WWW.IPPR.

ORG/NORTH

TheNorthern
Economyinthe
NextDecade
Paper5fromtheNorthernEconomicAgendaproject
ByMichaelJohnson,OlgaMrinskaandHowardReed
November2007
©ippr2007

InstituteforPublicPolicyResearchNorth
Challengingideas– Changingpolicy
1 ipprnorth|TheNorthernEconomyintheNextDecade

Contents
Aboutipprnorth......................................................................................................................................................................... 2
Aboutthecontributors ............................................................................................................................................................... 2
Acknowledgements..................................................................................................................................................................... 2
Executivesummary ..................................................................................................................................................................... 3
Introduction ................................................................................................................................................................................ 6
1.Challengesandopportunitiesforthenortherneconomy ...................................................................................................... 7
2.Recommendations:aprogressivenorthernagendaforthenextdecade............................................................................. 12
3.Conclusions........................................................................................................................................................................... 19
References................................................................................................................................................................................ 20
2 ipprnorth|TheNorthernEconomyintheNextDecade

Aboutipprnorth
ipprnorth,theNewcastle-basedofficeoftheInstituteforPublic ipprnorth
PolicyResearch,producesfar-reachingpolicyideas,stimulating BioscienceCentre
solutionsthatworknationallyaswellaslocally.Theseareshaped CentreforLife
fromourresearch,whichspansthenortherneconomicagenda, NewcastleuponTyne
publicservices,Anglo-Scottishrelations,foodpolicyandruralissues, NE14EP
aswellasastrongdemocraticengagementstrandwhichinvolvesa
widerangeofaudiencesinpoliticaldebates.
www.ippr.org/ipprnorth
Tel:01912112645

RegisteredCharityNo.800065

ThispaperwasfirstpublishedinNovember2007.
©ipprnorth2007

Aboutthecontributors

MichaelJohnsonisaResearchFellowatipprnorth.

OlgaMrinskaisResearchDirectoratipprnorth.

HowardReedisChiefEconomistatippr.

Acknowledgements

Wewouldliketothankourprojectpartners,withoutwhomthis
projectwouldnothavebeenpossible.TheyareOneNorthEast,
YorkshireForward,TheNorthWestDevelopmentAgency,The
NorthernWay,DeloitteandCELS.

WewouldalsoliketothankSueStirling,KatieSchmuecker,Kate
Stanley,LisaHarker,VictoriaO’Byrne,CareyOppenheimand
RichardBakerforcommentsonpreviousdraftsofthispaper.
GeorginaKyriacouatipprcopyeditedandformattedthereport.
3 ipprnorth|TheNorthernEconomyintheNextDecade
Executivesummary
Thisreportpresentsrecommendationsforthethreenorthern
regionsofEngland,theNorthEast,NorthWestandYorkshireand
theHumber,on:
•howtoimprovetheireconomicperformance;and
•howtonarrowthegapinprosperitybetweentheseregionsand
moreprosperouspartsofEngland,whilealsodeliveringasocially
justandenvironmentallysustainablenortherneconomy.
Itisthefinalreportfromipprnorth’sresearchproject‘ANorthern
EconomicAgenda’.
Therecommendationsdrawonthepreviouspapersfromtheproject,
publishedinNovember2007:
1.TheNorthinNumbers:AstrategicauditofthenorthernEnglish
economies,byMichaelJohnson,OlgaMrinskaandHowardReed
2.ThePublicSectorintheNorth:Driverorintruder? byOlga
Mrinska
3.EntrepreneurshipandInnovationintheNorth,byMichael
JohnsonandHowardReed
4.MovingOn:AprogressivetransportpolicyforNorthernEngland,
byHowardReed
Allfourpapersareavailabletodownloadfrom
www.ippr.org/publicationsandreports/.
Themainissues
Regionaldifferentiationinsocio-economicdevelopmentisanatural
phenomenoninanycountrythathasarelativelylargeterritoryand
population,butpublicpolicycanandshouldcontributetowards
closingthisgap,thougheliminatingitcompletelyisachallenging
ambition.
OurresearchdemonstratesthatthethreenorthernEnglishregions
eachfacesubstantialeconomicchallenges.Forexample,allthree
regionscurrentlyperformworsethantheUKaverageon
productivityandincomeperhead,working-ageemploymentrates,
businessstart-ups,andproportionsofhighly-skilledpeopleintheir
workforce.However,eachregionalsohassubstantialpotential,
whichiscurrentlyunderestimatedandunder-used.Unlockingthis
potentialwillrequiremoretailor-madepolicyinstruments,abetter
institutionalframework,highqualityregionalleadership,andextra
financialresourcesincertainareas.
Englandhasnospecificallydefined‘regionalpolicy’.Varioussectoral
policieshavearegionaldimension,butthesearenotwell
coordinated.Publicpolicyfailstoaddresscomplexregionalproblems
asitlacksanimportantspatialdimension:sectoralpoliciesshouldbe
betteralignedwitheachotherandshouldaddvaluetoeachother
ratherthanbeinginconflict.TheGovernmentshouldallow‘positive
discrimination’inregionalpolicy,withregionsofferedarangeof
instrumentsandresourcesthatdifferaccordingtotheirlevelsof
developmentandpotentialforgrowth.
Anationalspatialplanningstrategyisalsoneededinorderto
addressthecomplexproblemsofsustainabledevelopmentwithin
EnglandasawholeandintheNorthinparticular.Thethree
northernregionsshouldconsultonhowtodevelopajointspatial
developmentstrategytorespondtothechallengesoftheNorth’s
‘peripheral’location.
Recommendations
Ourin-depthanalysisofthenorthernregions,embracingawide
rangeofeconomic,socialandenvironmentalfactorsof
development,showsthatthereisnoapriorireasonwhytheNorth
cannotatleastmakeupalargeproportionoftheoutputgapwith
theEnglishaverageoverthenext10to20years.Belowweoutline
key recommendationsineachpolicyarea.
Thedeterminantsofproductivity
WhenmeasuringtheeconomicperformanceoftheUKregions,
thereisatendencytofocusexclusivelyonproductivityindicators,
suchasGrossValueAdded(GVA).However,inordertoclosethe
gapbetweentheNorthandtheEnglishaverage,itisessentialtohavea
muchbroaderperspectiveonperformanceandtofocusonthe
driversofproductivity:employment,skills,entrepreneurship,
innovation,investmentandinfrastructurespending.
Employment
TheNorth’scorestrategyforincreasingproductivityshouldbeto
attractmorepeopleofworkingageintothelabourmarket,
includingthosewhoarehardesttoreach.Onthesupplyside,one
optionwouldbetoreplacecurrentbenefitsforunemployedand
inactiveadultsofworkingagewithasingleincomereplacement
benefit,alongsideapersonalisedpackageofemploymentsupport
andconditionsonbenefitreceipt.Thiswouldbeeasierforclaimants
tounderstandandensuretheyweremuchmoreactivelysupported
intowork.ButtheGovernmentneedstoensurethatemployment
supportservicesforthehardest-to-reachgroups,particularly
IncapacityBenefitclaimants,areproperlyresourced.
Onthedemandside,werecommendthattransportpolicyneedsto
focusonmakingiteasierforworkerstogetto‘wherethejobsare’
byimprovingthetransportconnectivityoftheNorth.Measuresto
encourageinnovativeindustriesandsectorstostartupinorrelocate
totheNorth,andtoimprovetransportinfrastructure,willofferan
additionalboosttolabourdemand.
Skills
PublicfundingforadultlearningintheNorthneedstofocusonthe
unemployedandinactivepeopleofworkingagethatrequirethe
mostassistancewithskills:thosewithlowlevelsofqualificationsor
noqualificationsatall,long-termunemployedjobseekers,theover-
fiftiesandIncapacityBenefitclaimants.Itisessentialthatnorthern
employersareencouragedtoplayanactiveroleinadultskillspolicy
andbefullyengagedwiththepublicsectorinstitutions.Policies
thataddresstheNorth’s‘skillsdeficit’willalsohelptostrengthen
entrepreneurshipandprivatesectorinitiative.Inthisregard,the
plansforadditionalapprenticeshipsandtraininginbasicskills
announcedbytheGovernmentthismontharemostwelcome.
4 ipprnorth|TheNorthernEconomyintheNextDecade
TheroleofthepublicsectorinimprovingtheskillsmixintheNorth
shouldbeenhanced,bymovingmorepolicyandresearchpoststo
theNorth.AllthreeNorthernregionsalsoneedtotargetandattract
highlyskilledmigrants.TheGovernmentshouldengagethe
northernRegionalDevelopmentAgencies(RDAs)indeterminingthe
waythatnationalimmigrationpolicyshouldoperateinthefuture.
Thiscouldbedone,forexample,byaddingaregional‘weighting
system’totheforthcomingpoints-basedsystemforhighly-skilled
immigrants.
Entrepreneurship,innovationandinvestment
Previousresearchsuggeststhathighlevelsofpersonalwealtharea
keydeterminantofthedecisiontobecomeanentrepreneur.The
Northhaslowerthanaveragewealthduetorelatively-lowaverage
housepricesandlevelsofotherassetholdings.
Policiesthatencourageamoreevendistributionofwealthbetween
regionsarelikelytoencourageentrepreneurshipintheNorth.More
‘hybrid’public-privatesupportmechanismsarerequiredtoachieve
successfuleconomicgrowth:forexample,financialincentivesto
encourageparticipationincollaborativeprojects,improvementsto
transportandcommunicationsinfrastructure,andaneffective
regulatoryenvironmentforbusiness.ThenorthernRDAsshouldalso
undertakemoresystematicevaluationsoftheeffectivenessoftheir
entrepreneurshipeducationprogrammes.
TheResearchandDevelopment(R&D)taxcredithashada
significantpositiveimpactontheamountofresearchand
developmentintheUKanditshouldbeextendedifthetight
spendingenvelopesetbytheGovernmentinthe2007
ComprehensiveSpendingReview(CSR07)allows.Attheleast,it
shouldbemaintainedatitscurrentlevel.Theevaluationofthe
effectivenessofnationalandregionalinitiativesdesignedto
encouragenetworkingamongfirmsandbetweenfirmsandother
innovatorsrequiresmoreattention.
Attractinggreaterlevelsofinwardinvestmenttothenorthern
regionsisanothercrucialconditionforeconomicsuccess.Existing
initiativesfromthethreenorthernRDAsshouldbesupported,
althoughtheyshouldnotencourageinvestmentinonenorthern
regionattheexpenseofothers.TheNorthalsorequiresgreater
supportinenhancingbusinessconfidence,whichisakey
determinantofinvestment.Policyshouldaimtopromoteavibrant,
confidentimageoftheNorthtoinvestorsfromoutsidetheregion.
Transport
Thereisaneedforacross-cuttingstrategyofexpandingtransport
infrastructureintheNorthinsuchawayastoensureenvironmental
sustainabilityandconsistencywiththeGovernment’slong-term
targetsforgreenhousegasemissions.Greatermobilityand
accessibilityfortheNorthshouldbeachievedthroughthe
improvementofmodesoftransportthatemitlowerlevelsofcarbon
thanothers,forexamplebyimprovingthequalityofrailwaylinks
andexpandingtheuseofwaterwaysforfreight.Takentogether,
thesemeasureswouldconstitutea‘modalshift’inNorthern
transporthabitstowardslower-carbontransportsolutionsandaway
fromhigh-carbonoptionssuchasaviationandmotoring.However,
rulingoutanyexpansionoftheroadnetworkisanextremestep
thatshouldbeavoided:severecapacityconstraintsshouldbe
addressedeitherthroughdemandmanagementmeasuresor
targetedroad-building.
Twoofthenorthernregions–theNorthEastandYorkshireandthe
Humber–appeartoloseoutsignificantlyfromthecurrent
distributionofpublicinvestmentintransport:theDepartmentfor
Transportshouldreviewitsfuturefundingallocationstomakesure
thattheseregionsgetafairshareoffunding.Asrecommendedin
theEddingtonTransportStudyofDecember2006,transport
investmentprojectsshouldbeappraisedinvalue-for-money
assessmentsthatincorporateenvironmentalanddistributional
factorsaswellastheircontributiontoeconomicgrowth.The
Eddingtonstudymustnotbeusedtojustifyablanketrejectionof
majornewinfrastructureprojectsintheNorth,asthiscouldhave
verydamagingconsequencesfortheregion’sfutureprosperity.The
existingtransportgovernancearrangementsattheregionaland
sub-regionaltiersneedtobeimprovedtoallowagreaterflexibility
oftransportdecision-making.
Thepublicsectorandfiscaldecentralisation
TheGovernmentshouldplacegreateremphasisonthespatial
efficiencyofthepublicsectorintheNorth.Theimplicationsof
national-levelreformsforthenorthernregionsshouldbeassessedin
advance.TheNorthmightbenefitfromandcontributemoretothe
efficiencyagendaiftheGovernmentweretogobeyondefficiency
targetsandusemorevariedmeanstoimprovevalueformoney.The
relocationofmoremanagerialandexpertjobstotheNorthof
EnglandshouldbecoordinatedwiththeprioritiesoftheRegional
EconomicStrategies.Localsmallandmediumbusinessesshouldbe
supportedinordertobenefitfrommodernprocurementsolutions,
whichatthesametimeshouldbealteredtorespondtothe
Government’ssustainabilitycommitments.
TherelativelylargesizeofthepublicsectorintheNorthasashare
ofGrossValueAdded(GVA)shouldbeviewedasanopportunityto
usepublicspendingintelligentlytodeveloptherestoftheNorthern
economy,ratherthanasathreattoeconomicgrowthandstability.
Thereductionofthepublicsector’sshareinNorthernGVAshould
progressnotattheexpenseofcutsinpublicspending,butratheras
aresultoftheexpansionoftheprivatesector.
TheGovernment’sformulaeforallocationofpublicspendingshould
continuetoreflectthegreaterspendingneedsofthenorthern
regions.WhiletheGovernmentshouldincreasetheamountof
capitalinvestmentintheNorth,especiallyinthetransportsector,it
shouldalsodevelopamodern,needs-basedapproachtowards
allocatingcurrentspendingacrosstheregions.Itshouldallow
greaterdecentralisationandde-concentrationofregionalandlocal
authoritiestogohand-in-handwithatleastsomedegreeoffiscal
decentralisation,lettingregionsraiseandspendmoremoneylocally.
Policiesaimedatenhancingproductivitydrivershavethepotential
totransformtheNortherneconomyonlyiftheyareproperly
resourced.ThetightspendinglimitssetbytheCSR07willmake
thesetransformationalimprovementsdifficulttoachieveunless
therearesomefinancialinnovationsandashiftofprioritiesin
nationalspending,especiallyintheareasoftransportandthe
labourmarket.
Institutionalchanges
ThesimplifiedperformanceassessmentframeworkforRDAsisabig
steptowardsgreaterflexibilityofpolicydecision-making;itdoes
5 ipprnorth|TheNorthernEconomyintheNextDecade
not,however,reflecttheirnewfunctions,whichgobeyond
stimulatingeconomicdevelopment.Moreover,whileRDAshave
receivedsomeadditionalfunctions,therehasbeenaslight
reductionintheiroverallbudget.Theimbalancebetweenthe
additionalscopeofworkandthedecreasesinfundingmayhavea
negativeimpactontheeffectivenessofsomeregionalinitiatives.
Theintroductionofnewsub-regionalpolicyinstruments(inthe
formofMulti-AreaAgreements)providesadesirableadditionallevel
ofcollaborationbetweenlocalauthorities,butthereisadangerthat
thismightstretchtheircapacity.Localauthoritiesneedaclear
understandingoftheinstitutionalmechanismsandpolicytoolsthat
willbeavailabletothemunderthenewinstitutionalarrangements
likelytobeintroducedfollowingtheGovernment’sSubNational
ReviewofEconomicDevelopmentandRegeneration.
Meetingenvironmentalchallenges
Afundamentalcross-cuttingargumentrunningthroughour
researchistheneedtointegrateprogressiveenvironmentalpolicies
intoallaspectsofpublicpolicy.IftheUKisseriousinitsambitionto
builda‘low-carbon’economy,thenenvironmentalconsiderations
shouldnotbean‘add-on’topolicy;insteadtheymustformthe
backboneofanyscenarioofeconomicgrowthoftheUKandits
regions/nations.OnlythenwilltheUKeconomybeattheforefront
ofglobalinnovativeeconomywithoutlimitingfuturegenerations’
chancesofadecentandsociallyjustlife.Allpolicyinitiativesinthe
North,suchasthedevelopmentofnewresidentialhousing,
businessandretailofficespace,andtransportinfrastructure,should
beconsistentwithmeetingtheGovernment’sgoalofa60percent
minimumreductioningreenhousegasemissionsby2050and
shouldbefocusedonpreservingtheNorth’senvironmental
advantagesatthesametimeasclosingtheoutputgap.
Conclusion
Ifthepolicyrecommendationsinthisreportarefollowed,webelieve
thatthenorthernregionsofEnglandwill,attheveryleast,beable
tocloseasubstantialproportionofthe£30billiongap,identifiedby
theNorthernWayin2004,betweentheiroutputandthe English
averageGrossValueAddedperhead.Theywillbeabletodeliver
prosperityfortheNorthwhilesimultaneouslydeliveringamore
environmentallysustainable,lower-carboneconomy,andcreatinga
moreequalsocietywithabetterpublictransportinfrastructure,a
workforcewithahigherlevelofskills,andmorebalancedspatial
patternsofgrowthanddevelopment.
However,theprogrammeoutlinedhereneedstobefollowed
consistentlyintothemediumtolongterm–wellintothe2010sand
beyond–andstartedassoonaspossible.‘Quickfix’solutionswill
notwork,andthereisnosingle‘magicbullet’policythatwill
suddenlyunlocktheNorth’spotential.Rather,complementary
reformsandnewinitiativesneedtobeproducedoverawiderange
ofpolicyareas.Itisalsoessentialtohaveanoverarchingregional
leadershipagendathatismuchmorethanthesumoftheleadership
strategiesofindividualstakeholders.
Realistically,onlylimitedextraspendingwillbepossibleunderthe
tightspendingenvelopethatarosefromthe2007Comprehensive
SpendingReview.Anindiscriminateexpansionofpublicspending
ontheNorthisneitherlikelynordesirable.Butconversely,
permittingnoadditionalspendinginanyareaofregionalpolicy
wouldbeequallycounterproductive.TheNorthneedstargeted
additionalspending,whichwillrealiseitseconomicgrowthand
environmentalanddistributionalobjectives.
TheNorthofEnglandhaswhatittakestobeinthevanguardof
economicprosperityandwell-beingintwenty-firstcenturyBritain.
Allthatisrequiredisthepoliticalwillfromcentralgovernmentto
implementreformsalongthelinessuggestedhereandtoresource
themproperly,coupledwithwell-functioningimplementationof
policyattheregionalandlocalleveltoturnourblueprintfora
progressiveagendafortheNorthintoareality.
6 ipprnorth|TheNorthernEconomyintheNextDecade
Introduction
ThisisthefinalreportfromipprNorth’sNorthernEconomicAgenda
project,whichaimstoprovideadetailedinsightintotheeconomic
performanceofEngland’sthreenorthernregions:theNorthEast,
theNorthWest,andYorkshireandtheHumber.Previouspapersin
theprojecthavelookedattheroleofthepublicsector(Mrinska
2007),policytowardsentrepreneurshipandinnovation(Johnson
andReed2007)andtransportpolicyinthenortherneconomies
(Reed2007).Additionally,abackgroundauditpaperforthe
researchprovidedacomprehensivepictureofthecurrent
performanceoftheNorthagainstarangeofeconomic,socialand
environmentalcriteria,aswellasoutliningtheinstitutionaland
governanceaspectsofregionaleconomicpolicyinEngland,
includingrecentreforms(Johnsonetal 2007).
Thispaperbringstogetherourrecommendationsonfutureeconomic
policyfortheNorthofEngland,basedonthefindingsoftheearlier
papers.Ouraimistosuggestreformsthatwillenablethenorthern
regionstocombinestrongeconomicgrowthwithasociallyjust
distributionofthebenefitsfromthatgrowth,inamannerthatis
consistentwithenvironmentalsustainabilityandinparticulartheneed
toavertdangerousclimatechangeoverthetwenty-firstcentury.
Thefirstpartofthepaperlooksbrieflyattheopportunitiesand
challengestheNorthfacesinitsattemptstoachieveimproved
economicperformanceinanenvironmentallysustainableand
sociallyjustmannerandhencegreaterwellbeingforitscitizens.Itis
crucialtoprovideabalancedpicture,inwhichtheweaknessesof
theNortharepresentedalongsideitsstrengths.Economic
performanceacrossthethreenorthernregionsisbynomeans
uniformandtherearedramaticvariationswithineachoftheregions
too.Itisimportanttoassesshowamodelofsuccessfuleconomic
growthcanbecreatedandreinforcedintheNorthwhiletaking
accountofthediversityofeconomiccircumstanceswithinthe
regionsiftheNorthistosucceedinnarrowingorclosingthe
‘outputgap’thatexistsbetweenitsregionsandthemore
prosperousregionsoftheSouthandMidlands.
Thesecondpartofthepapersummarisesthepolicychangesthat
arenecessaryfortheNorthtoimproveitseconomicperformance,
withourrecommendations,toprovideaprogressiveeconomic
agendafortheNorthforthenexttenyears.Thethirdpartpresents
ourconclusions.
7 ipprnorth|TheNorthernEconomyintheNextDecade

1.Challengesandopportunities
forthenortherneconomy
TheNorthofEnglandexperiencedworld-leadingeconomicsuccess
basedonastrongmanufacturingindustrialbaseinthe19thand
early20thcenturies,followedbyseveraldecadesofdeclineasthe
Northlostgroundbothinrelationtootherleadingindustrialised
countriesandtootherregionsoftheUK.Duringtherecessionsof
themid1970s,early1980sandearly1990s,theUKfacedpainful
adjustmentprocesseswithlongperiodsofhighunemployment,and
theeconomicperformanceofdifferentregionsdiverged
substantially.
Ontheonehand,theregionsoftheUKthatmakeuptheGreater
SouthEast(London,theSouthEastandEastofEngland)adjusted
quitesuccessfullytostructuralchangesintheglobaleconomy,
boostedbyanincreasedfocusonbuildingthestatusofLondonasa
worldfinancialcentre.Ontheotherhand,thethreenorthern
regionsofEnglandexperiencedgreaterdifficulties.Theyweremore
reliantonthe‘oldeconomy’ofheavyindustryandmanufacturing
thantheGreaterSouthEastwas,andhencefacedalargerandmore
costlytransitiontowardsdiversificationandexplorationofthenew
sectorsoftheeconomythatwerebecomingmoreproductiveand
profitable.
In2004(themostrecentyearforwhicharegionalbreakdownof
GrossValueAdded[GVA]figuresiscurrentlyavailable),57percent
ofUKnationaloutputcamefromprivatesectorserviceindustries
comparedwith14percentfrommanufacturing1.Privateservices
provided50percentofUKemployment,comparedwith12per
centformanufacturing.However,thenorthernregionsarestillmore
dependentonmanufacturingthantheUKaverage;in2004,the
northernregionsaveraged19percentofoutputfrom
manufacturing,and14percentofemployment.Thenorthern
regionsthusfaceagreaterchallengethantheGreaterSouthEastin
adaptingsuccessfullytothedemandsoftheglobaleconomyofthe
21stcentury2.
WhenanalysingtheeconomicperformanceoftheUK’sdifferent
regionsandnations,thereisoftenatendencytoconcentrateona
limitednumberofeconomicandsocialindicatorstoillustrate
successorfailure.Thisisusuallydoneforgoodreason,sinceit
makesitpossibletoconcentrateonthecrucialfactorsdetermining
developmentinamethodologicallyconcisemanner.Yetsuch
methodologiesarenotalwayssensitivetothebroadrangeoffactors
thatcanhaveanimpactonaregion’sdevelopment.Forexample,
thefactorsthatinfluenceinvestmentdecisionshaveseendramatic
changesinrecentyears,andsomeoftheNorthEast’sstrongpoints,
suchastheavailabilityofrawmaterialsandproximitytoseaports,
nolongerplayakeyroleinalargeproportionofbusinesslocation
decisions.Theavailabilityandqualityofskills,business-support
infrastructure,telecommunications,andaccessibility(oftenthrough
multi-modaltransportnodes)arenowmuchmoreimportant.
Furthermore,inthemoderneconomy,aregion’sflexibility,andits
abilitytodrawonitsparticularadvantages,arebothcrucialfactors
forunlockingitspotential.Auniform,generalisedapproachto
analysisisthusunlikelytobesuccessful.Moreover,thechallenges
ofensuringsustainablesocio-economicdevelopmentwiththe
minimumpossibleimpactontheenvironmentmeanthatafurther
rangeoffactorsmustbeconsideredwhenassessingregional
development.
NarroweconomicindicatorssuchasGrossValueAdded,whichare
themeasuresmostoftenusedforcomparingeconomicperformance
betweenareas,regionsandcounties,havelimitations.Theyinclude
onlygoodsandservicessoldinthemarketsectoroftheeconomy,
orgoodsnotsoldonthemarket(forexample,manypublicservices
suchashealthandstateeducation)whosevalueisimputedbythe
OfficeforNationalStatistics(ONS)forthepurposeofcompilingthe
statistics.GVAalsomissesouthouseholdproduction3,andincludes
nomeasureformanyofthethingsthatpeoplevalueinlife–the
environment,communitycohesion,relationshipswithfriendsand
family,artsandculture,andsoon.
Hence,headlineeconomicindicatorsareahighlyimperfectmeasure
ofthe‘well-being’oftheNorth.Thatiswhythein-depthanalysis
belowofthenorthernregionsembracesawiderangeofeconomic,
socialandenvironmentalfactorsofdevelopment.Theanalysislooks
inturnateachofthefactorswebelievearecrucialforthenorthern
economiestoachieveeconomicsuccesscoupledwithenvironmental
sustainabilityandsocialjustice.
Demographics
TheNorthofEnglandfacesadifferentsetofdemographic
challengestootherpartsofthecountry;ratherthanmanaginga
growingpopulation,inrecentdecadestheNorthhasexperienceda
staticorfallingpopulation.TheNorthEastandNorthWestalong
withScotlandaretheonlyregionsthathadnegativepopulation
growthbetween1991and20044.YorkshireandtheHumberhad
onlyamarginalincreaseinpopulationoverthesameperiod,well
belowthenationalaverage.Sincemostrecentpopulationgrowthin

1.Ourdefinitionof‘privateservices’hereincludesthefollowing1-digitStandardIndustrialClassificationcategories:wholesaleandretailtrade,hotelsandrestaurants,
transport,financialservices,andrealestateandbusinessservices.Thedatausedistakenfromwww.statistics.gov.uk/statbase/Product.asp?vlnk=14650(accessedOct2007).
2.Thisisnottosaythatmanufacturinghasnoplaceinasuccessful21stcenturyglobaleconomy.Rather,itislikelythat,giventheUK’scoststructureandcomparative
advantagesintheglobalmarketplace,successfulmanufacturingfirmsintheNorthandelsewhereinBritainwilltendtofocuson‘high-tech’manufacturingusingahighly
skilledworkforceratherthanthehigh-volume,mass-producedmanufacturingrelyingonsemi-skilledandunskilledfactoryworkerswhichservedtheNorthsowellinthe19th
andearly20thcenturies.
3.Forexample,adultsinthehouseholdstayinghometolookafterchildren,thevalueofDIYdoneinthehome,andsoon.
4.Itshouldbenoted,however,thatsincetheexpansionoftheEUin2004therehasbeenarisingtrendinthenumberofmigrantsfromtheA8accessioncountriesinall
regions,includingthenorthernEnglishregions.SeeBauereetal (2007).
8 ipprnorth|TheNorthernEconomyintheNextDecade
theUKisduetonetimmigrationratherthantonewbirths
outnumberingdeaths,itispossibletoconcludethattheNorthof
Englanddoesnotappealtotheforeignersasaplacetoliveand
workasmuchastheregionsoftheMidlandsandSouthdo.Thisis
backedupbyresearchundertakenbyipprnorthonmigrationinthe
NorthEast,whichrecommendedthattheregionshouldharnessthe
roleofmigrationtoaddressitseconomicchallenges(Pillai2006).
UnlikeScotland,whichhasadegreeoffreedominformulatingand
implementingitsownimmigrationpolicies(forexample,theFresh
TalentInitiative),theregionsofEnglandareentirelydependenton
national-leveldecisions,andthecurrentdirectionoftravelof
nationalpolicyistowardsastricterapproachtoimmigration.The
newpoints-basedsystemforworkpermitapplications(tobe
introducedfrom1January2008)mightbringmorepredictability
andcontroltothenumberandlevelofqualificationsofpeople
enteringthecountry,butitcouldalsomeanthattheNorth’s
chancesofattractinghighly-skilledforeignworkerswillbeeven
slimmer,asthosethatdoenterthecountryaremorelikelytogoto
moredevelopedpartsofEnglandthathavebetterinfrastructure,a
greatervarietyofjobs,andhigherwages.
Anotherstrainonthenationaleconomyisthegreaternumberof
‘dispersedfamilies’(familieswithfewmembers)andanageing
population.AccordingtoONSthenumberofpeopleinBritainliving
aloneincreasedfrom3millionin1971to7millionin2005(ONS
2007b).Additionally,lifeexpectancyintheNorthislowerthanthe
nationalaverage(womenlivearoundtwoyearslessandmenlive
threeyearslessthanaverage).Withanageinganddeclininglabour
forcethereisaparticularneedtoputtheskillsandabilitiesofolder
peopletobetteruseinnorthernlabourmarkets.Thisisthecategory
thatisthemostproblematicintheNorth–thelevelofinactivity
amongpeopleagedbetween50andthestatepensionageismuch
highertherethantheUKaverage.Giventhisdemographicsituation,
thekeyopportunityfortheNorthtoimproveproductivityperhead
istoengagetheoldergenerationindifferenteconomicactivities,
includingprivatebusinesses,aswellastoencouragemorehigh-
skilledpeopletomoveintotheregion.
Theproductivitygap
Thepreviouspapersfromthisprojectofferawide-ranginganalysis
oftheNorth’seconomicperformance.Productivityindicatorsare
amongthekeyheadlinevariablesusedtoassesstheperformanceof
thenorthernregionsagainstothers(subjecttothelimitations
discussedabove).In2005GVAperheadineachofthenorthern
regionswaswellbelowtheUKaverage:78percentoftheaverage
intheNorthEast,85percentinYorkshireandtheHumberand86
percentintheNorthWest.AlthoughtheNorthEastandNorth
Westhavebeenclosingthegapsince2003duetohigherthan
averagegrowthrates,recentindependentforecastssuggestthatthis
trendwillnotcontinueandthegapbetweentheGreaterSouthEast
andtheNorthwillcontinuetowidenfrom2007onwards(Experian
BusinessStrategies2007).
TheproductivitygapbetweentheregionsissmallerifregionalGVA
ismeasuredperjobfilledorperhourworkedratherthanperhead
5.ThegapbetweentheregionalemploymentrateandthenationalaverageissmallerfortheNorthWestandYorkshireandtheHumberthanitisfortheNorthEast,butthe
samebasicpointmadeinthisparagraphholdsofthoseregionstoo.
6.SOAsareanewgeographichierarchydesignedbyONStoimprovethereportingof‘smallarea’statisticsinEnglandandWales.
ofthepopulationintheregion.Onthesemeasures,theworst
performingregionsconsiderablyimprovetheirindicescompared
withthenationalaverage,whilebetter-offregionsseeareduction
intheirproductivitylevel(forexample,theNorthEastindexofGVA
perhourworkedincreasesto95percentofnationalaverage).This
maybeareasonwhynewmeasuresofregionalproductivity
outlinedbytherecentComprehensiveSpendingReview2007
(CSR07)includedGVAperhourworked(HMT2007b).
OneoftheprimarymeansofincreasingGVAperheadintheNorth
East(forexample)tothenationalaveragewouldbetoincreasethe
rateofemploymentintheworkingagepopulationfrom71to75
percent(theUKaverage)5.However,initselfthiswillnotbe
enoughtoclosetheproductivitygapbetweentheNorthEastand
theUKaverageifmorepeoplewithlowerlevelskillsenterthe
labourmarket,becausethevalueaddedforeachhourworkedwill
becorrespondinglylowerthanifthenumberofhigher-skilledjobs
wereincreased.GVAperheadofthepopulationwouldrise,butnot
totheUKaveragelevel,whileGVAperjobfilledmightactually
decrease intheNorthEastunderthisscenario.
Anotherimportantissueisthatthenorthernregionshaveagreater
concentrationthanotherEnglishregionsofoldermanufacturing
industriesthathavebeenhitharderbystructuralchangeinthe
economyoverthelast35years.However,asanalysedindetailin
theauditpaperfromthisproject(Johnsonetal 2007),mostofthe
productivitygapbetweentheNorthandtherestoftheUKcannot
beexplainedbydifferencesintheindustrialcompositionofthe
northernregionscomparedwiththeSouth;theNorthisless
productivewithin eachindustry.
Levelsofdeprivationandincomes
TheextentofdeprivationintheNorthisoneofthefactorsholding
backthethreenorthernregionsfromachievingmoredynamic
economicgrowththroughadditionalinvestment.Thishas
substantialimplicationsfortheinvestmentclimateandthe
attractivenessoftheregionforbusinesses.Ananalysisofthe20per
centmostdeprivedSuperOutputAreas(SOAs)6 inEngland
(Johnsonetal 2007)showsthatthethreenorthernregionsare
heavilyover-representedrelativetotheirpopulationsize.
ThenorthernEnglishregions,togetherwithWales,NorthernIreland
andScotland,havethelowestlevelsofaveragehouseholdincomes
intheUK.AmongthethreenorthernregionstheNorthEastisthe
poorest,withanespeciallylowproportionofpeopleonhigh
incomes.Moreovertherearelargedifferencesinaveragehourly
earningsbetweenEnglishregions,withpeoplelivinginLondon
havingbyfarthehighestaveragewages,followedbythoselivingin
theSouthEastandtheEastofEngland.WagelevelsintheNorth
areroughlyequivalenttothoseintheMidlandsandtheSouthWest
ofEngland.However,mostoftheregionaldisparityinwagescannot
beaccountedforbydifferencesintheageorskillsofworkersin
differentregions,ordifferencesintheindustriestheyworkin.
Partofthegapinregionalearningsiscompensatedforbythe
differenceinlivingcostsandpricelevelsforgoodsandservicesin
9 ipprnorth|TheNorthernEconomyintheNextDecade

differentregionsoftheUK.Howeverthisdoesnotentirelyexplain aslikelytobeinemploymentcomparedwithsomeonewithout
thedifference.Forexample,intheNorthEast,pricelevelsare6per qualifications,andintheNorthWestandYorkshireandtheHumber
centbelowtheUKaverage,butaveragewagesformenare10per almosttwiceaslikely.
centlessthanaverage(controllingforskilllevels).
EducationalattainmentatGCSElevelintheNorth,whilestill
AlsopeopleintheNortharelesslikelytoownacarthanpeople laggingbehindthebestperformingregions,iscurrentlymuchcloser
elsewhereinthecountry,whichmaylimittheirmobilityinsearching totheUKaveragethanitwastenyearsago.Worryingly,though,
forandtravellingtojobs,aspublictransportisinsufficiently thenorthernregionshaveparticularlylowlevelsofparticipationin
developedinmanynorthernareas. post-16educationandtraining(between65and69percent,
comparedwitharound80percentintheSouthEastandSouth
Skillslevels
West).Thusthereisanuntappedhumanpotentialwhichinorderto
Unsurprisingly,giventhegapbetweentheNorth’sproductivityand
beunlockedrequiresadditionalpolicyeffortandresources.We
theUKaverage,theNorthalsosuffersfromadeficitonmostofthe
returntothisissueinsection2below.
determinantsofproductivity.Theseincludeskills(so-called‘human
capital’),transportinfrastructure,andinnovationand Locationandaccessibility
entrepreneurship.Thesearediscussedindetailbelow. Allthreenorthernregionssufferfromrelativelyweaklinkswiththe
prosperousGreaterSouthEast.Thissituationisparticularlyacutefor
OneofthegreatestchallengesfortheNorthistoincreasethelevel
theNorthEast,givenitslocationaround300milesfromLondon.
ofeconomicactivityofitspopulation.Thethreenorthernregions
TheexistingtransportinfrastructurebetweentheNorthandSouth
havethelowestlevelsofemploymentamongEnglishregionsand
isnotsufficienttocontributetowardsamoreequaldistributionof
havethelongestwaytogotoachievetheGovernment’slong-term
peopleandeconomicactivitiesacrossthecountry,andthereare
targetoffullemployment(whichitdefinesas80percentofthe
manybottlenecksthatpreventeconomicactivityspreadingoutfrom
economicallyactivepopulation).Mostoftheemploymentdeficit
thecongestedSouth(CommissiononSustainableDevelopmentin
experiencedbytheNorthisduetoalowerproportionofmenand
theSouthEast2005).Atpresent,morebusinessesandresidentsstill
womenover50inemploymentthaninanyotherEnglishregion.For
choosetobelocatedintheSouth,whereinfrastructureisbetterand
youngeradults,theiremploymentratesaremuchclosertothe
economicopportunitiesaregreater,eventhoughthecostsofdoing
Englishaverage.
businessarealsohigher.Thenumberofeconomicallyactivepeople
Thenorthernregionshaveahigherthanaverageproportionofout- whomovetobigcitiessuchasNewcastleorLiverpoolisnotenough
of-workbenefitclaimantsofworkingage.Ofparticularnote,the toseriouslycontributetothegrowthofthelocaleconomy.
numberofthoseclaimingIncapacityBenefit(IB)ismuchgreater
ThelocationoftheNorthcanbeperceivedasbeingevenmore
thanthenumberofpeoplereceivingJobseeker’sAllowance(JSA).
remotethanitactuallyis.Theabundanceofeconomic,socialand
Thus,increasingtheeconomicactivityofpeopleofworkingagein
culturaleventsintheNorthisstillmuchlowerthaninLondonand
theNorthcurrentlyinreceiptofIncapacityBenefitneedstobea
theGreaterSouthEast,eventhoughthelasttenyearshaveseen
policypriority.Thisgroupincludesnotonlymenformerlyemployed
mucheconomicandculturalrenaissanceintheNorthanditsbig
intheminesandfactoriesoftheNorth,butalsowomenwith
cities(includingManchester,Liverpool,Leeds,Sheffieldand
mentalhealthproblems,loneparents,andformeroffenders.Often
Newcastle),drivenbyambitioussocial,cultural,andproperty-
thesearealsopeoplewiththelowestlevelofeducationandskills
relatedregenerationprojectsacrossthethreeregions.Nonetheless,
attainment.TheGovernmentalreadyrecognisesthisissueandhas
notonlyistheintensityofhumanflows,tradeflowsandfinancial
beguntoaddressitwithitsPathwaystoWorkprogramme,but,as
flowsstillnotgreatenough,itisalsonotperceivedasbeinggreat
indicatedbyrecentipprproposalsforasingleworking-agebenefit
enoughtoreversetheregions’negativeimageasbeingon
andpersonalisedemploymentsupport(BennettandCooke2007),
geographicallyperipheral.However,therearereasonstobelievethat
furtherstepsareneeded(theseareoutlinedinmoredetailin
thissituationcouldimproveintheforeseeablefuture.
Section2below).
TheNorthisstrategicallylocatedbetweentheGreaterSouthEast
Skillshavebeenidentifiedasoneofthefivekeydrivingforces
andMidlandsontheonehandandScotlandontheother.There
behindimprovingthenorthernregions’economicperformance
shouldbegreatopportunitiesforthenorthernregionstobenefit
(ODPM2005).Iftheregionaleconomyistoperformmore
fromthislocation.AstheprosperityofScotlandandthesouthern
successfullyitneedstoachieveanimprovementinoverallskills
andMidlandsregionsincreasesovertime,utilisationoftheNorth’s
levelsandamixofskillsthatsuitsemployerrequirements.
ports,roadsandrailwaysislikelytoincrease.Hence,thecasefor
Theneedtoraisetheskillslevelandincreasethenumberofhigh- large-scaleinvestmentsintheNorth’sinfrastructure,forexamplea
skilledjobsisalsoidentifiedasapriorityinallthreenorthern high-speedraillinkbetweenLondonandthenortherncityregions,
RegionalEconomicStrategies(soontobecomeIntegratedRegional shouldbeassessedfromthepointofviewofstrengtheningthe
Strategies),reflectingtheparticularproblemwithskillslevelsinthe ‘transit’potentialofnorthernEngland.Thiscouldbringsubstantial
North:thethreeregions’shareofhighly-skilledpeopleislowerthan additionalprosperityinthemediumterm.
theaverageforEngland,whiletheirshareofpeoplewithlowskills
InawiderEuropeancontexttheroleofnorthernEnglandcouldbe
ornoskillsatallisaboveaverage.Aperson’slevelofskillsisalso
exploitedalotmorethanitisatpresent.Thegeopoliticalandgeo-
highlycorrelatedwithhisorherlevelofemployability–onaverage,
economiclocationofthethreeregionsenablesthemtobepartof
intheNorthEastsomeonewithqualificationsatLevel4(Alevelor
theNordiccommunityandthegreaternorthernEuropeanregion,
anequivalentvocationalqualification)oraboveismorethantwice
10 ipprnorth|TheNorthernEconomyintheNextDecade
whichprovidemanyeconomicopportunities.Theculturaland
historicallinksthatexistbetweentheregionsandnorthernEurope
areespeciallyimportantandshouldassistgreatlyincreating
strongerbridgeswithcountriesincludingSweden,Norway,Ireland,
DenmarkandGermany.
Aunitedapproachtowardseconomicdevelopmentofthethree
northernregionsinkeyareasofinfrastructureplanning(as
demonstratedbytheexampleoftheNorthernWaygrowthstrategy
[NorthernWay2004])willcontributegreatlytowardstheambitions
outlinedabove.Havingasinglespatialplanforthewholenorthern
regionofEngland(andideallyfortheentirecountry)would
contributegreatlytowardsmoreeffectiveplanningofthefuture
spatialdevelopmentofthenorthernregions.
Innovationandentrepreneurship
Withrespecttotheextentofinnovativeactivitiescarriedoutby
businessesandhighereducationinstitutions,theperformanceof
thenorthernregionslooksmoreencouragingthaninotherareasof
economicperformance,althoughthepictureisstillmixed.Private
andpublicsectorspendingonresearchanddevelopment(R&D)per
headisrelativelylowintheregionsoftheNorth(thoughtheNorth
Westenjoyshigherthanaveragebusinessinvestments).But
investmentsinR&Dbythehighereducationinstitutionsinthe
NorthareclosetotheUKaverage.Despitethismixedpictureon
R&Dspending,evidencefromtheEU’sCommunityInnovation
Survey(DTI2006)showsthatnorthernfirmsarejustaslikelytobe
makingactiveinnovationsasfirmsanywhereelseinEngland7,and
businessesbasedintheNortharenationalleadersinbringing
entirelynewprocessestotheindustriesinwhichtheyarebased.
Also,YorkshireandtheHumberhasthehighestlevelofpatent
applicationsamongallUKregionsandnations.
Thelevelofentrepreneurialactivityinthenorthernregionsislower
thanintheGreaterSouthEast,asbothofficialstatistics(thelevel
ofVATregistrationsbybusinessesineachregion)andthe
DepartmentforBusiness,EnterpriseandRegulatoryReform
(BERR)’sSmallBusinessSurveysuggest.ippr’sresearchbasedon
theUKFamilyResourcesSurveysuggeststhatpeopleintheNorth
Eastarelesslikelytoholdriskyassets,whichmaymeanthatthey
aremorecautiousthanpeopleinotherregions(thisanalysis,
however,doesnotextendtotheothertwonorthernregions).The
relativelylowlevelsofinheritedwealthasaresultofloweraverage
housepricesintheNorthalsocontributestoareducedlevelof
entrepreneurshipintheregion,asthisisacrucialpartofstart-up
capital.TheNorthisatadisadvantageintermsoftheamountof
housingcapitalwould-beentrepreneurscandrawon;whileproperty
priceshaverisenthere(astheyhavedoneeverywhereelseinthe
UK),thegapbetweenpricesintheNorthandtheGreaterSouth
Easthaswidenedoverthelastfiveyearsorso.Relativelylow
averagelevelsofskillsamongtheworkforceinthenorthernregions
areanotherfactorthatcontributestoexplainingtherelativelylow
levelsofentrepreneurshipintheNorth.
7.TheCommunityInnovationSurveydefinesafirmas‘innovation-active’ifitisengagedinanyofthefollowing:(a)introducinganeworsignificantlyimprovedproductor
processformakingorsupplyingproducts;(b)conductinganinnovationprojectthatisnotyetcomplete;or(c)makingexpendituresinsuchareasasinternalR&D,training,
acquisitionofexternalknowledgeormachineryandequipmentlinkedtoinnovationactivities.
8.NorthernWay2007apointsoutthatthequalityoftheNorth’scity-basedhousingisnotveryhighinmanycasesandthaturbangreenspacesintheNorthareoftenof
lowquality.
9.NUTS3areterritorialunitsintheframeworkoftheNomenclatureoftheTerritorialUnitsforStatisticsdesignedbyEurostat,whichcorrespondapproximatelytolocalor
unitaryauthorities.
Environmentandqualityoflife
ThenorthernEnglishregionshaveaveryhighqualityofnatural
environment,containing,forexample,largeareasofNationalPark
landandAreasofOutstandingNaturalBeauty.Onmanyofthe
environmentalindicatorsexaminedinourNorthinNumberspaper,
theNorthperformswell(forexample,onriverquality),althoughon
otherstheNorthisnobetterthanaverage–forexample,traffic
congestionaroundmanyofthenortherncityregionsisasbadas
anywhereintheUK(seeDepartmentforTransport2006formore
evidenceonthis).Furthermore,muchofthebestenvironmental
qualityintheNorthisfoundinrural areas,anditisnotclearhow
muchthisbenefitsthemajorityofthepopulation,whichlivesin
urban areas.8 Additionally,thereshouldbeadegreeofcautionin
sayingthattherelativelyhigh-qualityenvironmentoftheNorth
compensatesforitslowerincomesandproductivity–these
categoriesarenotreallycommensurate.Althoughthereissome
trade-off(forexample,highlevelsoftransportuseandurban
developmentmayreducetheamountofrurallandandalsolevelsof
tranquillity),thisshouldnotbeoverplayed.TheUK’splanning
systemhelpsprotectgreenspacearoundtownsandcitiesandrural
areas.
Thethreenorthernregionsalsohavequiteavariedpictureinterms
ofotherfactorsthataffectqualityoflife(Johnsonetal 2007).For
exampletheirperformancewithrespecttothepoliceserviceand
criminaljusticesystemismixed.Allthreenorthernregionshadlower
thanaverageconfidenceinthecriminaljusticesystem.Residentsin
theNorthEasthadhigherthanaverageconfidenceintheirpolice
forcebutforresidentsintheNorthWestandYorkshireandthe
Humberthiswaslowerthanaverage.
HealthoutcomesarerelativelypoorintheNorthcomparedwith
otherregionsofEngland.Asindicatedearlier,lifeexpectancyrates
arelowerthanthenationalaverageandmortalityratesfromheart
diseaseandcancerarehigherthaninanyotherEnglishregions.
Intra-regionalvariations
TheanalysiscarriedoutforthisprojectandpresentedinJohnsonet
al 2007showedthattherearealsosubstantialvariationsin
performancewithinandacrossthethreenorthernregions.For
example,iftheUK’saverageGVAperheadistakenas100,GVA
indicesforNUTS39 sub-regionsintheNorthin2004(thelatest
yearforwhichdataiscurrentlyavailable)rangefromahighof116
(forLeeds)toalowof58(forWirral).Inotherwords,averageGVA
perheadintheWirralin2004wasonlyhalfwhatitwasinLeeds.
Meanwhile,therewasalsoconsiderablevariationinthegrowthof
totalpercapitadisposableincomeineachNUTS3areaoverthe
decadebetween1995and2005–rangingfrom42percentin
Cheshiretojust16percentinSefton.
Therearesomeimpressivesuccessstoriesinsomeofthesub-
regionsoftheNorthsuchasthelargecity-regionsofManchester
andLeeds.Theneedforfurtherstrengtheningofthese‘growth
11 ipprnorth|TheNorthernEconomyintheNextDecade

poles’runsalongsidetheneedfordevelopingmoreambitiousand whileregionsthatexperienceadeficitintheseareasmightstruggle
effectiveredistributionmechanisms.Thesuccessfulurbancoresof toutilisetheproposedinstrumentsandcontinuetolagbehind.
theNorth,justasmuchasLondon,requiremoreandbetterlinks
Thetrendtowardsgreaterdevolutionandthetransferofmore
withtheirsurroundinghinterlands,includingruralareas,aswellas
dutiestolocalandregionalauthoritiessignalsthatregional(and
betterlinksbetweenareasofopportunityanddeprivationwithin
local)institutionsarelikelytobecomemoreimportantthanthey
eachcity-region.Onlythiscombinationwillleadtowardsadynamic
wereintheperiodfrom1997to2007.RegionalGovernment
andsustainableeconomicgrowththatdoesnotcausedeepening
Offices,RegionalDevelopmentAgencies,RegionalAssembliesand
intra-regionalsocialandeconomicdivides.
city-regions,sub-regionalpartnerships,localauthoritiesandthe
Publicfunds NorthernWay(thecollaborativestrategybetweenthenorthern
Asoneofthepreviouspapersfromthisprojectdemonstrates RDAs),areallworkingtowardsimprovingtheeconomicperformance
(Mrinska2007)theroleofthepublicsectorintheNorthis ofandsocialcohesionintheregionsoftheNorth.Moreover,the
substantialintermsofcurrentspendingandtheimpactithason qualityoftheperformanceofregionalandlocalauthoritiesisquite
thelabourmarket.However,thehigher-than-averagelevelsof oftenhigherthaninthemoreprosperousSouthernregions
spendinghavenotledtodramaticchangesintheeconomic (Johnsonetal 2007).
performanceoftheNorthoverthelastfewdecades.Theprivate
However,recognisingsomedegreeoffragmentationand
sectorisstillnotstrongenoughtonarrowtheproductivitygap
inconsistencyintheinstitutionalsystem,theSub-nationalReviewof
betweenthenorthernregionsandtheEnglishaverageinthesectors
EconomicDevelopmentandRegeneration(HMT2007a)announces
ofindustrythatcouldbenefitfromalargernumberofhigh-quality
planstostreamlinegovernancestructuresattheregionallevelby
privateproviders(forthereasonsexplainedaboveunder‘Innovation
disbandingRegionalAssembliesandgivingRDAsresponsibilityfor
andentrepreneurship’).Asshownearlier,theoverallevidenceonthe
preparationoftheIntegratedRegionalStrategies.Italsocontains
economicstructureandproductivityperformanceofthenorthern
ambitionstoincreaseaccountabilitytolocallyelectedbodiesand
economiesshowsthatthereisstillplentyofroomforimprovement.
Parliament(throughthecreationofthepostsoftheRegional
Ourresearchstartsfromtheassumptionthattheamountof MinistersandtheestablishmentofRegionalSelectCommittees).
spendingavailableinfortheNorthinfutureislikelytodecline,for Theexactmechanicsofthesereformsarestillunclearinpractice,as
threereasons.First,thecomingyearswillseecutsintheUK’s thereisaneedformanyregulatorychanges,andcapacityatthe
domesticbudgetforselectiveregionalassistance.Second,therewill localandsometimeregionallevelsisstillinsufficient.
alsobereductionsinthelevelofsupportavailablefromEU
Theanalysisofthecurrenteffectivenessofregionalpoliticaland
StructuralFunds,whichhavetraditionallyplayedanimportantrole
economicinstitutionsmadebythisproject(thoughfarfrom
inprovidingfundsforbigregenerationandsocialprojectsinthe
comprehensive)suggeststhatlocalauthoritiesandRDAsare
North.Finally,thereistherelativelytightenvelopeforoverallpublic
reasonablyeffectiveinprovidingvalueformoney.However,thereis
spending,assetoutinthe2007ComprehensiveSpendingReview.
alsothewiderissueofleadershipattheregionallevel–notonly
Giventheseconstraints,thenorthernregionswoulddowelltouse
leadershipofspecificorganisations,butintermsofformulatinga
publicfundingasaninstrumentfordrivingmoreinnovationsin
coherentapproachamongallcorestakeholdersthatcouldsteerthe
publicandprivatesectoractivitiesandenabletheprivatesectorto
processofformulatingavisionfortheregionandmakingitreality.
becomeamoresubstantialcontributortothewealthofthethree
northernregions.Iftreatedasadevelopmentalelementofthe AstheOECDTerritorialReviewofNewcastleandtheNorthEast
regionaleconomy,thepublicsectormaybeabletounlockaccessto (OECD2006)suggested,acollectivefailureofvisionandleadership
privatecapital. existsatmanylevels.Overallinthisproject,ouranalysishas
primarilyfocusedoneconomicperformanceandthusdoesnotallow
HavingarelativelylargepublicsectoratthisstageoftheNorth’s
ustoprovideacomprehensivejudgementontheeffectivenessof
developmentshouldbetreatedasanopportunity,notasathreat.
northernpoliticalandeconomicinstitutionsacrosstheboard.
However,thisiswiththeconditionthatthesector’ssuccessful
However,wehavelookedinmoredetailatgovernance
economicperformanceintheNorthfromnowresultsinareduction
arrangementsincertainkeyareasofeconomicpolicy:forexample,
ofitsshareinnorthernGVAduetotheexpansionoftheprivate
analysisofthecurrentarrangementsforgovernanceoftransport
sectortoalevelequivalenttothatseeninbetter-performingregions
policyatthelocallevelinReed2007suggeststhatthePassenger
oftheUK,ratherthanduetocutsinpublicspending.
TransportExecutivesrunningurbantransportpolicyformost
RegionaleconomicpolicyinEngland (althoughnotall)ofthenortherncity-regionslackadequatepowers
Britainlacksaregionalpolicythatwouldallowpolicymakersto todothejobproperly.Thesituationisevenworseoutsidecity
favourcertainregionsaccordingtothespecificfactorsoftheir regions,withaconfusingmultiplicityoftransportdecision-makers
developmentand‘positivelydiscriminate’inordertocreatean atloggerheadswitheachother(HMT/DfT2006).Our
environmentinwhichitwouldbepossibletodecreasethegapin recommendationsinthenextsectionincludesuggestionsfor
regionalprosperity–andthusleveloutpotentialtensionsbetween governancereformsincasesthatwehaveexaminedindetail.
differentpartsofthecountry.Alltheinstrumentsofregionalpolicy
areequallyavailabletoallEnglishregions(withsomesmall
exceptions).Thismeansthatthoseregionsthathavebetter
capacity,infrastructureandinitiative/leadershipareabletomake
betteruseoftheavailabletools,andthusperformevenbetter,
12 ipprnorth|TheNorthernEconomyintheNextDecade
2.Recommendations:
Aprogressivenortherneconomic
agendaforthenextdecade
Thissectionoutlineshowthenortherneconomycanclose–orat
leastgosomewaytowardsclosing–thegapbetweenitseconomic
performanceandtheUKaverage.Basedonthefindingsofthis
researchandanumberofotherrelatedprojectsatippr,wehave
identifiedasetofpolicyrecommendationsforthecoreareasthat
havebeenanalysed,aswellaswiderrecommendationsaimedat
improvingtheeconomicperformanceofthethreenorthernregions.
Theseprovideaclear,progressiveplanofactiontargetedatboth
thenationalandregionalpowerbodiesandthenon-governmental
agenciesthatplaykeyrolesinpromotingtheregions’sustainable
socio-economicdevelopment.
Itmustbeemphasisedthatthereisno‘magicbullet’thatwill
instantaneouslyreversetheNorth’srelativeunderperformance.
Regionaldifferentiationinsocio-economicdevelopmentisa
phenomenonthattendstoexistinanycountrywitharelatively
largeterritoryandpopulation.Itisexplainedprimarilybyunderlying
socio-economicfactorssuchasaregion’slocation,populationand
demographicstructure,thesectoralcompositionofitseconomy,its
workforce’sskills,anditstransportandinfrastructure.Publicpolicy
cancertainlycontributetowardsclosingthisgapbutitisdifficult,if
notimpossible,toeliminateregionaldisparitiescompletelywhile
maintainingadynamicmarketeconomy.
Themorechallengingquestionforthenationaleconomyisjusthow
bigagapispoliticallyacceptable:thebiggeritis,themore
dangeroustheoverallsituationis.Largedisparitiesmightleadfirst
todiscontentandthentotensionbetweentheregionsandgradual
destructivetendencies(therearequiteafewexamplesofthiswithin
theEuropeanUnion,suchastheseparatistmovementsinItalyor
Belgium).Currently,theUKhasthebiggestdisparityinGDPper
headbetweenitsrichestandpoorestregionsamongall27member
countriesoftheEuropeanUnion(atthelevelofNUTS210).
Closingthegapwilltaketime,and–incertainkeyareas–public
money.Itwillalsorequireactionacrossawiderangeofpolicyareas,
andpoliticalwillatthenationalandlocallevels.However,the
findingsofthisresearchgivegroundstoarguethatinrealitythereis
nodistinctiveareathatcanbeconstruedas‘regionalpolicy’assuch
inEngland.Rather,thereisaregionaldimensiontovariouspolicy
areas(suchasenvironmental,industrialandlabourmarketpolicy),
buttheseareasarenotalwayswellcoordinated.Forexample,as
discussedearlier,astricterapproachtoimmigrationpolicyata
nationallevelmayadverselyaffecttheoperationoflabourmarkets
10.NUTS2areterritorialunitsintheframeworkoftheNomenclatureoftheTerritorialUnitsforStatisticsdesignedbyEurostat,whichcorrespondstolargecountiesora
groupofsmallercountiesand/orunitaryauthorities.
11.TheNorthernEconomicAgendaprojectdidnotcontainaspecificstrandonlabourmarketpolicyasotherrecentipprresearchhascoveredthisarea.Thereforethe
recommendationsherearebasedonproposalsfromrecentipprpublications,primarilyTheSandTimer:EmploymentandSkillsintheNorthWest (JohnsonandSchmuecker
2007)andIt’sAllAboutYou:CitizenCentredWelfare (BennettandCooke2007),appliedtothenorthernEnglishcontext.
intheNorthEastinparticular,whichareinneedofadditional
migrantworkerstooffsetdeclinesinthedomesticpopulation.
Publicpolicylacksanimportantspatialdimensionthatwouldregard
individualregionsasacoherentsystem.Thefailuretoconsiderthe
effectsofpolicymadebyonedepartmentoragencyonpolicies
administeredbyanotherdepartmentoragencymightreduceeither
orbothpolicies’effectiveness,orevenleadtoconflictbetween
them.
1.Closingtheoutputgap–focusingon
productivitydrivers
The‘outputgap’measuresthatareusedtoillustratetheNorth’s
performancedeficitrelativetotheEnglishaveragetendtobefocused
onsuchindicatorsasGVAperhead,perfilledjoborperhour
worked.Inordertoclosethegapinoutputperheadbetweenthe
NorthandtheEnglishaverageitisessentialtofocusonthedrivers of
productivity–whichwetakeinthissectionasmeaningGVAper
head ofthepopulation.Eachofthekeydriversisdiscussedinthe
recommendationssectionsbelow.
Increasingemploymentrates
TheNorth’scorestrategyforincreasingregionalGVAperhead
shouldbetoattractmorepeopleofworkingageintothelabour
market,includingthosewhoarecurrentlyeconomicallyinactive
suchasloneparentsanddisabledpeople11.
Labourmarketpoliciescanbedividedintotwotypes–supply-and
demand-side.Supply-sidepoliciesaretodowiththesupplyofwork
tothelabourmarket,thatis:gettingmorepeopleintowork,
improvingthequalityofwork,improvingchildcareandworking
conditions,increasingthesupplyofskilledworkers,andsoon.
Demand-sidepoliciesaretodowithincreasingemployers’demand
forlabour.
a)Recommendationsforsupply-sidelabourmarketpolicies
Asingleincomereplacementbenefitshouldbeintroduced
ThiswouldreplaceIncomeSupport(IS),Jobseeker’sAllowance
(JSA),IncapacityBenefit(IB)andCarer’sAllowance.Thisproposal
shouldmakeiteasierfortherelativelylargenumberofout-of-work
benefitclaimantsinthenorthernregionswhowouldliketoseek
worktodoso.Thesinglebenefitwouldbeeasiertounderstandfor
claimantsandwouldofferaprogrammeofmoreactiveemployment
supportasanintegratedpartoftheconditionsofbenefitreceipt
(seeSainsburyandStanley2007).Thisreformwouldbuildonthe
13 ipprnorth|TheNorthernEconomyintheNextDecade
successofthePathwaystoWorkprogramme,whichhasalready
beenrolledouttoIncapacityBenefitclaimants.
EmploymentsupportforcurrentIBclaimantsmustbeproperlyresourced
TheGovernmentiscommittedtoimplementingEmploymentand
SupportAllowance(ESA)toreplaceIBfrom2008,withimproved
employmentsupportforclaimantswhowanttoseekwork.Thisis
animportantsteptowardsthedevelopmentofasingleworking-age
benefit.EvaluationoftheearlystagesofthePathwaystoWork
programmeshowsthatalthoughamorepersonalisedapproachto
employmentsupportismoreeffectivethana‘one-size-fits-all’
activewelfarepolicy,itismoreexpensive(atleastintheshort
run)12,andneedstobeproperlyresourcedtobeeffective.The
Government’sviewisthatcutsinthebudgetoftheDepartmentfor
WorkandPensions(DWP)overtheperiodcoveredbyCSR07will
notcompromiseJobcentrePlus’sabilitytodeliveremployment
supportservicesortocontractthemfromtheprivateandvoluntary
sectors.However,theeffectivenessoffrontlineemploymentsupport
servicesneedstobecontinuallymonitoredintheNorth(as
elsewhere),andextraresourcesmadeavailableifperformanceis
beingadverselyaffectedbythetightspendingenvelope.
AllrelevantdepartmentsshouldengagewithCityConsortiaand
devolverelevantpowers
ThisrecommendationappliesespeciallytotheDepartmentfor
Children,SchoolsandFamiliesandtheDepartmentofHealth.There
are15CityConsortiapilotprogrammesnationally,ofwhichfiveare
locatedinnortherncity-regions13,bringingtogetherpublicsector
agenciessuchaslocalauthorities,JobcentrePlus,localLearning
andSkillsCouncils(LSCs)andPrimaryCareTrusts(PCTs)with
privateandvoluntarysectororganisationstohelpimprovelevelsof
skills,employment,progressionatwork,andhealth.Asdiscussedin
Johnsonetal (2007b),theexperimentationwithconsortiaatacity-
regionalleveliswelcome,andshouldenablelabourmarketpolicyto
operateacrossareasthatequateroughlytotravel-to-work-areas,
resultingingreaterpolicycoherence.However,forthepilotsto
work,departmentalagenciessuchasPCTsandLSCsmustbe
allowedtofullyparticipateincitystrategies,mainstreaming
resourcestomeetlocallyagreedpriorities.Therewillneedtobe
genuinedevolutionofpolicyleversfromDWPandothercentral
governmentdepartmentsfortheconsortiatoworkproperly.Thisis
inlinewiththestrategyofdevolvingmorefeaturesofthewelfare
systemtolocalauthorities,asrecommendedintheGovernment’s
recentGreenPaperonWelfareReform(DWP2007).
b)Recommendationsfordemand-sidelabourmarketpolicies
Policyshouldfocusonlinkingareasofdeprivationtoareasof
opportunity
Giventhelargeintra-regionaldisparitiesinemploymentratesinthe
NorthdetailedinJohnsonetal 2007,transportpolicyneedsto
focusonmakingiteasierforworkerstogettowherethejobsare.
Improvingtransportconnectivitywithinandbetweennortherncity-
regionsisthuscrucial.Wesaymoreaboutthisinthetransport
recommendationsbelow.
NorthernemployersshouldbeengagedthroughLocalEmployment
Partnerships
LocalEmploymentPartnershipsareanewmechanismfor
collaborationbetweenJobcentrePlusandprivateandpublicsector
employers,launchedinthe2007Budget.Underthescheme,
employersvoluntarilyagreetocreatenewjobopportunitiesfor
unemployedandinactivepeopletoenterwork,inexchangefora
supplyof‘job-ready’candidatesfromJobcentrePlus.Thisscheme
hasparticularpotentialtobeeffectiveinthesub-regionsofthe
Norththatcurrentlysufferfromhighinactivityratesamongthe
working-agepopulation.JobcentrePlusshouldactivelypromotethe
schemeamongemployersthathaveasubstantialpresencein
northernEngland.
Furtherpublicsectorjobsshouldberelocatedtothenorthern
regions
Therelocationofpublicsectorjobsthatwerepreviouslybasedin
Londontovariouslocationsacrossthecountry(manyofwhichare
innorthernEngland)shouldcontinueandaccelerateifpossible,as
thiscanhelpboostthedemandforhigh-skilledworkersinthese
areas,asdiscussedinMrinska2007.Inturn,thisshouldmakethe
labourmarketsintheNorthworkbetterbycreatingadditionaljobs
forhigh-skilledworkers.
Additionally,themeasuresthatwediscussbelowonencouraging
innovativeindustriesandsectorstostartupin,orrelocateto,the
North(suchaslow-carbonenergyproduction)andimproving
transportinfrastructurecouldofferaboosttolabourdemandasa
by-productofageneralupturninbusinessactivity.
However,inorderforallofthesepoliciestocometofruition,
sufficientresourcesneedtobeallocatedsotheycanbe
implementedsuccessfullyandfulfiltheirpotentialtotransformthe
northernlabourmarkets.Thismaybeproblematicinthewakeof
thecuts,inrealterms,totheDepartmentforWorkandPensions’
budgetoverthenextthreeyearsannouncedinrecentBudget
statementsandconfirmedinthe2007ComprehensiveSpending
Review(thoughCSR07alsoannouncedanewNeighbourhoodFund
of£2billionover2008-11,whichwillbespentonenhancing
economicactivityatlocallevel,andwillincludeskills).
Thereisalsoneedforanholistic,consistentapproachtopolicy,with
efficientsequencingofpoliciesandprogrammes,asaframework
thatchangesfrequentlyisdisruptiveforbotheffective
implementationandevaluationoftheactualresults.
Improvingworkforceskills
ThissectionofrecommendationsdrawsontheNorthernEconomic
Agendaprojectpaperonthepublicsector(Mrinska2007),butalso
workbyDelorenzi(2007)andPillai(2006)forippr.
Publicfundsforadultlearningshouldbefocusedontheworkless
peoplethatneedthemthemost
Therehasbeenashiftinthefocusofgovernmentfundingfor
educationandskillsawayfromadultlearningandtowardsadditional
interventionsinthe‘earlyyears’.Giventhissituation,theremaining
publicfundingforadultlearningintheUKneedstofocusonthe
groupsofworking-agepeoplenotinemploymentthatneedthe
mostassistanceinimprovingtheirskillssothattheycanenterorre-
enterthelabourmarket.Thesearethesamegroupsthatareover-
representedintheNorthcomparedwithotherEnglishregions:
adultswithlowlevelsofqualificationsornoqualificationsatall,
long-termunemployedjob-seekers,theover-fiftiesandIB
claimants.Thus,arenewedfocusonadultswhoneedmost
assistancewithskillsshouldhelpclosethegapbetweentheNorth
14 ipprnorth|TheNorthernEconomyintheNextDecade
andotherEnglishregions.
Northernemployersshouldengagewithskillspolicy
Thequalityoflocalskillsprovisionislikelytodependmoreonthe
qualityoflocalemployers,andtheirengagementwithfurther
educationcolleges,LearningandSkillsCouncilsandtheCity
Consortiamentionedearlier,thanithasdoneinthepast.Thisisa
consequenceoftheGovernment’srecentpolicyshifttowardsgiving
employersagreaterroleinthecontentandoperationofadultskills
policy(firstannouncedinthewakeoftheLeitchreview[Leitch
2006]).Inthisnewsetting,itisabsolutelyessentialthatnorthern
employersareencouragedtoplayanactiveroleinadultskillspolicy
andbefullyengagedwiththepublicsectorinstitutionsthat
coordinatepolicy.UnlessbusinessesintheNorthareatleastas
engagedastheircounterpartselsewhereintheUK(andpreferably
moreso)thereisadangerthattheNorthwillfallfurtherbehindon
skillsprovisionandperformance.
Therelocationofpublicsectorjobsshouldbeusedtoenhancethe
North’sskillsmix
Publicsectormanagerialpostsareincreasinglybeingrelocatedto
theregionsfromthecentre.However,thecurrentdynamicsof
relocationisstillnotenoughtomakealarge-scalecontribution
towardsclosingtheproductivitygapbetweentheNorthandthe
Southinabsoluteterms.Thepublicsectorshouldmovemorepolicy
andresearchpoststotheNorth,thusstrengtheningthenorthern
regions’expertiseandscientificcapacityandallowingsynergieswith
theNorth’srelativelystronguniversityresearchbasetobe
exploited.
HighlyskilledmigrantsmustbeattractedtotheNorth
Allthreenorthernregionsneedtotargetandattracthighlyskilled
migrantstocomplementandenhancetheregions’existingskills
profileandtoavoidthemfallingfurtherbehindtherestoftheUK
intermsoftheirskillslevels.Improvinggraduateretention,
especiallyofinternationalstudentsintheregion’stertiary
institutions,willbecrucialtothis.Withtheseobjectivesinmind,
centralgovernmentshouldengageRDAs(especiallynorthernRDAs)
moreactivelyindeterminingthewaynationalimmigrationpolicy
shouldoperateinthefuture.Immigrationflowsaredistributed
unevenlyacrosstheUKandsomeregionsstillrequireagreater
numberofhighlyskilledimmigrantstofillvacanciesforwhichthere
isashortageofdomesticlabour.Thiscouldbedone,forexample,
throughaddingsomeregional‘weightingsystem’tothe
forthcomingpoints-basedsystemforhigh-skilledimmigrants.
Boostingenterprise
Entrepreneurshipshouldnotbesubsidiseddirectly
Thebalanceofevidencesuggeststhatattemptstosubsidise
entrepreneurshipdirectlyhavenosignificantpositiveeffectsand
mayevenbecounterproductiveastheyencouragedisplacementof
unsubsidisedentrepreneursbysubsidisedentrepreneurs(Greeneat
al2004).Currently,entrepreneurshipsubsidiesdonotplayamajor
roleinenterprisepolicy;ourresearchsuggeststhatitwouldbea
mistakeforthemtoplayabiggerrole,astheydidinthe1980s.
Disparitiesinthedistributionofwealthshouldbeaddressedinstead
Oneoftheprimarydeterminantsofanindividual’sdecisionto
becomeanentrepreneurisaccesstopersonalwealth.Wealthis
importantbecauseitprovidesstart-upcapital(whichisparticularly
importantforindividualentrepreneursorsmallbusinessesthatmay
finditdifficulttosecureloanfinancefromthemarketonreasonable
terms,duetocreditconstraints–seeJohnsonandReed2007).The
Northisatadisadvantageintermsofthedistributionofwealthin
thathousepricesandotherassetholdingsarelowertherethanthe
UKaverage.Thus,policiesthataimtoaddressthedistributionof
wealth,whetherviaencouragingwiderownershipofassets(suchas
theChildTrustFund)orreducinghousepricedisparitiesbybuilding
moreaffordablehousinginareasthatfacethegreatesthousing
shortages,arelikelytobeaneffectivewayofencouragingamore
evendistributionofentrepreneurialactivityintheUKandboosting
overallstart-uprates.
TheNorth’sskillsdeficitmustalsobeaddressed
Thesecondkeydeterminantofentrepreneurshipiseducation:
bettereducatedpeoplearemorelikelytobecomesuccessful
entrepreneurs.Therefore,policiesthataddresstheNorth’s‘skills
deficit’willalsoaddressentrepreneurship(althoughwilltaketimeto
filterthrough).
Moreevidenceisneededontheeffectsofentrepreneurship
education
Thereislittleevidencethateducatingchildrenabout
entrepreneurshipitselfhasapositiveimpactonentrepreneurship
ratesoverandabovethegenerallevelofeducationpeoplehave.
However,thereisashortageofrigorousevaluativeevidenceonthe
effectivenessofentrepreneurshipeducationprogrammes.We
recommendthatthenorthernRDAsundertakemoresystematic
evaluationsoftheirowninitiativesinthisarea.
Public-privatesupportmechanismsforbusinessshouldbeimproved
ThepublicsectorintheNorthplaysanimportantroleincreatingan
enablingenvironmentfortheprivatesectortooperatein,andin
buildingandimprovinglinksbetweenbusiness,innovativescience
andhighereducation.More‘hybrid’public-privatesupport
mechanismsarerequiredtoachievesuccessfuleconomicgrowth:
fromfinancialincentivestoencouragingparticipationin
collaborativeprojects,throughadequatetransportand
communicationsinfrastructuretoaneffectiveregulatory
environment.
Promotinginnovationbybusinessesandhighereducation
TheR&Dtaxcreditshouldbeextendediffundingpermits
TheR&Dtaxcreditisthemainexistingfiscaltoolforencouraging
innovationintheUK.Empiricalevidencesuggeststhatithasa
significantpositiveimpactontheamountofresearchand
developmentundertakenhere.Itshouldbeatleastmaintainedat
itscurrentlevel,andpreferablyextendedfromitscurrentbudgetof
£600millioniftheGovernment’soverallfiscalpositionallowsthis.
However,thetaxcreditschemeisanationalprogramme,andas
suchwillnotdoanythinginitselftoaddresstherelative
underperformanceoftheNorth.
Moreevidenceisneededontheimpactsofpoliciestoencourage
networking
InitiativessuchasKnowledgeTransferNetworks(atthenational
level),YorkshireForward’sVirtualEnterpriseNetworksandOne
NorthEast’sNorthEastProductivityAlliancearedesignedto
encouragenetworkingamongfirmsandbetweenfirmsandother
innovatorssuchashighereducationinstitutions.Theyareagood
15 ipprnorth|TheNorthernEconomyintheNextDecade

waytocorrectamarketfailureintheory,butmoreattentionneeds
tobepaidtoevaluatingtheireffectsinpractice–itisnotyetclear
howmuchofapositiveimpactoninnovationratestheyhave.
Attractingexternalinvestment
Attractinggreaterlevelsofinwardinvestmenttothenorthern
regions,especiallytheNorthEast,iscrucialasitisunlikelythat
sufficientcapitalforbusinessinvestmentonthescalerequiredto
closethe£30billion‘outputgap’withtheEnglishaveragecanbe
generatedusingsolelyinternalsourcesoffinance.
Avibrant,confidentimageoftheNorthshouldbepromoted
Businessconfidenceisakeydeterminantofinvestment.TheNorth
ofEnglandrequiresgreatersupportthanotherregionstoenhance
thisconfidence.Somedegreeofangeratthewaytheregionwas
largelyoverlookedforinvestmentduringtherecessionyearsofthe
1970s,80sandearly90sisjustified.Andforthissituationnottobe
repeated,amoreprominentandinspirationalpromotionalcampaign
shouldbedevelopedandimplementedacrosstheNorth.The
existinginitiativesfromthethreenorthernRDAssuchasOne
NorthEast’s‘PassionatePeople,PassionatePlaces’campaignshould
besupported,althoughRDAsshouldbewaryofstrategiesthat
mightencourageinvestmentinonenorthernregionattheexpense
ofanother.
2.Transport
Ourrecommendationsfortransportpolicydivideintothreeareas:an
overallframeworkfortransportinvestment,futureprioritiesfor
primarymodesoftravel,andgovernancereforms.
Aprogressiveframeworkfortransportinvestment
Northernregionsmustgettheirfairshareoftransportinvestment
ThereappearstobeabiasagainsttheNorthEastandYorkshireand
theHumberintermsoftheamountofpublicspendingontransport
perheadofthepopulation.Comparingtransportspendinginthe
northernregionswiththeEnglishaveragelevelofspending
(excludingLondon)14 showsthatwhiletheNorthWesthasalmost
exactlytheaveragelevelofspending,theNorthEastreceivesonly
81percentoftheaverage,andYorkshireandtheHumber78per
cent.Whiletheunevenflowofinvestmentinlargeregional
transportprojectsdoesnotnecessaryreflectanunderlyingbiasin
transportfundingallocations,werecommendthattheDepartment
forTransportreviewsitsfuturefundingallocationsresultingfrom
the2007CSRtomakesurethatYorkshireandtheHumberandthe
NorthEastaregettingtheirfairshareoffunding.
Aprogressiveapproachtotransportappraisalisneeded
AsidentifiedbytheEddingtonTransportStudy(HMT/DfT2006)
andtheNorthernWay’srecentworkontransportpolicy(Northern
Way2007b,2007c),itisessentialthattransportinvestmentprojects
arechosenonthebasisofpropervalue-for-moneyassessments.
However,‘valueformoney’mustbeinterpretedinbroadterms,not
intermsofnarrowmaximisationofGVA.Appraisaloftransport
projectsshouldbebasedoncost-benefitanalysisthatincludes
environmentalfactorsanddistributionalconsiderations.Withthisin
mindwewelcometheDfT’sdecisiontoupdatetheNATA(New
ApproachtoTransportAppraisal)frameworkusedtoassess
transportproposals.
Across-cuttingnortherntransportinfrastructurestrategyisrequired
Thereisaneedforacross-cuttingstrategyofexpandingtransport
infrastructureintheNorth,inlinewiththeenvironmentalpressures
andchallengesfacedbytheregions.Greatermobilityand
accessibilityfortheNorththusshouldbeachievedinconjunction
withtheimprovementoflessenvironmentallyharmfultransport
means,forexampleimprovingthequalityofrailwaylinks(including
apossiblehigh-speedrailoption)andexpandingtheuseof
waterwaysforfreight(includingcanalsandrivers).Takentogether
thesemeasurescanfacilitateashiftinnortherntransporthabits
towardslower-carbontransportsolutionssuchasrail,busesand
cyclingandawayfromhigh-carbonoptionssuchasaviationand
privatemotorvehicles.
Large-scaletransportinvestmentsfortheNorthshouldnotbe
ruledout
WhiletheEddingtonStudysuggeststhatincrementaltransport
investments(suchastheWestCoastMainLineroute
modernisation),whichupgradeexistingtransportnetworksand
infrastructure,oftendeliverbettervalueformoneythan‘step
change’investmentsthatprovideentirelynewinfrastructure(such
asLondon’sCrossrail),thisisnottrueineverycase.Step-change
transportinvestments(suchasanewhigh-speedraillineorlines
fromtheNorthtotheSouth)shouldnotberuledoutapriori15 .In
particular,itisessentialthattheEddingtonStudynotbeusedto
justifyablanketrejectionofmajornewinfrastructureprojectsinthe
NorthasthiscouldbedisastrousfortheNorth’sfutureprosperity.
Rail,roadandair
Thecaseforhigh-speedrailintheNorthshouldbeappraised
Afullappraisalanddecisionisneededonthedesirabilityofnew
high-speedsurfacepublictransportlinksbetweentheNorthand
theSouthandtheNorthandScotland,andhigh-speedlinks
betweennortherncity-regionsthatarecurrentlypoorlyconnected.
TheGovernment’srailWhitePaperofJuly2007(‘Deliveringa
SustainableRailway’)contendsthatnoassessmentofthecasefor
high-speedlinksisnecessarybefore2012.However,wewould
recommendthatanassessmentbeginsassoonaspossible,to
preventtheexistingnorthernpublictransportinfrastructurefrom
becomingabrakeonfutureeconomicadvancement.
Selectivenewinvestmentshouldbemadeinnorthernroads
Thereisaneedforselectivenewtransportinvestmentsinthe
northernroadnetworktodealwith‘bottlenecks’forseveralkey
roadsandnorthernports,asnotedintherecentCityRegion
DevelopmentPlans,RegionalEconomicStrategydocuments,and
NorthernWaytransportpublications.Thisisnotcarteblanchefor
indiscriminateexpansionoftheroadnetworkonthescaleofthe
1980s,andincrementalmeasurestoimprovedemandmanagement
ontheexistingroadnetworkarethepreferable(andlowestcost)
solution.However,weshouldnottaketheextremestepofruling
outanyexpansionoftheroadnetwork.Buildingextraroadscan

14.WeexcludeLondonfromthecalculationsasitsleveloftransportspendingperheadisalmostthreetimeshigherthantheaveragefortheUKexcludingLondonand
henceisatypical.
15.WhengivingevidencetotheTransportSelectCommitteeinMay2007,SirRodEddingtonwasveryclearonthispoint:hedidnot intendtoruleoutlarge-scaletransport
investmentsinhisfindings(HouseofCommonsTransportSelectCommittee2007).
16 ipprnorth|TheNorthernEconomyintheNextDecade
haveaplaceinprogressivetransportpolicywheretherearesevere
capacityconstraintsduetoinadequacyintheexistinginfrastructure.
Andindecidinghowtoimproveconnectivitytonorthernports,the
possibilityofaugmentingandexpandingtherailfreightnetworkas
acomplementtotheroadnetworkshouldalsobetakeninto
consideration.
Airportexpansionmustbeconsistentwithlong-termclimate
changestrategy
Theambitiousplansforregionalairportexpansionoutlinedinthe
Government’s2003WhitePaperTheFutureofAirTraveland
reiteratedinmorerecentDfTpublicationsshouldonlybeallowed
togoaheadinsofarastheycanbeshowntobeconsistentwith
theGovernment’slong-termstrategyofa60percentcut16 in
emissionsofgreenhousegasesby2050,asenshrinedinthe
ClimateChangeBillcurrentlypassingthroughParliament.We
returntothisissueinthecontextoftheoverallenvironmental
policyfortheNorthlaterinthissection.
Governancereforms
Transportauthoritiesincity-regionsshouldbegivengreater
powers
AsrecognisedbytheCommissionforIntegratedTransport(2007)
andtheEddingtonTransportstudy(DfT/HMT2006),thecurrent
arrangementsfortransportgovernanceinurbanareasare
inadequate.ThePassengerTransportAuthority(PTA)/Passenger
TransportExecutive(PTE)modelforcity-regionaltransport
governanceistherightbasicapproach,butcurrentlythepowers
ofPTAsandPTEsaretoolimited.Theyneednewpowersover
highwaysandtrafficmanagementinurbanareasandagreater
influenceovertheschedulingandavailabilityofpublictransport
services.Additionally,city-regionsandothercitiesandtowns
shouldbegivenmorepowerstoimplementurbanroad-user-
chargingschemes.TheproposedreformsinthedraftLocal
TransportBillareanimportantsteptowardstacklingthe
inadequacyofcurrentgovernancearrangements,butreform
needstobebolderandquicker.
Currentarrangementsfortheregionalgovernanceoftransport
policyareinadequate
Ataregionalandpan-regionallevelthereneedstobeclearer
linesofcommunicationandincreasedliaisonbetweentheRDAs
andthemaintransportpowerbrokers–theHighwaysAgency,
OfficeofRailRegulation,NetworkRailandtherailcompanies,
andtheairportandportoperatorsaswellastheDepartmentfor
Transport.RDAsshouldhavemoreinfluenceontransportpolicy
fortheNorth,withaspecificremittomakethecaseforbetter
integrationbetweendifferenttransportnodes.
Ambitiousinvestmentandreformareessentialtotransformthe
prospectsfortransportintheNorth(aselsewhereintheUK),but
thetightspendinglimitssetbythe2007ComprehensiveSpending
Reviewwillmakethesetransformationalimprovementsdifficultto
achieveintheshorttomediumterm.TheCSRsetsaspending
envelopeforDfT’sbudgetof3percentperyearnominalincreases,
meaningthatpublicspendingontransportwillcontinuetofallasa
percentageofGDP–asithasdonesincetheearly1990s.Inthe
16.60percentisthecurrentlong-termtargetintheClimateChangeBill,buttheGovernmentisconsideringstrengtheningthisto80percentinresponsetorecentscientific
evidence.
2010stherewillneedtobeamajorincreaseintheamountofGDP
devotedtotransportspendingtoachieveaworld-class,
environmentallysustainabletransportsystemintheNorth.
3.Amoregenuineregionalperspectivefor
regionalpolicy
‘Positivediscrimination’inregionalpolicyshouldbeallowed
WhilewerecognisethatthismightbesensitivegiventheBritish
propensitytoseeanyregionalvariationasa‘postcodelottery’,
offeringarangeofinstrumentsandvariedresourcestoregionswith
differentlevelsofdevelopmentandpotentialforgrowthwould
actuallybeamoreequitablearrangement.Thereshouldbe
instrumentsthatareavailableonlyfortheregionswiththelowest
levelofsocio-economicdevelopment(determinedusingalimited
numberofsocio-economicindicators).Currently,therearedifferent
fundsandinstrumentsavailableforthedeprivedlocalareas,butthe
natureofproblemsandperspectivesofdeprivedcommunities
locatedintheGreaterSouthEastforinstanceisverydifferentfrom
thoseintheNorth.Localitiesandsub-regionsintheseregions
shouldhavetoolsspecificallytargetedonlyatthem(preferably
developedjointlybynational,regionalandlocalauthorities).
Sectoralpoliciesshouldbebetteralignedandshouldaddvalueto
eachotherbyexploiting‘synergy’effects
Suchpoliciesshouldrecogniseandmakeuseofpositiveinteractions
betweendifferentdepartmentalpoliciesandpolicyareas.Thenew
institutionoftheRegionalMinistersmaybeabletoplayakeyrole
inaligningdifferentaspectsofpolicy,butthiswillrequireajoined-
upapproachbythenineMinistersthatrepresenttheinterestsof
theirparticularregion.
Anationalspatialplanningstrategyisneeded
Thisisnecessaryforaddressingcomplexproblemsofsustainable
developmentofthecountryingeneralandtheNorthinparticular.A
NationalSpatialDevelopmentPlan,whichwouldalsofeedinto
trans-Europeanspatialdevelopmentstructures(suchasthe
EuropeanSpatialDevelopmentPerspective),couldplayakeyrolein
futuretransportappraisal,inhousingplanning,inkeepingabalance
betweenexpandingurbanzonesandruralareas,inpreservinggreen
beltsandareasofexceptionalnaturalimportance,andsoon.
AspatialdevelopmentstrategyfortheNorthshouldbedeveloped
Thethreenorthernregionsshouldconsultonhowtodevelopajoint
spatialdevelopmentstrategytorespondtothechallengesofthe
North’s‘peripheral’locationandtochangetheperceptionofit
beingaremote,farawayplace.Theopportunitiesofferedbythe
NorthofEngland’stransitionallocationbetweentheSouthand
Scotlandshouldbeexplored.
4.Implicationsofnationalpublicsectorreform
fortheregions
Thenextstageofpublicsectorreform,aimedatincreasingvalue
formoneywillbemainlyachievedbystreamliningprocurement,
outsourcing,andcollaborationforsavingonadministrative
functions.TheNorthwillbenefitfromandcontributetothese
processestoagreaterextentiftherecommendationsbeloware
implemented.
17 ipprnorth|TheNorthernEconomyintheNextDecade
Value-for-moneyinthepublicsectorshouldbeimproved
TheCabinetOffice,inimplementingitsefficiencyagenda,
shouldgobeyondefficiencytargetsandusemorevariedmeans
toimprovevalueformoneyandspurinnovationinthepublic
sector.Forexample,asystemofincentivescouldbecreatedto
boostcollaborativeinitiatives,oraconditionalityprinciple
(wherebenefitsareonlyreceivedifspecifiedobligationsare
met)setupforprovidingfinancialresources(ontopofthe
minimumrequired).
Alevelplayingfieldisneededfornorthernbusinessesinpublic
procurement
TheOfficeofGovernmentCommerce,jointlywithlocaland
regionalauthorities,shouldsupportandbuildthecapacitiesof
localsmallandmediumbusinessesinorderforthemtobenefit
frommodernICT-basedprocurementsolutions.Thiswouldincrease
theirchancestotapintoeven-increasingpublicprocurement
contractsnotonlylocally,butacrossthecountry.
Environmentally-sustainableprocurementshouldbepromoted
Procurementproceduresshouldalsobealteredinordertorespond
totheGovernment’scommitmenttoworkwithsupplychainsthat
provide‘innovativeeco-technologiesandsolutions’,asindicatedin
theGovernment’sSustainableProcurementActionPlan(HM
Government2007).
5.Financialrecommendations
Regionalpublicspendingallocationsshouldreflectneeds
HMTreasuryneedstodevelopamodern,needs-basedapproach
towardsallocatingcurrentspendingacrosstheregions.Atthe
sametime,theGovernment’sformulaeforallocationofpublic
spendingshouldcontinuetoreflectthegreaterneedofthe
northernregionsforadditionalspendingtoimprovetheir
economicperformance.Thisneedisnotleastduetothefact
thatitcostsmoretoprovideservicesinthelargebutrelatively
sparselypopulatedareasofthenorthernregionsthanitdoesin
moredenselypopulatedregions.
PubliccapitalinvestmentsintheNorthshouldbeincreased
TheGovernmentshouldincreasetheamountofcapital
investmentinthepublicsectorforthenorthernregionsrelative
totherestofEngland,especiallytheallocationsfortheNorth
EastandYorkshireandtheHumber.Capitalinvestmentsare
especiallyneededinthetransportsectorofthesetworegions,as
describedearlier.
Fiscaldecentralisationshouldbeincreased
TheGovernmentalreadyallowsgreaterdecentralisationand
deconcentrationofregionalandlocalauthorities.Thisshouldgo
handinhandwithatleastsomedegreeoffiscaldecentralisation
andlettingregions‘raise’and‘spend’moneylocally,which
wouldenableregionstogetusedtomeasuringtheirpotential
objectivelyandlookmorecreativelyattheirsourcesofpotential
income.However,thismustbeaccompaniedbyhighquality
leadershipatthelocalandregionallevel–forexample,
addressingtheweaknessesthattheOECDfoundinitsterritorial
reviewoftheNewcastlearea(OECD2006).
6.Makingthemostofrecentandplanned
institutionalchanges
AbroaderevaluationframeworkforRDAsisneeded
FollowingtheGovernment’sdecisiontodisbandRegional
Assemblies(by2010),thenewrolesoftheRegionalDevelopment
Agenciesshouldimproveconsistencyandcoherenceinthe
processesofspatialandeconomicstrategicplanningand
implementationoftheregionalstrategy.However,thenew
assessmentframeworkproposedbytheSub-NationalReview(HMT
2007a)willevaluateRDAperformanceagainsta‘singlegrowth
objective’(stilltobedetermined),basedonfivecoreindicatorsof
economicperformance.Thereisnoframeworkforevaluatingthe
RDAs’performanceinpromotingsustainablespatialplanning,
housing,environmentalprotectionactions,andsoon.Andthough
weareverymuchinfavourofthesimplifiedperformance
assessmentframework(specifiedbytheGovernmentinCSR07),we
stillrecommendamendingthecurrentsituationbyexpandingthe
RDAs’evaluationframeworktoreflecttheirnewfunctions,whichgo
beyondstimulatingeconomicdevelopment.
MoreconditionalityshouldbeattachedtothefundingofMultiple
AreaAgreements(MAAs)
TheGovernmentrecentlyannounced13pilotMAAs,sevenofwhich
arelocatedintheNorthofEngland.Thisnewcollaborative
instrument,ofwhichthesearethefirstwave,goesbeyondthe
traditionalcooperationbetweenlocalauthoritiesintheareaof
transport:italsocoversinvestment,housing,andemployment,
whicharecrucialpolicyareasforthesub-regionsiftheyareto
achievemoredynamiceconomicdevelopmentandtackle
worklessness.Ithasapotentialtobuildonthedynamismofthebig
citiestothesurroundingregions,asitislargelybeingdevelopedby
thecity-regions(forthemoment,atleast).
WebelievethesuccessoftheMAAs’implementationwilldepend
greatlyonthemotivationofparticipatingpartiesandthelevelof
funding.Toincreasetheeffectivenessofthescheme(whichis
completelyoptionalforthelocalauthorities)inasituationwhere
limitedfundsareavailable,thereshouldbeagreaterdegreeof
conditionalityattachedtotheallocationofresources:MAA
partnershipbudgetsshouldbedependentonthequalityoftheir
work.Mostsuccessfulpartnershipsshouldexpectmorefundswhile
thosethatstruggletodevelopjointpoliciesshouldreceiveonlya
minimumleveloffundinguntiltheyrevisetheircollaborative
strategy.
Moreclarityisneededovertherolethatlocalauthoritiesshould
playinthenewinstitutionalframework
MAAsrepresentanadditionallevelofcollaborationforthelocal
authorities,whichfromnowonhaveastrengthenedrolein
economicdevelopmentthroughanewlyintroducedstatutoryduty
(HMT2007a).InthenextCSRperiodtheywillhaveagreater
impactontheregionaleconomythroughdevelopmentand
implementationoftheIntegratedRegionalStrategies.However,as
MAAsarecompletelyreliantontheinitiativeoflocalauthorities,
theirparticipationinthisscheme,aswellasintheregionalstrategic
processandtheimplementationofLocalAreaAgreements(LAAs),
mightstretchtheircapacityandconsequentlyhavenegative
implicationsforthequalityofpolicyoutcomes.
18 ipprnorth|TheNorthernEconomyintheNextDecade
Thereisaneedforlocalauthoritiestounderstandclearlywhat
policiesworkbetteratwhatlevelsothattheycouldavoid
overlapping.Itisalsoimportanttorealisethatindifferentregions
differentterritorialtiersmightbeappropriateforspecificinitiatives,
asregionsdifferinthescaleofterritory,population,intensityof
economicactivityandthenatureoftheproblemstheyface.Thus,
theflexibilityofthisapproachshouldbematchedwithclarityover
theextentandlimitsoflocalauthorities’responsibilities,and
minimumstandardsacrossthecountry.Itmightbenecessaryto
developasinglematrixoftheinstitutionalmechanismsandpolicy
toolscurrentlyavailabletothelocalauthoritiessotheyhaveasingle
visionofallopportunitiesandobligations.
ExpectationsofwhattheRDAscanachieveneedtoberealistic
Althoughwebroadlywelcometheinstitutionalreformsannounced
intheCSR07,thereisapossibletensionbetweenthebroadeningof
theRDAs’functionsandtheirfuturefinancialallocations.TheRDAs
receivedsomeadditionalfunctionswhichusedtobeinthe
NorthernWay’sareaofcompetence.17 Theywillalsoseean
extensionoftheirfunctionsbeyondeconomicstrategyandbusiness
supporttoembracesomeofthefunctionsofRegionalAssemblies.
However,theiroverallbudgetswillbesmaller.Therehastobea
concernthattheimbalancebetweentheadditionalscopeofwork
anddecreasedamountoffundsmighthaveanegativeimpacton
theeffectivenessofsomeregionalinitiatives.Thisconcernstill
standsevenifagreaterroleoflocalauthoritiesineconomic
developmentandtheirincreasedbudgetsreducestheworkloadof
theregionalinstitutionsinthisarea.
7.Meetingenvironmentalchallenges
Theimperativesofaprogressiveenvironmentalpolicy–centredon
encouraginga‘low-carbon’economy,sustainablebuilt
developmentsthatprotectandenhancetheenvironmentwherever
possible,andbuildinganewroleforUKindustryattheforefrontof
innovationinenvironmentaltechnology–cutacrossmost,ifnotall,
oftheareasonwhichthisprojectmakespolicyrecommendations.
Ourspecificrecommendationsfollow.
Newdevelopmentneedstobesensitivetoenvironmental
considerations
Developmentofnewresidentialhousing,businessandretailoffice
space,andtransportinfrastructureintheNorthshouldbefocused
onpreservingtheNorth’senvironmentaladvantages(suchas
NationalParklandandgoodriverquality)atthesametimeas
closingtheoutputgap.Planningandfocusingnewdevelopment
shouldbeoncityregionswhilemaintainingthegreenbeltand
NationalParks,andtransportinfrastructureshouldbeplannedin
ordertoachieveashifttoasustainabletransportsystem.
Allpolicyinitiativesneedtobeconsistentwithmeetingthe
Government’sgoalofa60percentminimumreductionin
greenhousegasemissionsfromallUKsourcesbytheyear2050
Forexample,assuggestedearlier,itisunlikelythatcontinued
regionalairportexpansionatthepaceenvisagedbytheDfT’s2003
AviationWhitePaperwillbepossibleforthenextfourdecadesif
17.Asannouncedinthe2007CSR,theNorthernWay’sbudgetfor2008-2011is£45millioncomparedwith£100for2005-07.Thereductioninfundingforthelaterperiod
isexplainedbythefactthatsomeoftheinitialfunctionsoftheNorthernWaywerealwaysintendedtobetime-limitedandhavenowconcluded,whileothershavebeen
mainstreamedintotheRDAs.SeeNorthernWay2007dfordetails.
theUKistomeetitsemissionstargets.Thepolicyprescriptions
emanatingfromDfTandBERRhavetobemadecompatiblewith
thelong-termclimatestrategybeingchampionedbythe
DepartmentforEnvironment,FoodandRuralAffairs.Avoiding
dangerousclimatechangeistoopreciousanobjectivetobe
compromised,andhigh-speedgrowthingreenhousegasemissions
byonesectorshouldonlybetoleratedifitcanbemorethanoffset
bydrasticreductionsinothersectors.
Theneedtomovetowardsalow-carboneconomyinthefuture
shouldbetakenasanopportunityratherthanathreattoUK
industry
AsdiscussedbyipprindetailinLockwood(2007),Government
policyneedstoencouragenewtechnologiesforenergysupplyand
storage(forexample,carboncaptureandstorage,second
generationbiofuels,hydrogen,offshorewind,andnew‘end-use’
efficiencytechnologies).Technologiesrepresenttheonlyrealistic
waytoachievecontinuedeconomicgrowthwhilereducing
greenhousegasemissionsatthesametime.Asdiscussedin
JohnsonandReed(2007),recentGovernmentinitiativessuchas
theEnvironmentalInnovationsAdvisoryGroup(DTI2006a)andthe
TechnologyStrategyBoard(TSB)andtheEnergyTechnologies
Institute(ETI)(DTI2006b)haveputthebeginningsofaframework
inplacethatwillenableBritishindustrytopursuelow-carbon
innovationeffectively.Giventhatthreeofthesix‘ScienceCities’
announcedinthe2004Pre-BudgetReportand2005Budgetare
locatedintheNorth,andthatsurveyevidence(DTI2006)suggest
thatfirmsintheNorthEastandYorkshireandtheHumberarebest
atintroducingmarket-leadinginnovationsintotheirsectors,itisto
behopedthattheETIandTSBwillmaketargetedinvestmentsin
environmentalinnovationsinthenorthernregions.Thiswould
supplementtheenvironmentaltechnologyinitiativesthattheRDAs
arealreadypursuing,andwouldmakeitmorelikelythattheNorth
willbeinthevanguardofthedrivetowardsnewenvironmental
technologiesandtheachievementofatruly‘low-carbon’Britainin
thedecadestocome.
8.Theneedforbetterregionaldata
Wehaveconsistentlyfoundindoingthisworkthatthequalityof
dataavailableataregionalandsub-regionallevelissignificantly
insufficientforuseinhigh-qualityempiricalworkonthe
determinantsofregionaleconomicpolicy.Thefollowingpointsare
particularlyurgent:
• Regionaloutputdeflatorsarestillnotavailableformeasuringthe
actualleveloflivingcostsattheregionallevel,despitethe
explicitrecommendationoftheAllsoppReviewof2003that
theybedeveloped(HMT2004).TheGovernmentshould
allocatethenecessaryfundstoenabletheOfficeforNational
Statisticstoproducethisdata.
• TheOfficeforNationalStatisticsshouldimprovethequalityof
publicsectoremploymentdatafortheEnglishregions(by
makinguseofreliableadministrativesourcesofinformation).
19 ipprnorth|TheNorthernEconomyintheNextDecade

3.Conclusions
Ifthepolicyrecommendationsinthisreportarefollowed,webelieve maintainedoveranumberofyears.Anditisalsoessentialtohave
thatthenorthernregionsofEnglandwill,attheveryleast,beable anoverarchingregionalleadershipagendathatismuchmorethan
tocloseasubstantialproportionofthe£30billiongapinoutput, thesumoftheleadershipstrategiesofindividualstakeholders.
identifiedbytheNorthernWayin2004,betweentheNorth’sGross
Wehavebeenrealisticaboutthedegreeofextraspendingthatwill
ValueAddedperheadandtheaverage in England.Moreimportantly
bepossibleunderthetightspendingenvelopearisingfromthe
from aprogressiveviewpoint,theregionswillbeabletodeliver
2007ComprehensiveSpendingReview.Certainly,anindiscriminate
prosperity fortheNorthwhilesimultaneouslydeliveringamore
blanketexpansionofpublicspendingontheNorthisneitherlikely
environmentallysustainable,lower-carboneconomy,andcreatinga
nordesirable.Butbythesametoken,a‘hairshirt’approachwhere
moreequalsocietywithabetterpublictransportinfrastructure,a
noadditionalspendinginanyareaofregionalpolicyispermitted
better-skilledworkforceandmorebalancedspatialpatternsof
overthenextfewyearswouldbeequallycounterproductive.Inthe
growthanddevelopment.
previouspapersfromthisprojectandinthispaper,wehavemade
Itisimportanttoemphasise,however,thattheprogrammeoutlined thecasefortargetedadditionalspendingwhereitwillmakethe
hereneedstobefollowedoverthemediumtolongterm–wellinto mostpositivedifferencetowardsrealisingtheNorth’seconomic
the2010sandbeyond.‘Quick-fix’solutionswillnotwork,andthere growth,environmentalanddistributionalobjectives.
isnosingle‘magicbullet’policythatwillsuddenlyunlockthe
TheNorthofEnglandhaswhatittakestobeatthevanguardof
North’spotential.Rather,complementaryreformsandnew
economicprosperityandwell-beingin21stcenturyBritain.Allthat
initiativesneedtobeproducedoverawiderangeofpolicyareas
isrequiredisthepoliticalwillfromcentralgovernmenttoimplement
includingmacroeconomics,labourmarket,skills,businessand
reformsalongthelinessuggestedhere,andwell-functioning
enterprise,immigration,publicsectorreform,transport,and
implementationofpolicyattheregionalandlocallevel.Thiswould
environmentandspatialpolicy,forourrecommendationstoachieve
turnourblueprintforaprogressiveagendafortheNorthintoa
maximumeffectiveness.Aconsistencyofpolicyneedstobe
reality.
20 ipprnorth|TheNorthernEconomyintheNextDecade
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