Business

Should Britain let go of London?

  • 26 March 2013
  • From the section Business
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"A first-rate city with a second-rate country attached." That is how one rather brutal friend of mine describes London.

He happens to be an American, working in the City. But plenty of people working or staying in London from around the world feel the same way - even if they might put it more politely.

For a certain kind of "global citizen", London today feels like the new capital of the world - while, for people living in other parts of the UK, it all too often feels like another planet.

Our cosmopolitan capital is so different, so successful - have we got to the point where the rest of the UK would actually be better off without it?

That's the question I set out to answer, in my contribution to a new BBC 1 programme which was broadcast rather late on March 25th.

Faster

To anyone who lives in London that will sound crazy. But to others it might strike a chord.

The rest of the UK might be living through the toughest squeeze in a century, but it doesn't feel like it, walking around many parts of the capital. And in many ways, it hasn't been like that either.

London had a recession, but it didn't last long. Its economy grew by nearly 12.5% between 2007 and 2011 - twice as fast as the rest of the UK. And the property market barely stopped either.

A recent study estimated that the value of London's property had risen by 15% - or £140bn since the financial crisis began.

That increase - just the increase - is more than the total value of all residential property in the north east of England.

London's top ten boroughs alone are worth more, in real estate terms, than all the property of Wales, Scotland and Northern Ireland, added together.

Why, you might ask, would the UK want to walk away from all that wealth - give up the goose that lays so many golden eggs?

More

The Office for National Statistics reckons that the average Londoner contributes 70% more to Britain's national income than people in the rest of the country - a difference of £16,000 each a year.

It's tricky to measure, but they also seem to pay more in taxes than they get back in government spending.

But of course, one big reason for that is that most other places have not been doing nearly as well. In fact, as I mentioned earlier, the divide between them has widened since the financial crisis, because London has been growing so much faster.

So, whatever the capital's success is doing for other parts of the UK, you might say that it doesn't seem to be helping them to catch up.

It made me wonder playing host to a "first-rate" global capital also came with a massive catch: that as well as subsidising the rest of the country, London's very success was also holding it back.

This is an idea that's been debated for decades - at least since London's massive expansion in the inter-war period, when planning rules didn't really exist and London became "Greater London", with a much greater population to match.

Wrong size

But the film set me thinking about all the ways that policy gets distorted by so much of Britain's economic, political and cultural all being concentrated in one place.

Without London, the UK would look like a rather different economy - one less focussed on financial services, more reliant on manufacturing. That could make a difference to macro-economic policy.

But more interesting, perhaps, would be the impact on policy-making in general, if the bulk of decisions stopped being taken in Whitehall.

Whether it's the "spare room subsidy" or the government's "new homes bonus", every politician you talk to, outside London, will have their pet example of a "one-size-fits-all" policy dreamed up in Whitehall which fits the priorities of London and the south east a lot better than the rest of the UK.

The chief executive of Birmingham City Council, Stephen Hughes, liked the thought experiment. He told me getting rid of London would be a fantastic challenge to big cities like Birmingham.

Because, instead of complaining about those one-size-fits-all policies, he and his colleagues would have to get on with coming up with their own.

Slow

Travelling around for the film brought home another crucial way in which London has got things sewn up: Transport. I'm ashamed to say I hadn't fully appreciated this point before making the film.

You don't, if you spend your time going between London and other parts of the UK.

You can cover the 120-odd miles between London and Birmingham in a train in 84 minutes. Birmingham to Manchester is not much more than half the distance, but I found the fastest train between the two actually took longer: about 90 minutes.

Similarly, it's only 40 miles from Manchester to Leeds, but the fastest train takes nearly an hour.

You might think High Speed 2 will change this - isn't it all about bridging the North-South divide?

But when you're sitting in Birmingham or Manchester, you can see why many people outside London think high speed rail will actually make things worse.

They worry that a faster connection to London will simply make it even less attractive to go anywhere else.

'Second tier'

Alexandra Jones, who runs the think-tank Centre for Cities, told me about research they had done, showing that businesses in cities like Manchester or Leeds tend to look first to London when they need to buy in specialist help or establish a joint venture in a particular sector, even when the talent or expertise they need is also readily available, more cheaply, in a neighbouring city.

Transport is surely one of many reasons for that. Why would you look closer to home if the nearer city takes just as long to get to?

Over time, you can see how London's dominance could become ever more entrenched, with Britain's "second tier" cities never reaching critical mass.

By now you might be thinking that all I have managed to do is take a circuitous route to a pretty standard conclusion: Britain has a really big North-South divide, which is very hard to change.

Trust

But I did come across some signs of progress - in Salford Quays, for example. It turns out it's all about what economists call "agglomeration" - linking businesses and others kinds of economic activity together in such a way that they can start to punch above their weight.

You might be familiar with Salford Quays. It's where the BBC has moved a big chunk of its operations.

But that's not why I went there. I went there because Brian Robson, now a professor emeritus at Manchester University, told me Salford was an example of what Britain's other cities might look like, if they were given the freedom to think about what works in this new economy, and chart their own course.

Robson has spent years thinking about how to help the UK's other cities get more of the action. He says the new city deals - and other moves the government has been taking to give Britain's "city regions" more scope to pool and control their own resources - are genuinely encouraging.

Lord Heseltine's recent report, "No Stone Unturned", was all about this. Fans would see the chancellor's decision to accept many of its proposals as another step in the right direction.

There are more examples in my film. By the end, I couldn't help thinking that it's not London that the rest of the country has a problem with - it's the UK's over-centralised system of government.

For generations, officials in Whitehall have taken more and more power away from Britain's cities - and trusted them less and less.

This government isn't the first to say it wants to change that. But you never know, maybe this time it might really mean it.