Yes, yes, we know this

Putting together official figures and the Bank of England’s own calculations, it looked at regional GDP per head from the capital up to Scotland. And it showed that only two regions of the total 12 were actually richer than they were before the credit crunch. Those two regions were London and the south-east. Nearly everywhere else was poorer than in 2007 – sometimes, as in Northern Ireland, a lot poorer.

It’s also true that the UK has one of the greatest (second largest I think) differences in regional GDP in the EU. That’s because we’ve got London, which is a global city, part of the global economy and rich because of it, then we’ve got the rest which is pretty much a mid level European economy and all rather Meh.

However, there’s another way to look at the same figures. If you map GDP per capita across those regions, then public sector as a percentage of GDP by region, you’ll see that the poorer areas have more public spending.

That is, government makes you poor.

14 comments on “Yes, yes, we know this

  1. Public spending makes those in London and the South East poorer but makes those in the rest of the country richer.
    You could stop all public spending thereby making those in London/South East even richer but then it would be overrun by Northerners in search of wealth.
    Southerners pay to keep Northerners out, along the lines of ‘nice place you’ve got here, shame if anything happened to it’.

  2. Nearly everywhere else was poorer than in 2007 – sometimes, as in Northern Ireland, a lot poorer.

    Does that include house prices? During the bubble, average house prices in NornIron were at ridiculous levels – something like 11 times average local income.

    According to Al-Beebra, the cost of a home in the province doubled between 2005 and 2007, then crashed – presumably because everybody realised it was still Northern Ireland.

    So being “poorer” than in 2007 isn’t necessarily a bad thing. Unless you’re an estate agent.

  3. I seem to remember a Channel4 documentary a few years back (at the time of the crash?) which suggested that London and SE actually got more than their fair share of public spending. It was ‘hidden’ by the nature of the spending, e.g. on crossrail, etc. It also mentioned a ‘colonel’s wives’ effect which showed that much defence spending had to be within easy travelling distance of Harrods and Harvey Nicks, so that’s where senior officers were based.

    Is my memory entirely faulty on this? Perhaps it was just proggy propaganda or wishful thinking from my remote northern outpost.

  4. ScottR,

    There is a lot of that. It’s a sort of Upper/Middle Class Socialism – jobs at Westminster, jobs at the BBC, jobs in the Arts, lottery funding etc. Then there’s the £3bn/annum given to London Transport. Then there’s the big one: Housing Benefit – £10bn/annum, half the HB of the country.

    I know there’s some bits of London that are very successful, around the city. And there’s a bit of computer graphics work in Soho. But the rest of it seems to either be low-grade jobs or part of the supply chain to all those bits of the state that aren’t that important, like museums and DCMS.

  5. Inequality is the natural order of things. There is a surplus from smart ambitious people working collaboratively. As long as that surplus exceeds the extra cost of land and building labour etc in the rich area, then smart people with moxy will migrate to the rich place. The digital economy which allows more value to be added from team working and that value to be delivered using less land than before has moved the equilibrium upwards so the regional inequality has risen.
    Alas, as BiW says, unnatural forces are at work in London, too much central government spending and investment, higher benefit levels due to Housing Benefit.

  6. Per Tim’s original comment IIRC that is similar to one of the arguments put forward by James Bartholomew in the Welfare of Nations.

  7. BobRocket,

    > Southerners pay to keep Northerners out, along the lines of ‘nice place you’ve got here, shame if anything happened to it’.

    Isn’t that the same logic under which e.g. Britain pays for motorways in Greece (via the EU)?

    On the other side of the pond, I suspect that Californian liberals willingly hand over large amounts of tax (by voting Democrat) for the very same reason.

  8. “a ‘colonel’s wives’ effect which showed that much defence spending had to be within easy travelling distance of Harrods and Harvey Nicks, so that’s where senior officers were based.”

    Years ago at a “smoker” I remarked that the company made economically rational decisions on, for example, how thick the insulation on a pipe should be, but left the trivial decisions, such as where HQ should be, to the Chairman’s wife. I’ve never had my hand shaken so much.

  9. ScottR,

    “It also mentioned a ‘colonel’s wives’ effect which showed that much defence spending had to be within easy travelling distance of Harrods and Harvey Nicks, so that’s where senior officers were based.”

    This was proved correct in the early ’80s. The Government decided it needed to move some of the defence spending out of central London and as a consequence the Royal Signals Manning and Records office (HR department) was moved to Glasgow. There was hell on amongst senior officers whose wife’s were threatening rebellion at having to leave London. (It wasn’t just Royal Signals but I have first hand experience of seeing it happen.)

    dearieme,

    “Years ago at a “smoker” I remarked that the company made economically rational decisions on, for example, how thick the insulation on a pipe should be, but left the trivial decisions, such as where HQ should be, to the Chairman’s wife. I’ve never had my hand shaken so much.”

    Before it launched and became Orange I was chatting to the HR Director about why the HQ was based in Bristol. He said that a lot of research is done in to why company HQs are where they are but in the end it boils down to where the founding CEO/Chairman wants to live. In the case of Orange the first FD who was promoted to CEO when the licence was awarded was based with BAE, one of the early shareholders, in Bristol and refused to move anywhere else.

  10. “It also mentioned a ‘colonel’s wives’ effect which showed that much defence spending had to be within easy travelling distance of Harrods and Harvey Nicks, so that’s where senior officers were based.”

    This was a plot line in a Yes, Prime Minister episode, when Jim Hacker wanted to solve unemployment by moving defence establishments to the North.

  11. …but left the trivial decisions, such as where HQ should be, to the Chairman’s wife.

    If I want approval to build -say- a gas plant for $5Bn, I will produce volumes of analysis, and it will get at most 10 minutes discussion by the Board of Directors. If I want to increase travel per diems across the company by $15/day (total cost, perhaps $200K/yr), I will need to produce less analysis, but it will engage the Board for at least an hour, and likely longer.
    No one fully understands capital project risks, gas cost forecasts, expected operating performance, discount rates, and so on – and nor do they want to ask questions that would expose their lack of expertise. Everyone ‘understands’ per diem costs and rates, and has an opinion on them, and will defend it vigorously.

  12. dcardno: this was an entire chapter in C. Northcote Parkinson’s book. It’s known as Parkinson’s Law of Triviality.

  13. @ ScottR January 10, 2017 at 12:04 pm

    ” … a ‘colonel’s wives’ effect which showed that much defence spending had to be within easy travelling distance of Harrods and Harvey Nicks, so that’s where senior officers were based.”

    So that explains the aircraft carrier on the Serpentine.

    Still no aircraft though …

    DP

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