Regional inequality, regional policy and progressive regionalism

The fourth instalment of the Soundings futures series looks at regional policy.

Regional inequality has re-emerged as a major political issue in Britain in recent years as the effects of the post-2008 economic crisis and associated austerity measures have exposed stark regional disparities, particularly between London and the South East and former industrial areas and rural districts in the North and Midlands of England. These divisions have been further highlighted by the Brexit vote of 23 June 2016, with many disadvantaged former industrial areas voting 'leave', pointing to a widespread sense of political disenchantment and abandonment.

Regional inequalities in Britain, commonly symbolised by the notion of the North-South divide, are, of course, deeply entrenched, dating back to the nineteenth century and beyond. They reflect not only the legacies of the underlying process of deindustrialisation from the 1960s and the growth of financial and producer services in the greater South East, but also a longer history of imbalanced inter-regional relations and the geographical concentration of power in London.

Since the establishment of the 'special areas' in the 1930s, successive governments have expressed varying levels of political commitment to tackling regional inequalities. Since the 1980s, regional policy has been informed by neoliberalism, favouring 'bottom-up' and business-oriented forms of local and regional growth. During this period shifts of government have often been accompanied by institutional 'churn', as incoming administrations have sought to stamp their own political imprint on the landscape of sub-national economic governance. This preoccupation with institutional reform has been described by one commentator as amounting to 'a pathology of compulsive re-organisation', involving the 'wholesale sweeping away and re-creation of organisations and an endless tinkering and meddling with what currently exists'.¹ Despite a recurrent rhetoric of localism and decentralisation, this meddling reflects the underlying centralism of the British state, which enables central government to impose its favoured institutional structures on regions and localities. While devolution to Scotland, Wales and Northern Ireland can be seen as exceptional in this respect, the devolved governments often act as centralising forces within their respective jurisdictions.

This article assesses the scale of regional inequalities in Britain and the orthodox policy initiatives that have been advanced to address them. It argues that successive policy initiatives have failed to reduce regional inequalities - they have in fact widened in recent decades. It then sets out some elements of an alternative agenda, based upon a fundamental reshaping of the structure of economic governance.²

The scale of regional inequalities

Britain now has one of the highest levels of regional inequality of any major European economy (Table 1). According to data from Eurostat, the gap in GDP per head between the richest and poorest regions in the United Kingdom ranked fourth in a sample of 20 EU countries in 2014.³ While levels of regional inequality fell somewhat in the post-second world war period, they have grown since the late 1970s, coinciding with the most severe period of deindustrialisation, the curtailment of traditional regional policy and the introduction of neoliberal policies. Regional inequalities accelerated in the 1980s and continued to widen throughout the sustained growth phase of the 1990s and early-to-mid 2000s. By contrast, levels of regional inequality have fallen in several European countries (Table 1).

The magnitude of regional inequalities in Britain is evident in the levels of nominal GDP per head in 2014. GDP per head is some 2.4 times higher, at £45,000, in the richest region (London) than in the poorest regions (Wales and the North East), where it is around £18,000 per head. Levels of GDP per capita relative to the UK average were lower in 2013 than in 1988 for all regions outside London, the South East and the East of England - except for Northern Ireland, which had the lowest GDP per head relative to the UK average in 1988 and continues to lag behind.⁴

Table 1.

Regional imbalance in selected European Union countries*

Source: R. Martin, A. Pike, P. Tyler and B. Gardiner, 'Spatially rebalancing the...