I recall one word that dominated a business seminar in Manchester some time ago. The seminar was on the north-south divide, and the word was London. It was obsessive. Why does London keep taking our best people, everyone asked? Why do our children all want to get to London?

This week’s report by Lord Kerslake on the north-south divide presents the problem in graphic terms. The Organisation for Economic Co-operation and Development (OECD) shows Britain with the widest regional inequality of any advanced nation. London’s economy is growing at between two and four times the rate of the north. It is blessed with better health, better trains, better skills. The south-east has largely escaped austerity, its public spending rising £2bn in a decade. The north’s has fallen by £6bn. Fixing this gap will require action “on a level with Germany post-unification”, the report says, when trillions were spent over decades on the former east.

Some of this gloom is misleading. Surveys claim London is the least happy region in the land, the north far more content. The OECD and the Institute for Fiscal Studies have also shown that inequality in Britain is less between north and south than between particular places. Leeds contrasts with Rotherham. East London is poorer than Harrogate.

The increasingly dysfunctional Houses of Parliament should abandon their billion-pound gilded temporary outposts in Westminster, and go north for five years

In addition, low house prices are starting to draw people out of town, followed by companies such as Goldman Sachs, PricewaterhouseCoopers and JP Morgan. Just over 10 years ago only 1% of emigrants from London went northwards. That is now 13%. Big cities are critical to any revival, and some of these are clearly on the turn. They are developing “Latin quarters”, seen as crucial in keeping “young creatives” locally engaged, such as Birmingham’s Jewellery Quarter and Manchester’s Northern Quarter. The worst problems are the smaller places: the Barnsleys, Blackburns and Oldhams.

Kerslake is aware of the need, but he does not address the issue obsessing my Mancunians. To them the issue was London, seen as exciting, creative, rich – an existential menace. Rulers since Elizabeth I have tried to reduce its appeal. She tried to send her courtiers back to their country estates, and failed. London has always been the goose that lays Britain’s golden eggs, and is still – now more than ever.

My economics tutor used to warn us that much of what he taught might one day be proved wrong, but he hoped at least to have showed us how to recognise nonsense. A case in point must be Kerslake’s solution to the north, which tallies with Boris Johnson’s old-Labour cliche of “levelling-up”. It lies in vast dollops of public investment in infrastructure, in interconnectivity, skills and “cross-governmental, ministerially led” coordination. This is the same language used by Harold Wilson, Margaret Thatcher, Tony Blair – every prime minister– usually in the year after an election.

None of this addresses what Manchester understands, that you will not level up the north without levelling down London. The capital has to reduce its appeal to the north’s most precious resource, its creative talent and entrepreneurial zeal. This requires big regional cities to develop “creative critical mass”. They must treasure their heritage, their converted mills, their historic districts – anything to distract their young people from craving a move to London. This may involve sucking energy from their surrounding towns – as Leeds has from Bradford. Cities such as Frankfurt, Toulouse, Milan and Barcelona have established a cultural self-confidence that has succeeded in resisting the magnetism of their country’s capital. The only city outside London to come near such magnetism is semi-autonomous Edinburgh.

Barnsley, South Yorkshire. ‘Northern cities will flourish only when London stops stealing their people, their ideas and their power.’ Photograph: Christopher Thomond/The Guardian

In the case of demagnetising London, the task is near insuperable, but it must be attempted. Revival will come from small steps, not giant infrastructures. These steps will never work if they depend on London, on its taxpayers, its civil servants, its government. Dependency economics has been the curse of Scotland and Wales. There is no such thing as public spending-led growth – as has conspicuously failed in eastern Germany. Growth comes from employers and investors being stimulated to exploit local skills and talents. They should pay local taxes and run local government. Northern cities will flourish only when London stops stealing their people, their ideas and their power.

If the regions are to rise, London must in some degree fall. It must stop gorging on infrastructure investment – as, mercifully, it may now do on Heathrow expansion. It should stop drawing ever more commuters into its centre, which is what Crossrail and HS2 (now running only to the Midlands) are about. It must stop cramming itself with students, the one truly energising factor in many northern city economies. London’s student fees should soar, and northern ones plummet. The capital should stop receiving the lion’s share of arts subsidy.

Kerslake rightly acknowledges that Britain must decentralise government power. But how many times must we hear this trotted out? Experience abroad advises accountable local mayors, delegated taxes, borrowing powers and no more reliance on begging from Whitehall.

I believe this will never happen until those with power are physically ejected from the capital. Civil servants and politicians (and journalists) must go north. The increasingly dysfunctional Houses of Parliament should abandon their billion-pound gilded temporary outposts in Westminster, and go north for five years. It would refresh them and it would certainly refresh the nation.

Demoting London to promote the regions would not necessarily mean a richer Britain, though the present imbalance must be damaging to national prosperity. Wealth is not the issue. Brexit has shown it is now subservient to populist slogans such as patriotism and group identity. One such “identity” is the north, and it has shown itself politically toxic. The north-south divide must be countered. This will happen only if the “levelling” is real. London should ready itself for a hit.

• Simon Jenkins is a Guardian columnist