Friday, 27 April 2012

We Have A Government Which Is Actively Destroying The North-East

Do you get the impression that the Tories are trying to destroy the north-east?
David Cameron warned us before the election that he intended to do so, but I think there were some who didn’t believe him at the time.
Anyway, he has been as good as his word.

Cutting back on the Welfare State

First, there were the cuts in benefits.  Tough new rules have been introduced for Housing benefit, and for people on Job Seeker’s Allowance.  Thousands have had their working tax credits revoked.  The government is currently reassessing those on sickness benefit and – in County Durham – declaring 45% of them ‘fit for work’, and placing a further 26% of them into a ‘work-related activity’ category (which means that they will be moved onto JSA after a year).  These changes will affect the north-east disproportionately, because we have a high proportion of people on benefits – 14% of the people in Aycliffe are ‘workless’ (i.e. receiving some kind of benefits) compared to 10% nationaly.
I am aware that some of those local people defined by Mr Cameron as ‘decent hard-working families’ may approve of these changes, because you have been sold by the government a ‘scrounger’ narrative, which alleges that people on benefits are in fact just being lazy, and taking money out of your pocket. But even if you believe the propaganda, you cannot deny that these cuts represent a significant cut in demand, especially for basic consumer goods, in the region … and that cut in demand will affect the general prosperity of the region.

Cutting back on local government

Secondly, there have been the cuts in local government.  These cuts have been organised so that they have hit the north-east far harder than down south (where one authority actually received more money).  To this has been added an attack on public sector pensions (workers are going to be required to pay more, for longer, for a smaller pension) and an officer pay freeze. 
Worse, in fact, is coming soon, for the government is determined to return to Councils control of their locally-generated business rate … which would be fine if we had lots of thriving businesses up here, but we don’t.  The guess in County Durham is that the measure will cut a further £80million a year from the County Council’s budget (on top of the £125million cuts over four years already determined).  It is a massive figure to find on a total budget requirement of £447million.
Now it is true that many private sector employers and employees despise and envy the ‘gold-plated’ public sector, and the government in this has tapped into a popular feeling that Councils waste money and that the restrictions of a ‘small state’ were long overdue.  What people are finding now, however, is that charities and valued community facilities are having to be cut, and that many private firms actually made money out of working on local government contracts … or doing jobs for local government employees.  As the local Councils contract, so does the local economy.

Cutting back on NHS funding in the north-east
A further blow to the north-east has been slipped through without anyone noticing, in that the government has quietly changed the basis on which it allocates NHS funding.  Hitherto, regional funding has been based on the level of deprivation (since it has long been established that health is a function of wealth).  From now on, however, funding is to be based upon the how long people live (on the argument that, if an area has more old people, it bears a greater burden of care).
This, by the way, is heinously erroneous.  Most of a person’s cost to the NHS is incurred in the last year of life – which happens whether you die at 57 or 87.  In the meantime, the decision will consciously move money away from the poorer areas where people are unhealthier and die younger, and give it to richer areas where people are healthier and live longer.
De facto, it will take money from the north-east’s Health Trusts and give it to the south-east.

Cutting back on north-east pay
In addition, the government presses ahead with its plans for regional pay differentials – which will see public sector workers in the north-east earning much less for the same job than their equivalents in the south. 
Now, to be fair, as I write this blog, I am conducting a twitter-debate in which my opponent is claiming that there are wages differentials in the private sector, so why not in the public sector too?
Indeed, the policy is being sold by the government not only as ‘fair’, but as necessary for the local economy, because – they say with a degree of justification – high public sector wages are making the regional economy unprofitable. 
However, it doesn’t take a genius to work out how falling public sector wages will make the region more profitable – they will in their turn drive down private sector wages.  This may indeed increase corporate profits, but it will make us all the poorer up here, not least by reducing the amount of money families have to spend in the local shops.  If you are a conservatory-builder, the benefit you gain from reduced wages will not make up for the fact that no one in the area has enough spare cash to be able to order one of your conservatories. 
Regional pay threatens to decimate our region.  Regionally negotiated pay will wreck national negotiating structures, weaken unions, and ultimately reduce everyone’s pay.  Regional pay will reinforce the 'bright flight' already tempting our able young away from the region - leaving for jobs and higher pay. And, most of all, lower public sector pay will take £billions out of a north-east economy which is already stagnating from lack of demand; the result will be a Keynesian multiplier in reverse, whereby the teacher can’t pay the plumber, who therefore can’t pay the wholesaler, who therefore can’t pay the landlord, who therefore can’t renew the plumbing etc.

Creating a cheap-housing 'Homeland' for the poor
In the meantime, I fear the north-east is set to suffer from the government’s housing policies. To be fair, rents are lower up here, so the number of people suffering from the rent cap will actually be much lower than down south, and neither do I think that as a population we will be hit any harder than anywhere else in the country by the bedroom tax.
What we DO need to worry about, however, is what knock-on effect the housing cap will have on our area.
You may have seen in the news, this week, the story of the London Borough of Newham which – unable to find homes for its residents at an affordable rent – is looking to ‘ship out’ numbers of tenants (who are losing their homes because they cannot now afford the rent) to places elsewhere in the country.  I am told that, where such a transfer is arranged, those people go to the top of the housing list.
Many of these people have jobs – albeit low-paid jobs – in the capital, and the question is being asked why we are moving people from London where there are jobs, to places up north where there aren’t.
What I fear will happen is that – in a fashion reminiscent of the Bantu homelands under apartheid – places like the north-east will end up as cheap housing pools for the families of manual workers.  Like the black people of South Africa, the ‘workers’ of the family will move to London to live in squalid, shared accommodation for months at a time, sending money back to their families living in cheap-housing in the north.
Is this what the rich want? – a ‘made-in-Chelsea’ zone in-and-around the metropolis, with their menial servant workforce hidden away in lodging houses, and their families – along with the disabled and unemployed – coping as best they can in the boondocks of the north, out-of-sight-and-out-of-mind.

[Reflecting on this section, I wondered whether I might not be guilty here of overstatement, and I certainly don't expect busloads of migrants from Brent to start turning up with their suitcases.  But I do suspect that the rent differential will gradually encourage, as a counterpoint to the 'bright flight' the region suffers, a knock-on 'rent creep' effect as families are forced to move seeking cheaper housing.  It is a measurable phenomenon, and one we need to montior.]

The failure to stimulate the private sector

But what, you ask, happened to the government’s promise that the slack created by the cuts in the public sector would be taken up by growth in the private sector? 
What has the government done to facilitate such a process?
Now it is true that, in the latest budget, Newcastle was designated to become a ‘super-connected’ broadband city, so all credit there (unless you live outside Newcastle, that is).
But when our local MPs spoke in the recent debate on the north-east economy, they were damning in their criticism of the almost-nothing that this Tory government is doing to stimulate business in the north-east:

“This Government have abolished our [Regional Development Agency], despite the fact that during the last three months of 2011, the north-east enjoyed record high growth in exports…”
“Some £329 million [of European regional development funding] was made available, but £129 million remains un-invested directly because of the loss of One North East…”
“Considered together, London and the south-east account for 84% of planned [infrastructure] spending, compared with only 6% for the three northern regions and an unbelievably minuscule 0.04% for the north-east. That equates to £2,731 per head of population for London and the south-east, more than all the other regions combined, compared with £201 in Yorkshire and Humber, £134 in the north-west and just £5 in the north-east of England…”
“Finally, in the month when the north-east is losing its regional development agency, its local enterprise partnerships will receive a paltry £10 million from the Growing Places fund…”
Thus, whilst it is taking £billions out of our north-east economy in benefit cuts, reduced Council funding and regional pay arrangements, the government is utterly failing to direct back any funding to stimulating growth.
The result is obvious in our visibly failing economy; and it will only get much, much worse, not better.

Embedding the regional disadvantage

To be fair, if I were a southerner reading this litany of complaint, I would at this point be losing patience.
‘What a sponging moaner,’ I would be saying, ‘what he’s bemoaning is nothing more than the fact that we are giving him LESS than we always have. Those north-easterners need to stop demanding more handouts and start making their own way in the world.’
What can one say?  When one is continually demanding a re-balancing of the nation’s wealth, it is indeed easy to look as though one is a continually open mouth.
But what I would say to that southerner would be to ask him to consider how things have got that way.
The north-east economy runs at a loss because the terms of trade are against it. The south-east has a huge economic advantage, so wealth continually flows from the outer regions of the United Kingdom TO the south-east, which continually, therefore, gets rich through its balance-of-payments surplus viz-a-viz the rest of the country.
If we in the north east had the south-east’s proximity to the continent, its governmental and financial centres, and its communications infrastructure, perhaps it might be fair to blame us for a failing economy.  But whilst we do not have such economic advantages, we are ALWAYS going to decline relative to the south-east without some mechanism to redistribute wealth back north (which is exactly what the government is stopping) or some mechanisms to attract industry to the north-east (which is exactly what the government is failing to provide).
So don’t throw up your arms and decry these ‘lazy’ north-easterners who ‘lack’ the necessary entrepreneurial skills and work ethic to grow their economy!

As far as County Durham and Newton Aycliffe are concerned, even the paltry efforts the government IS making to encourage business outside the south-east rebound against us. 
Again, let’s listen to one of our MPs in the recent debate on the north-east economy:

“The Scots at Holyrood still have economic development and tourism strategies and are still offering inward investment incentives, all important determinants whether a company invests in Scotland or the north-east, but the Chancellor and the Secretary of State for Business, Innovation and Skills seem oblivious. For example, Amazon, despite considering a site in the north-east, located in Edinburgh, purely on the basis of the grants available. Given the existing imbalance in Edinburgh’s favour, the decision to locate the Green investment bank there seems like a political and economic knee in the groin for regions such as the north-east of England…”
Thus, when you are just outside a ‘development’ zone, it becomes even harder to get your economy going, because any of the reduced business interest which might occur gets directed away from you, and towards the nearby enterprise zone.

This is particularly apposite for County Durham and Newton Aycliffe.
Two enterprise zones have been established in the north east. One zone comprises the Sunderland-Tyneside coastal belt. The other – spearheaded by Tees Valley Unlimited – includes Redcar, Teesside and Darlington. 
The Tees Valley Enterprise zone is the cruellest cut for us because – as you will see if you look at the map – Newton Aycliffe sits right next to the zone, just outside any reliefs or allowances it might offer.
The people of Newton Aycliffe face an uphill struggle trying to attract industry to come to our Business Park, however good it might be, because you can get a grant if you set up just a few miles away.

Conclusion: a war of attrition has been declared on the north-east
I have lots of complaints about the last Labour government as far as County Durham is concerned.  For a number of years, we had as our MPs the Prime Minister as some of the leading politicians in the land – yet when the Labour government eventually fell, it left us still with an inadequate two-lane motorway (and a normal two-way road north of Newcastle), outside its high-speed rail plans, and with a desperately slow broadband network.
But one thing you’ve got to hand to Blair and Brown, however, was that they DID try to take some of the money that was ponding up in the south-east, and through-flow it back to the north-east.  The Labour government sited government agencies in the north-east, funded the very vigorous One North-East, and expanded the public sector rapidly.

But what has happened is that, in the meantime, the south-east has got fed up of what-it-sees-as continually bailing us out, and it has decided that it wants to keep the money it earns IN the south-east, and it wants to stop all this ‘redistribution’ to the poor and the regions … and it has elected a government which stated explicitly that such was what it would do if it came to power.

And that, ladies and gentleman, is exactly what is happening now.


  1. here is Will Self's view - thankfully, similar to mine:

  2. It may take people time to believe that a Government could be so cynical (or maybe not), but the truth is out there if they have time to wake up and smell the coffee. Your 'rant' is well worth a read as I can add my own experiences, such as; Public Sector Pensions, Education cuts, EMA, Direct funding cuts, Private sector redundancies, Relying on Charity. The fact that only 20% of the cuts have actually been acted upon with 80% still to come, the impact on the majority may only be felt years down the line and it will be too late to reverse them. What is more disturbing is that the Liberal Democrats are supporting this destruction of society not even blinking or looking back at their deceitful act. It is true to say that these 'posh' boys have not got a clue about the real impact their policies will have on the real people the actual contributors to society. However, we in the Labour Party need a strategy that's different, an innovated one different from those being extolled by the present political elite, a clear redistribution of wealth as envisaged by our forefathers might be a start; 'To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution, and exchange, and the best obtainable system of popular administration and control of each industry or service.' Or if you prefer New Labours version;'that by the strength of our common endeavour we achieve more than we achieve alone, so as to create for each of us the means to realise our true potential and for all of us a community in which power, wealth and opportunity are in the hands of the many, not the few, where the rights we enjoy reflect the duties we owe, and where we live together, freely, in a spirit of solidarity, tolerance and respect.'

  3. I was interested to read in an article from False Econcomy that wages devaluation, of course, is a conscious policy:
    "...the burden of restoring competiveness falls on ‘internal devaluation’. Stripping away the econo-speak, this means cutting real wages in the periphery..."
    - i.e. the government is*not* introducing regional pay differentials to 'make things fair' - it is doing so consciously to reduce 'real wages in the periphery' as part of a policy iof 'internal devaluation'
    - i.e. our government are ruining us *on purpose* as a process of allowing austerity to lower our wages to make British goods more competitive abroad.