The yawning economic divides between London and the north are now comparable to those in Germany after the fall of the Berlin Wall, a powerful new report warns.

In a milestone investigation into Britain's stark regional inequalities, former head of the civil service Lord Bob Kerslake finds decades of 'unstated' government bias towards the capital will take half a century to reverse.

His most striking conclusion draws parallels with German reunification in the 1990s, when leaders there faced a huge uphill battle to heal the economic chasm between West Germany and the former Soviet East.

He points to the vast waves of investment poured into the Eastern half of the country over the years that followed, thanks to a national consensus in Germany that the gap had to be closed.

(Image: Wikipedia Creative Commons)

The British government must now do the same for the north, he concludes.

In our own version of Ronald Reagan's 1987 'tear down this wall' speech, in which the US President demanded the Berlin Wall be pulled down once and for all, Lord Kerslake calls for a 'sea change' in the way Whitehall and Westminster operate.

Otherwise, he warns, areas such as ours will never catch up and infrastructure in London and the south east will simply not be able to cope in the future.

Stark regional divides are apparent in everything from life expectancy to income levels, he says, arguing that a new long-term ‘plan for England’ - one that takes in the different answers needed for different areas, underpinned by proper devolution - is now needed, along the lines of plans already in place in Wales and Scotland, as well as a £250bn renewal fund.

“The problems have built up over half a century," he argues in a new report for the independent UK 2070 Commission, which he chairs.

(Image: UK2070 Commission)

"It will take a generation of sustained action to reverse them."

Here, we look at the commission’s key findings.

Fifty years of favouring London

Lord Kerslake - who looks at the issue from both ends of the telescope, having been head of the civil service but before that, in the late 1990s, chief executive of Sheffield city council - deliberately takes the long view in the investigation, looking both backwards and forwards in time.

His report finds governments have either deliberately or unconsciously favoured investment in the capital consistently, over decades.

“The policy orthodoxy has been that the growth of London would lead to a direct net benefit to other areas of the country – the spill-over or trickle-down effect,” says the report.

(Image: Chris Radburn/PA Wire)

“In practice this has not happened."

Instead, the UK's economies have drifted further and further apart.

Despite claiming to be closing that divide, successive governments have instead pursued an ‘unstated and countervailing bias’ towards London in their policymaking, he says, a ‘de facto’ assumption that investment would be better channelled there.

“An overwhelming body of evidence points to a historic concentration of public investment in London and the wider south east.

“This applies whether this is spending on research and development, culture, sport, the arts, national administration, national media or even military expenditure.”

(Image: UK2070 Commission)

Over time, governments have continually reinforced existing north-south divides, despite nominally aiming to replace the jobs lost in northern towns following the 1980s collapse in manufacturing.

That vicious circle includes the way the Treasury distributes funding for things like transport projects, by using a ‘cost benefit’ analysis - essentially meaning that ‘fast-growing’ places that are already successful, like London, ‘automatically move to the front of the queue for more public investment’.

Spending on infrastructure has focused on ‘coping with areas with short-term stress’, such as the capital, he finds - itself an expensive exercise.

(Image: Mark Waugh)

“The largest slug per head is going to London,” Lord Kerslake says of transport investment, 'which is already ahead of everywhere else'.

Wealth and opportunity in the capital are now ‘highly visible’, but cannot be accessed by the majority of the country, most of whom cannot afford to live there.

In the meantime, the gap gets wider.

‘A huge gulf’

So how divided are we?

“A huge gulf exists between the UK’s best-performing regions and towns,” argues Lord Kerslake, making us ‘one of the most regionally unbalanced countries in the industrialised world’.

We are the 28th most regionally divided out of 30 major Western economies studied for the report, while having one of the most centralised governments on the planet.

The UK also has some of the lowest levels of government investment in the Western world, but what does get spent goes disproportionately towards London.

(Image: Mark Waugh)

Noting, in particular, huge regional differences in health, employment levels, income and life expectancy, he says: “Between 1971 and 2011, such struggling neighbourhoods remained largely concentrated in north west, north east England and Scotland,” although Scotland has since made significant progress.

London has a 50pc higher productivity rate than anywhere else in the UK, a gap that has particularly widened in the past 15 years.

It was also better equipped to survive the 2008 economic crash than elsewhere, meaning that in reality, its economy was barely affected and the gap grew.

At the same time governments have approached areas that haven’t benefited from London-style growth with an attitude of ‘managed decline’, finds the report.

Some cities in the south, such as Milton Keynes, have powered ahead. But northern towns and cities - even Manchester, which has performed well in comparison to others, such as Liverpool - have lagged behind.

“The challenge is that these divisions in society are longstanding and growing, despite policies to reduce them,” finds the report.

That has resulted in a bleak outlook in some areas.

"In areas of need there is a resulting narrative of division, discontent or even despair where there is little perceived hope of a better future locally.

"There is too much inertia in he system which locks in past trends and results in a form of institutional fatalism."

(Image: UK2070 Commission)

Lord Kerslake argues we will become even more divided if politicians don’t turn things on their head.

‘Business as usual’ would see more than half the country’s new jobs created in London and the south east over the next 50 years, according to new research commissioned for the report - despite it only accounting for barely a third of the population and already struggling with pollution, congestion and a water infrastructure that cannot cope.

As it stands, we are now so economically divided that he sees direct parallels with the vast chasm that opened up in Germany after more than four decades of Communist rule in the East.

Our answer to the Berlin Wall

Lord Kerslake doesn’t hold back on this comparison, calling the similarities with 1990s Germany ‘particularly relevant’.

The report details the ‘major’ economic challenges bearing down on the German government when the Berlin Wall fell, opening up a country of two vastly different economic halves.

“In the years immediately following unification, the former East German economy went into ‘freefall’,” he says.

“Every third job was lost. Infrastructure was decrepit.

(Image: Mirrorpix)

“Few railways were electrified, and many ran on single lines, much of the telecommunication networks stemmed from the 1930s, 20pc of the housing was uninhabitable.”

A ‘national consensus’ then formed in Germany that ‘decisive action was needed’.

That led to a so-called ‘solidarity’ fund: essentially an agreement across politics and society that the East needed significant financial contribution from the West if the gap was to be bridged - not least because otherwise, it would hold back the German economy as a whole.

“By 2014 around €1.5 trillion in public money had been made available for investment in regenerating and renewing cities, regions and infrastructure, supported by a spatial framework to tackle the inherited social and economic inequalities,” he says of that fund.

In Germany’s case that was paid for partly through a specific tax, with the bulk of the burden on the richest in society. A substantial part of that went on infrastructure and new transport systems.

While the gap has not been totally eradicated by Germany’s strategy, unemployment in the East is now only two per cent higher than in the West.

(Image: UK2070 Commission)

Had leaders not done that, people in Eastern towns and cities would have continued to head West and the spiral would have accelerated, argues the report.

But that was only possible because politicians were determined to do it.

“The key lessons from German experience are not just the scale and use of the investment but also the political will, commitment to territorial cohesion, sense of fairness and justice, and the scale, longevity and consistency of the funding programmes which were planned, agreed and then implemented,” finds Lord Kerslake.

He concludes: “The legacy of division between East and West Germany meant that during the 1990s Germany was much more spatially unequal than Britain.

“Now the situation has reversed and the UK is regionally more unequal than Germany.”

The solutions

The report - now going out for public feedback - calls on government to look at the north radically differently.

Speaking to the Manchester Evening News about his findings, Lord Kerslake admitted both Whitehall and Westminster are both currently ‘dominated by Brexit to the exclusion almost of anything else’.

But he added: “I think at some point we will have to see a break in the clouds.

“I think there will be a lot of debate about what some have called post-Brexit renewal: how do we bring the country back together again after this really very fractious period in this country’s history?

(Image: PA)

“And then I think there will be an openness to new ideas about how we do that and that will include tackling the spatial inequalities, the economic inequalities, which I think are not the only thing here, but are a significant contributor to the way in which the country has fractured over recent times.”

The report initially recommends several key solutions.

Firstly, real, meaningful English devolution in a carefully-planned framework, rather than on an ad hoc and piecemeal basis, as at the moment.

That will require more capacity to be poured into regional government, so that it is able to plan and take long-term decisions.

Secondly, the commission sees that fitting into a ‘plan for England’: a long-term investment strategy that will span governments and elections, in the same way Germany drew up its approach after 1990, underpinned by a £10bn-a-year renewal fund, backed up by a new infrastructure bank.

And it recommends an ‘MIT of the north’: essentially a new cutting-edge research and development institution that can help drive new high-tech jobs and growth here.

(Image: UK2070 Commission)

But fundamentally, the report calls for a ‘sea change’ in the way government looks at areas outside of the south, a ‘new national narrative’.

“I think the German example is instructive,” he told the M.E.N.

“They seriously committed to reunification and effectively they took two countries and moved them closer - not completely there yet - to being one country. I think in this country the absence of that has led us to take one country and see it fragment into many.”

Admitting it his commission's ideas would require political bravery, he said the consequences of doing nothing are even more serious, as the north continues to ‘decouple’ from an increasingly unlivable south.

“So everybody will lose," he added.

"And I think the realisation of that will drive the political will to do something.”