North South Divide Exacerbated by Coalition policies
Blog / January 19, 2012 / Comment now
It has been announced this week that unemployment reached its highest point since 1994. The unemployment figure of 2.68 million for the period September-November 2011 represents a rise of 118,000 from the previous quarter. Youth unemployment for the same period was recorded as 1.04 million, an increase of 52,000 on the previous quarter, and is now at the highest level since current records began in 1992. In Easington, the number of unemployed claimants was 3,063 in December 2011, a rise of 471 from December 2010.
The rapidly rising unemployment rate is testimony to the failing economic policies of this Tory-led Coalition that chooses to stand aside at a time when intervention is desperately needed. However, the impact of these job losses is not simply being felt evening across the UK. Instead, a decade of progress made in reducing the North-South divide is being reversed. In the North East unemployment has increased 19% and stands at 11.7% compared to a national average of 8.4%.
Coalition Ministers has sought to propagate the myth that the North East fared no better during the boom years of the Labour government. However, this is not supported by the facts. Based on Gross Value Added per head indexes, the rate of growth in the North East went from being the lowest of the regions during the 1990s to being the second highest during the last decade. Employment growth between the mid-1990s up to the 2008 economic downturn increased by 11.2% compared to 9.2% nationally.
Another myth, this time put forwarded by the Prime Minister prior to the 2010 General Election, is that the North East had become over reliant on the public sector at the expense of the private sector. Rather, between 2003 and 2008, private sector employment rose by 9.2% whilst at the same time public sector employment grew by only 4.1%. Between 1999 and 2007 the number of North East businesses rose by 18.7% which compares favourably to London’s business growth of 19.6% for the same period.
The North East economy began its long overdue recovery under the last Labour government, following decades of neglect by Tory governments. This record is being quickly undone by coalition policies across all government departments. Whilst the North East was hit hard by the global downturn of 2008, it is the policies of this government which are entrenching a North-South divide and disproportionately damaging the North East’s economy. Even after the global downturn, employment rose under the Labour government between August-October 2009 and August-October 2010 by 24,000 before falling sharply under new the Coalition government.
The inherent unfairness of Coalition policies for the North East is not confined to unemployment. The Association of North East Councils has highlighted the huge variation in changes to council grant funding per person across the UK as another area where the North East will be worst affected. The reduction in councils’ revenue support grant and changes to the allocation rules for additional funding from central government means that the most deprived and poorest areas will lose most between now and 2012-13.
Heat Map: Changes to Council Funding
The unfairness is highlighted by the fact that councils in more prosperous areas in the south will receive a per person increase whilst North East councils face some of the largest cash cuts. There are further proposals for other changes to how councils raise their funds such as the localisation of Business Rates. Early analysis by Durham County Council has shown that such a move would increase the budget of Westminster Council by £950 million each year whilst Durham County Council would lose a further £86 million.
Coalition Ministers have also announced their intention to allow regional pay differences for low paid workers across the public and private sector. Whilst no firm policy has been announced by the government, the issue was raised in the autumn statement which asked for expert advice on how public sector pay might better reflect local markets. Rebalancing our economy for the future and redressing the north-south divide should be a priority for government. However, proposals to entrench regional pay differentials in the public and private sector would simply entrench this divide.
A final assault on the North East’s economic future has been the destruction of our well-established structures for regional development. One of the first actions of David Cameron’s government was to abolish our Regional Development Agency, One North East, and do away with Regional Ministers who had been able to play an important role working with the private sector on large scale investment programmes. The net affect has been a two-thirds cut to regional development funding and the establishment of a much smaller national fund to which every region must compete for investment. Pricewaterhouse Coopers evaluated the work of RDAs between 2002-03 and 2006-7 demonstrating their role in improving economic output from investment. The report showed that for every £1 spent by RDAs an average of at least £4.50 of economic output was achieved. This rose to an output of at least £6.40 when future benefits were assessed. Local Enterprise Partnerships have been set up to replace RDAs, however these bodies are unfunded and are dispersed across the region.
The Labour government was able to mitigate against the worst impact of the global downturn through investment and support for private sector growth. The reckless actions of this Coalition have set in reverse the progress that was being made between 2009 and the last General Election. The North East requires an alternative vision for confidence, growth and jobs. Labour’s Five Point Plan provides a foundation for this and proposals for a guaranteed job paid for people out of work for over 12 months, as suggested by IPPR North, would start the process of regeneration so badly needed in the North East.
