The first Budget of Boris Johnson’s majority government will be delivered on 11 March. This government has vowed to focus on addressing the economic inequality between the South East and many first-time Conservative constituencies won from Labour, predominantly in the North and the Midlands, so what can we expect?
Statistics show that regional inequality in the UK is the worst of any comparable developed country. Despite efforts at both a regional and national level over previous decades, this inequality continues to widen. Such efforts are criticised for lacking sufficient detail to effect real change. Although the government already redistributes tax revenues from London and the South East to economically weaker regions, data suggests that redistribution of an additional £10 billion a year would still not be enough to make a difference.
The UK2070 Commission (an independent inquiry into regional inequalities) released its final report at the end of February. It advocates:
- channelling £15bn a year through the new Shared Prosperity Fund (tripling the EU funding it replaces);
- investing in a “new connectivity revolution”, including spending at least 3% of UK economic output on infrastructure every year;
- creating R&D “networks of excellence” to extend the London-Oxford-Cambridge “golden triangle” – an excellent opportunity for our university clients to work with their local communities to drive regeneration;
- devolving powers to the regions;
- strengthening local economies in disadvantaged towns;
- linking policies between the shift to zero-carbon and rebalancing the economy; and
- focussing on smaller scale initiatives which encourage town and borough councils to engage with developers to bring about regeneration.
We wait to see which, if any, of the report’s recommendations are implemented by the government in the Spring Budget but it is clear that there is potential for much disruptive impact on future investment by both local authorities and developers alike in areas such as infrastructure, transport and business projects in their regions. Targeted intervention is likely required to bring about substantive change and research from EY indicates that the manufacturing, technology and public sectors are the most important for rebalancing. Clients in these sectors could potentially reap the benefits of initiatives and public spending plans geared towards these areas regionally.There may perhaps be huge opportunities for regeneration and we would expect to see such additional investment leading to increasing property values.
The Northern Powerhouse initiative has been criticised for focusing too heavily on metropolitan areas, such as Manchester, to the detriment of smaller towns and rural areas. Considering this within the context of the government seeking to reward voters who helped swing the Conservative victory in December, particularly in smaller towns, might suggest that the time is ripe for a more ground roots approach. Indeed, speaking to EG, the Town Centre Securities; chairman and chief executive, Edward Ziff said if the Conservative Party “had a brain”, it would invest in the North.
Will the new Government’s Budget be able to reduce the inequality gap after years of failed efforts? We await the details but if the foundations are there, with the political will, they may just succeed.