Wednesday, July 25, 2007

Regional Income Inequalities

I think it can be hard to get your head around regional income inequalities; the sheer scale of them. Some graphs I found on the Eurostat site help.


This shows the actual regional inequalities; the data is here. British regions include some of the richest in Europe, Inner London is at 302.9% of the EU27 average, or Berkshire, Buckinghamshire and Oxfordshire at 173.8%. Others are decidedly poor, West Wales and the Valleys at 80.3% or Merseyside at 87.3%.

This shows that the United Kingdom has the largest range of any EU country. Of course, a range is only so instructive, it would be nice to see the variance. I bet the UK would be at or near the top of that table as well though.

Finally, this map shows growth. The gaps are not being closed. Rich regions in the UK are increasing their distance from the poorer ones.

This is despite a massive subsidy, which Mike Denham established the scale of - for example the South pays 9% of its GDP. This subsidy is not new. It is clearly failing to create a revival in the North and needs to be reassessed if the poorer regions are to recover some of their nineteenth century glory. David B Smith establishes comprehensively how government spending, even financed by the South, can trap the Northern economy into dependence if it takes up too large a percentage of the economy. The public sector in the North makes up 58% of that region's 'GDP', close to the 75% that the Communist regime is thought to have managed to control in the old Soviet Union. Enough to crowd out private industry, keep the subsidy politically necessary by preventing a revival in the North's economic fortunes.

The more you look at regional inequalities the more two things become clear:

  1. Britain's GDP per capita is a rather weak statistic. There is too much variance for it to mean much.
  2. We really need to think about new approaches to improving the economic prospects of poorer regions.

4 comments:

Anonymous said...

Surely if we want to improve our approach to tackling regional inequalities we need to measure the massive subsidies that the South has enjoyed over the period since 1979? Maybe include the subsidy effect of putting the exchange rate at a level friendly to the City rather than manufacturing?

Or if that's too holistic for you, maybe just add up how the failure to enforce proper drainage and sewerage regulations has subsidised the migration of people from North to South, where economics might have predicted that instead some companies might move to where the people are? Or the effect of a transport policy geared to expanding the London conurbation, rather than bolstering alternative ones?

We might even consider that if the City of London is abstracted from London, the "socialisation percentage" figures start to look pretty ugly there too.

But I guess it's a lot easier just to mumble about lowering taxes in the south and "stop subsidising the rest of the country."

Finally of course, if you have any intellectual honesty, you'll take a look at the figures used for the "GDP of the South East" which conveniently count company profits from factories in the North as part of the South East's GDP when company HQ is near London...

We might also start charging the South for it's overconsumption of electricity produced elsewhere for the National Grid and indeed investigate transfers of water resources.

Once we've done that, maybe we'd be closer to understanding the economies of the United Kingdom.

Matthew Sinclair said...

I haven't mentioned lowering taxes in the South once in this post. I mentioned it in the last one on regional inequalities but that was very much a side-issue. It's a shame you've resorted to defensive mud-slinging rather than actually reading what I have to say.

Calling a particular exchange rate or a failure to ensure proper drainage or sewerage regulations a 'subsidy' is obviously ridiculous.

I agree that Outer London certainly has problems. I think socialisation in some of the outer boroughs would be just as high as in the North. That would have been a good point had you not submerged it in your ad hominem.

The regional GDP is based upon gross value added statistics for different regions. They're the best we have to work with and from the ONS and Eurostat, talk to them if you think they're so far out.

I don't follow your National Grid point...

Anonymous said...

Maybe include the subsidy effect of putting the exchange rate at a level friendly to the City rather than manufacturing?

I was under the impression that we had floating exchange rates, so that "we" do not put the exchange rate to anything.

Or if that's too holistic for you, maybe just add up how the failure to enforce proper drainage and sewerage regulations has subsidised the migration of people from North to South, where economics might have predicted that instead some companies might move to where the people are?

I have not noticed that the sewers work any better in the North than the South. Clearly these regulations are useless. And you clearly think them to be harmful, as you think the South has benefitted from their absence.

Or the effect of a transport policy geared to expanding the London conurbation, rather than bolstering alternative ones?

What transport policy?

The construction of the M60 and M1 extension to benefit Manchester and Leeds?

W G Gruff said...

I live in the north and am almost desperate for the sort of lucrative, short-term, semi skilled job I could find with ease in the south (to finance my return to self-employment, ultimately) but there is little to be found. The recruitment sections of the local papers here are filled with public sector vacancies, especially in the North East, where I lived until recently, but really worthwhile jobs are few, and 'far between'.

Southern subsidies would be better spent helping the north back into self-dependence (which means large scale unemployment in the short term and massive investment in adult education), rather than further into state dependence.