best exacerbated the causes of the regional inequalities which are a barrier to success).

As Conservatives, we must always work with the world as it is rather than as we would like it to be. Our approach to regional growth policy must acknowledge that many previous attempts to catalyse growth in regional economies have had very limited success. It is however central to the Whole Nation mission that we identify means of addressing regional economic underperformance. This doesn’t mean attempting to pick winners or indiscriminately throwing taxpayers money at the problem. It does require learning from some of the progress made by Conservative metro mayors in recent years, small scale successes which have boosted local economies around the country and what has worked internationally: we hope to explore such examples in the coming weeks and would welcome contributions from those who have seen practical steps make a difference in their area.

Finally, whilst some have questioned the wisdom of committing capital spending by the state in an effort to boost less productive regions, it is vital not to be too short termist in assessment of such spending. Evidence based public investment which aligns with the power of private sector finance has the potential to reduce the demands which are currently put on more productive parts of the UK as a result of the need for fiscal transfers to support left behind communities. If we want to be the party of lower taxes, reducing the demands on the public purse by increasing the opportunities for well paid employment and business growth is a good step towards making this possible. It is to the advantage of the whole nation for all its constituent parts to fulfill their productive potential.

References

(1) “Is Britain really as poor as Missisippi? John Burn-Murdoch Financial Times 11/08/2023 https://www.ft.com/content/e5c741a7-befa-4d49-a819-f1b0510a9802

(2) P99-100 The Productivity Institute Agenda for Productivity (2023) Chapter 9: Regional Productivity, Inequalities, Potential Causes and Institutional Challenges, https://www.productivity.ac.uk/wp-content/uploads/2023/11/TPI-Agenda-for-Productivity-2023-DIGITAL-VERSION.pdf

(3) Statista https://www.statista.com/statistics/1168072/uk-gdp-per-head-by-region/ (based on ONS data)

(4) https://www.gov.uk/government/speeches/prime-minister-boris-johnsons-statement-in-downing-street-7-july-2022

(5) https://ukfoundations.co/