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Midland Engine eclipsed by Government’s London-centric spending bias, report claims

Midland Engine eclipsed by Government’s London-centric spending bias, report claims

🕔02.Sep 2015

Public spending on infrastructure investment is heavily biased towards London, with the capital set to receive more funding than every other English region combined, according to new research.

The south east has 3.4 per cent of funding, the south west has 2.1 per cent, the east of England has 1.8 per cent, the east midlands and west midlands both have 1.7 per cent, the north west has 6.7 per cent, Yorkshire and Humberside has 2.2 per cent, and the north east has just 0.5 per cent.

The findings call into question the government’s commitment to economic rebalancing and to creating a Northern Powerhouse, according to the report’s authors at the University of Sheffield.

The Sheffield Political Economy Research Institute’s (SPERI) analysis of the government’s National Infrastructure Pipeline shows that infrastructure investment in London is set to be over £45 billion, which is equal to £5,305 for each member of London’s population.

This compares to a UK average of £3,192 per person.

In the West Midlands, however, the average spend is barely more than £500 per person.

Outside of London the north-west is benefitting most with investment averaging £1,946 per head.

Average infrastructure spending in Yorkshire and Humberside is £851 per head and just £414 per head in the north east, the lowest of any English region.

The National Infrastructure Pipeline includes investment projects in sectors such as energy, transport, waste, communications, water and science.

Dr Craig Berry, co-author of the report and Deputy Director of SPERI, said:

The Chancellor talks about creating a more balanced, higher productivity economy but is so far failing to deliver it.

The report also looks at the relationship between regional investment in infrastructure and private sector business activity. Its findings call into question one of the key arguments used by the government to underpin their austerity agenda which is that public investment ‘crowds out’ private sector activity.

The ‘crowding out’ argument suggests that those areas where the private sector is strongest will have lower levels of public investment in infrastructure, and that investment will be directed to where business activity is weakest to encourage a private-sector led recovery.

Yet the report finds that English regions where the private sector is weakest receive far less infrastructure investment.

London has the strongest private sector with more businesses and more start-up businesses than any other region, and receives the most infrastructure investment. The capital has 470 businesses and 98 start-ups per 10,000 residents, a start-up rate more than twice as fast as any other region, excluding the south east and east of england.

The three northern regions have fewer businesses per head than all other English regions. Just three per cent of businesses in England, and three per cent of business start-ups, are based in the north east.

Dr Berry said:

Investing in infrastructure to improve our transport, digital and energy networks is a way of improving productivity and boosting the private sector. Our analysis suggests that the government is content to maintain the bias of investment towards London, because it seeks to support the strong business activity that already exists in the capital.

Continuing to disproportionately invest in infrastructure in London risks fuelling the regional imbalances in our economy, and in coming years this looks set to get worse. The National Infrastructure Pipeline doesn’t include plans to build the Crossrail 2 rail line in London or expand Heathrow. Yet it does include plans to electrify the Trans-Pennine and Midland Mainline railways that have been indefinitely ‘paused’.

Dr Berry said the regional inequality in public infrastructure investment meant that a resurgence in private sector activity in the North and Midlands is less likely than would otherwise be the case.

The report and tables can be seen here.

Pic: Crossrail

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