North-east and Wales should get over double the funding per person of London – study

A future Labour government should use funds from a national investment bank, targeted transport spending and buying British as part of a long-term strategy to spread economic prosperity to the struggling regions, a specially commissioned report for the party has said.

The report called for funding from the national investment bank – a key plank of the opposition’s economic strategy to be heavily skewed in favour of communities hard hit by the decline in manufacturing.

It said funding by head in Wales and the north-east should be two and a half times that of London, which would should have the lowest per capita spending of any region.

Rebecca Long-Bailey, the shadow business secretary, welcomed the report from a team from Sheffield Hallam University, which has published a series of studies into the problems of the older industrial areas and seaside towns.

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The report said Britain was a “profoundly unequal society”, divided not just by class, gender and race but also by geography. An individual’s chances in life varied greatly depending on there they lived.

In particular, the erosion of the UK’s manufacturing base – further and faster than in other countries – had “destroyed the economic foundations of many communities, leaving them struggling to find a new role in the world. This has fuelled feelings of political alienation and, many would argue, lies behind the support for Brexit in so many disadvantaged communities”.

Among the 29 recommendations, the report says Labour should supplement national support for training and skills by earmarking a substantial proportion of the replacement of EU structural funds for skills development in less prosperous local economies and also exploit any freedom offered by Brexit to set state aid rules that would lead to a better balanced economy.

“In government, Labour has the chance to make a big difference to Britain’s fractured economy and to narrow the differences in prosperity between regions and local areas across the country,” it said.

“In doing so it can restore hope to communities that presently feel left behind and ease the pressure on the most congested parts of London and the south-east where the growth of the economy and population is outstripping the ability of infrastructure and the housing market to cope.”

The report said:

• From 2010 to 2016, employment in London grew by 18%; in Tees Valley and the Black Country, employment fell.

• The vast majority of Britain away from areas in and around London have earnings below the national average.

• “Hidden” unemployment is much higher in weaker local economies where up to 10% of all working age adults are pushed out of the labour market.

Britain’s north-south divide has been widening for many decades and the Sheffield Hallam team warned that Labour should not expect rapid change overnight. Reversing the polarisation between the rich and poor parts of the country was a task that needed to be sustained for years across more than one parliament.

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“But there should never be any doubt that change is possible. Indeed, the long history of UK regional policy shows that in the absence of substantial regeneration efforts over the years the economies in much of the North, Scotland, Wales and Northern Ireland would be in a far, far worse state than at present. Regional and local economic development policies do work – they just take time,” the report said.

Long-Bailey said: “There is something fundamentally wrong when the fifth richest country in the world has the highest level of regional inequality in the whole of Europe. While some areas of the UK are doing well, vast swathes of the country are being held back with lower wages, lower output, higher unemployment and weaker local economies.

“This report provides a detailed analysis of the UK’s regional problem and we will look closely at the recommendations as we seek to build on our existing policies to rebalance Britain.’’