Barnett and the block grant
John O’Farrell suggests a stronger formula could ease local economic problems.
All governments are coalition governments. Especially single party governments, where party ‘unity’ is maintained by either the ruthless whipping of the recalcitrant or the sort of whispered scratch-my-back deals which makes a mockery of open government. In a way, multi-party governments are better for the electorate. At least most of the deals have to be in the open, as the party manifestoes are ditched for published programmes for government.
That means that deals can be done, provided they don’t break the law, or at least any law that can’t be changed by the new government. Coalitions are seen as normal in Berlin and Dublin, and even in Edinburgh, Cardiff and Belfast. The Westminster village is confusing isolation with centrality, like residents of remote Pacific islands.
In historical retrospect, Labour’s most lasting achievement, aside from the deficit, was devolution for Scotland, Wales and Northern Ireland. The confluence of this election and this recession must concentrate minds not only in the regions and nations, but in Whitehall as well.
These islands are experiencing different recessions. The fact of devolution means that it is easier to see the contours of the distinct regions and nations of the United Kingdom. Some regions are worse hit than others. Construction, for example, has been particularly badly hit in Northern Ireland, where not so long ago, one worker in seven was employed in some building-related activity.
Thirty years ago, the UK had a balanced economy, with shipbuilding, car-making, mining, banking, farming, and a relatively equitable spread of economic activities across the national economy. That
balanced economy has gone.
Research published last month in the Observer demonstrated that regions and nations of the UK which had crawled out of the last recession are effectively back to square one. A decade’s progress has been wiped out. “Most of the pain is concentrated in the one-time manufacturing hubs, which missed out on the boom years because entrepreneurialism and private sector job creation failed to compensate for the factory and mine shutdowns,” reported the paper. “The majority of new jobs were generated by the public sector, leaving such areas highly vulnerable to cutbacks in state spending.”
Areas around Liverpool, Middlesborough, south Wales and Glasgow top the unhappy chart of what the Observer calls “The Top 10 Benefits Blackspots,” only out done in misery by Northern Ireland. The cruel irony of all this misery is that one regional economy is most to blame for the crash – the City of London and the financial sector which dominates the economy of the South East and whose misfortunes dominate the headlines of its neighbours in Fleet Street.
The boom profited hugely the region around London, but the rest of the UK saw little of the trickle down effects. The bust, however, is most keenly felt in those parts of the Kingdom which are most marginalised – socially, economically, culturally and when it comes to those who set the agenda for the ‘national’ press and the general election.
There was a story told about Tony Benn when he was Energy Secretary under Harold Wilson. On the wall of his office was a large map of Britain – which he had turned upside down. He told his mystified civil servants that it helped him “look at the
country in a completely different way”, as it might be looked at from, say, Scotland, or Wales, or Northern Ireland. Whomsoever gets into power after 6 May, might be advised to do something similar.
Research into the UK’s staggering inequalities of wealth show clearly that the dividing markers are based upon education, class, gender and geography. It is true that the class divide is the most persistent, especially within our differing social groups, but geography really matters. In short, if the UK continues to depend upon the Square Mile to ‘produce’ one-third of its GDP, then two things have to change before we are returned to what is effectively being hostages of banks which are too big to fail.
We need to redefine what constitutes wealth creation, and we need to re- balance the UK’s economy so that the regions get a look in. We don’t just need the Barnett formula to continue the block grant, we need Barnett-plus: an integrated economic strategy for all parts of the UK. Then we may be ready to properly trigger our moribund and timid private sector.
