North East economy is too reliant on Whitehall
Jan 26 2009 by Ben Guy, The Journal
THE North East economy is among the most Government-dependent in the UK, a study has suggested.
Thousands of North jobs are directly dependent on Whitehall spending, leaving the region especially vulnerable to any cuts which may have to be introduced during the recession.
Figures suggest that public sector spending is set to account for up to 66.4% of the region’s economy this year, up from 58.7% four years ago.
Across the whole of the UK, 49% of the economy will consist of state spending, with Wales, at 71.6%, and Northern Ireland, at 77.6% the most dependent.
But Malcolm Page, deputy chief executive at One North East, said it was more important to focus on growing the private sector than shrinking the public sector.
He said: “It’s not that the public sector in the North East is too big, it is that the private sector is too small. The decline of traditional industries in the past means we need to establish more big private-sector companies in the region.”
One North East is trying to create thousands of new businesses as part of its efforts to close the growing North South divide.
The study was carried out by the Centre for Economics and Business Research.
One of the biggest public sector employers in the North East is the Department of Work and Pensions, which employs 13,400, including hundreds of workers in jobcentres.
And experts fear that the reliance on state spending will increase even more as the recession continues, with benefit handouts increasing following job losses.
Latest figures from the Office for National Statistics show that since Labour came into power in 1997 jobs in the public sector nationally have swelled by more than 500,000to 5.7 million.
But, Vince Cable, the Liberal Democrat Treasury spokesman, said that the state’s grip on the North East could actually help soothe the impact of recession.
He said: “Newcastle and areas like that have a large public sector which will at least shield traditionally very depressed areas from the battering that south east England is going to get.”
