Exodus call clouds serious questions

Aug 18 2008 by Adrian Pearson, The Journal

LAST week, they were called “plain wrong”, “barmy” and “stupid” after they suggested giving up on parts of the North and moving people south.

But imagine this was the top line of the report instead: It is revealed the Government spends £8,177 per head each year to improve life in the North East, but the region is no nearer to closing the North-South divide which sees thousands of families earning less than their southern counterparts.

Add a conclusion stating, for argument’s sake, all our regeneration leaders had evidently failed 2.5 million people and a view that generations more are destined to live below the standard of life expected in the South East.

Would the report authors still have been accused of a “lack of clear understanding” of the region?

There is little need for a media background to predict the next day’s headlines, and they certainly would not have upset David Cameron’s two-day trip to the North West.

Instead there is now, no doubt, some interesting internal dialogue in a London office as economists of a certain think tank wonder how things went so wrong in the telling.

They need not search for long. Northern pride was the one factor they failed to measure, a failing which again proves why elected representatives and not bean-counting researchers run the country.

But despite the unconventional conclusion in the Policy Exchange report, there are many, mainly non-Labour, politicians whispering that parts of it may not have been too far off the mark.

In the furore and amusement that followed publication, many were only too happy to use the report as a way of attacking the Conservatives or re-affirming their commitment to the North.

Yet if the authors had simply said we need to look at how we spend the money and what we can realistically expect, then Labour could have faced very different headlines. After all, there have been many think tank reports indicating a lot of money is being spent with not very much return. The renowned Organisation for Economic Co-operation and Development told the region two years ago it had unrealistic expectations and should rethink plans to revive the economy and close the North-South divide.

It stopped short of suggesting we build a fence around Sunderland and all head south, but details showed similarities.

Iain Hasdell, head of local government financial services group KPMG, seems to be one of few to read more than just the press release sent out with the report.

He said the details were a mixed bag, with the figures at the very least “providing a welcome exposé about the need for regeneration policies and funding in the UK to be radically improved”.

Mr Hasdell also notes the report failed to recognise the need for better organisation when spending public cash.

Like many, he finds most of the report nonsensical, but agrees real problems face the region. The Conservatives have frequently questioned whether development agencies such as One NorthEast provide value for money, although they have so far stopped short of a plan to scrap them all. And when their regional development agency plans are announced later this year, they will probably include other ways of ploughing billions of pounds into northern cities.

Their opposition to the multi-million-pound quango is undoubtedly too technical to be a big vote winner, and the reaction to the Policy Exchange report may well lead to plans being watered down, but behind the scenes the Conservatives are asking a question many independent economists want answered: Just what do we get for our money? One NorthEast spends £250m a year, administers a similar chunk of European cash and has a say over spending in some Government departments.

Its hard work has helped create many new businesses, with the region’s economy the fastest growing in the UK, and made big inroads into the pay gap that separates the North from the South.

Yet, as the Policy Exchange report failed to make clear, by some measurements the North has not come any closer to catching London and the South East.

Statistics from Revenue & Customs suggest that the personal income of many in the North has “continued to slip relative to the country as a whole”.

If this was any other report you would have seen headlines reading “Billions spent but we’re getting poorer,” and then the only people asked to explain their actions would have been regeneration chiefs.

Indeed, the Labour-leaning ippr north is currently chairing a commission to see why pockets of severe deprivation exist in the region despite the huge chunks of Government cash spent each year.

It is worth mentioning here the statistics anyone with a defensive disposition will be calling out for.

Sunderland was identified recently as the most digitally connected city in the UK, saw a 50% rise in inward investment projects last year and gross weekly pay has increased three times as fast as in the rest of the region in the past five years.

The only conclusion most would agree on then is that for the North East, success is a waiting game. As Mr Hasdell points out, the economists at Policy Exchange quite simply failed to note the potential for success seen by many in the North.

And Sunderland arc recently admitted its plans will raise standards in the city over decades, not months.

Barmy they may be, but for the time being at least it is true the North will continue to play second fiddle. If only the Policy Exchange had looked to the same future for which many here are preparing.