Thursday, November 28, 2013

London - a capital crime

Deutsche Bank describes Britain as “two nations” – an island of wealth within the M25 and a hinterland of poverty everywhere else.
This is the latest in a long line of pronouncements. The London Standard recently described London as “a world class city state attached to an Eastern European economy”.
Much of this is London-centric provincialism of the worst sort but, in so far as it’s true, it’s because the Great Wen is the seat of power and Londoners are so blind to life north of Watford they keep all the wealth and jobs for themselves.
Oliver Harvey, a Deutsche Bank economist, says economic output per person employed in London is roughly double the UK average; from 1997-2008 the difference in gross value added per person between London and the rest of the UK exploded from £10,000 to £18,000 and has remained roughly constant since then.
The biggest change, apparently, is that London is increasingly detached from the fortunes of the old industrial heartlands. The evidence also suggests that not only does London suffer less from recessions than the rest of the UK, it now tends to bounce back more quickly.
I'm not sure it's as bad as it appears. There are several reasons for this including the question of how you define London and, for that matter, a London business.
If KPMG does work in Germany, is the revenue generated allocated to London specifically or the UK in general? The answer is London because the Head Office is there but it is debatable if it should be credited to the London GVA account.
The fact is that London and the provinces are interdependent and it is misleading to suggest one could prosper without the other. 
More to the point, London may be doing well but much of its personal wealth is built on a wholly artificial house-price spiral which will one day kick people in the teeth (maybe when the Russians go broke); it's living costs are therefore exorbitant forcing up pay rates but resulting in lower standards of living; it is heavily dependent on migrant labour at exploitative, rock-bottom pay rates which create a downward spiral of poverty amid all this prosperity; and as the seat of Government, the centre for the media and the location of head offices, it is guilty of a self-congratulatory, self-justifying financial conspiracy against the rest of the country (no wonder the Scots want to escape). 
The answer is devolution of power, closure of most Government offices in London and their move to the provinces, no matter how much the civil servants kick and scream as did the BBC luvvies forced to move to Manchester.  
An example of the State bias towards London can be seen in the recent debate about arts funding. You will find London gets a vastly excessive subsidy at the expense of the provinces largely because the decision-makers prefer to go to the Opera in London than in Buxton.
The truth is that London-centric policies are denying the rest of the country an opportunity to compete.
A CBI study a few years ago showed State spending on rail transport in London was ten times per head the rate of spending in the provinces.
This simply reinforces the disparity between the capital and the rest, helping to create the vicious circle where it is perceived that the best facilities are in London and therefore sucking into the city all the talented people who would be happier, wealthier and wiser if they stayed well away from the M25.
We may be doomed to get HS2 but that is almost entirely for London's benefit – rich Londoners will be able to pay royal visits to Birmingham, Manchester and Leeds and still be back home in time to see the latest subsidised play at the laughably-named "national" theatre in London.
HS2 will also benefit London by spreading the commuter belt even further, allowing more poor saps to travel daily to the capital from the provinces to get to work.
It will suck more life out of reasonably prosperous cities like Birmingham but the CBI, city council etc short-sightedly think HS2 is a good idea because they would like the building work, the repair shops etc that it will bring.
Meanwhile the line is to arrive into Euston, that monstrous sixties carbuncle which is already jam-packed, instead of to St Pancras where you could easily change trains for Eurostar.
There is still no direct rail connection between the provinces and the Channel Tunnel even though we were promised such a thing long before the route was opened. Why is it assumed that provincials have no business heading to France or Belgium (and vice-versa)?
Meanwhile look at the scandal over a new "London airport". No doubt it will end up at Heathrow or, if not, at Boris Island.
Why is there any need for another London airport at all when the regional airports (Manchester, Birmingham, East Midlands, even Luton) could be expanded to deal with any genuine capacity demand perfectly easily?
This would spread prosperity around the country, it would be cheaper to achieve and less disruptive for Londoners. Yet the attitude seems to be – as always – that if it isn't in London it doesn't really exist.
London is guilty of creating a brain drain from the provinces as a result of this vicious circle. All major investment is London-centric (hell, even the blasted Olympics went to London; when Birmingham bid for them a few years ago, nobody outside the region had a good word to say for it – why? For that matter, why is the national football stadium in London?).
All this investment in London encourages businesses to headquarter there. That sucks in talented people. That, in turn, requires more state investment and so it goes on.
The regions' death spiral has to be broken but that would cost London money, jobs etc and as all the decision-makers are in London, it will never happen. Look at how little money Michael Heseltine has managed to wring out of the treasury for the Local Enterprise Partnerships as an example of the way London dominates and refuses to release any of the reins of power.
There is a chance that in the near future the Palace of Westminster will have to close for refurbishment and MPs will be obliged to meet elsewhere. It would be instructive to force them to meet in the provinces, away from London, and take the civil service with them. If that happened, you would suddenly see a boost in state spending in the area chosen as the seat of parliament because suddenly the people in power would be forced to look at the world from a different perspective.
The poverty in many old towns and cities, the joblessness, the lack of economic growth and the drain on the State that this represents (through benefits etc) are almost entirely due to the London-centric attitude of too many influential people in this country (petty London provincialism, even among exiled Scots, Brummies, Scousers etc).
A balanced economy requires a balanced attitude to London but that would require a massive withdrawal of public investment in the capital. This would be politically unacceptable in London because the place is so crowded already the voters would not put up with it.
Yet it is all an illusion: the City creates money out of thin air and, when it disappears, the provincial taxpayer has to bail out the banks while Londoners continue to receive their eye-watering bonuses while house prices are utterly absurd because London is now the money-laundering capital of the world, welcoming Russian crooks with suitcases full of cash stolen from a country which is in irreversible financial decline.
Pay rates may be lower in the provinces but if you judged the question by standard of living and one of Dave's happiness indexes, I suspect you would find a different answer.


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