Regional Policy

Abstract

Unemployment, standard of living, house prices and the level of investment are some of the variables which help us to form an economic picture of a region. In order to decide whether the north-south divide really exists we need to compare such data for different parts of the country. The term ‘north’ will be used to cover areas that lie north of a line from the Severn to the Wash. When the country is broken down into regions North refers to northern England.

Hopes that the next decade will witness the elimination of the deep economic gulf between North and South are likely to be sorely disappointed.

Even though labour shortages in London and the South East will force some decentralisation of economic activity to neighbouring regions, more distant areas, with the exception of Wales, are unlikely to benefit, concludes a study by Cambridge Econometrics and Northern Ireland Economic Research on regional economic prospects.

The report predicts: ‘The future is expected to resemble the 1950s when the peripheral regions languished, more than the 1960s and 1970s when strong government regional policy measures brought a revival to the peripheral.’

The report also concludes that the line dividing the prosperous South from the slow growing North still begins at the Severn Estuary but has shifted in a more north-easterly direction so that the Midlands is now included in the South. Even so the division shows no sign of being eradicated in the 1990s.

One of the main assumptions of the report, which is one of the few to project economic trends to the end of the century, implies that regional policies could redistribute prosperity more evenly throughout the country. While the report’s authors are careful to avoid such an explicit conclusion and there is scarce evidence that regional policy brought about any lasting transfer of wealth in the past, the suggestion remains. The study appears to demolish the government’s assumption that economic growth will eventually radiate out to all the regions.

While there is little evidence for the government’s case, the study does indicate that for some regions, like the East and West Midlands, East Anglia and some extent Wales, have benefited from expansion in the South and will continue to do so. Of all the regions the Midlands will grow most rapidly, expanding 49.4% between 1987 and 2000.

Moreover, the report projects that economic growth will average 2.4% a year during the 1990s, after slower growth up to 1992. But that is well below the current level of growth of productive capacity of around 3 to 3.5%. And if the current investment boom is sustained, the ability of the country to grow without inflaming inflation could increase.

Adapted from The Independent, 3

January 1989.