Northern Ireland: more Tallinn than Finchley

19 Dec 2019 Nick Garbutt    Last updated: 20 Dec 2019

We are often told that the UK is a powerful western economy. But that is profoundly misleading. 

Taken overall the UK may well be the fifth biggest in the world – but that is only because of the complete economic dominance of inner London.

A report just published by the Social Market Foundation reveals the extraordinary extent of the disparity in wealth between London and the rest showing that much of the UK is actually more like the poorer countries of eastern and southern Europe than a western economy.

Northern Ireland is a case in point. It has  a GDP per capita of €24,000 – roughly the same as Estonia, a former Soviet state. Margaret Thatcher may have once said that NI is as British as Finchley. Economically Belfast has more in common with Tallinn.

Inner London West, in contrast has a GDP per capita of  €188,000. This literally puts it off the scale of wealth – this part of the capital is more than twice as wealthy as Europe’s richest state, Luxembourg which claims €75,900 per capita.

The UK’s poorest region, Southern Scotland is at €19,400, the same as Turkey, a country in economic meltdown.

The Social Market Foundation shows marked variances across the UK, but finds that most of it is far closer economically to poor states than wealthy ones: Lincolnshire is close to Poland, Cornwall to Hungary, Kent to Slovenia, Essex to Spain for example.

Therefore whilst the UK may rank as a wealthy nation this masks the extraordinarily extreme divide between its richest and poorest regions. Inner West London is almost ten times wealthier than Southern Scotland and six times better off than the UK average.  

That level of discrepancy is not seen elsewhere in Europe. Germany is an interesting case in point. As might be expected the parts of the country that used to be East Germany lag behind the more prosperous West – but Germany’s richest region, Hamburg, is only 2.4 times wealthier in terms of GDP per capita than its poorest region – Mecklenburg-Vorpommern.

Hardly surprising then that the Social Market Foundation should conclude: “A focus on the “economics of geography” and regional inequalities needs to be at the heart of economic policymaking in the next UK parliament – especially if politicians are serious about healing the divisions that exist in this country.”

We are yet to see if the new Westminster government takes this on board. However Boris Johnson did make his maiden speech in Sedgefield (economically akin to Poland) and the Digital minister Matt Warman has said: "One Nation Conservatism is about geography as much as it is about economics."

There certainly has been much talk about helping poorer regional economies, including our own to catch up with London.

Yet tackling the problem of “left behind” regions is more complex than it first seems. To take just one statistic over the past 10 years Londoners enjoyed an average of £708 of transport spending per person compared with £289 in the north of England.

To most of us that appears perverse and unfair. The more improvements there are to the infrastructure in London compared with the rest of the UK, the wealthier London will become, making the wealth gap still wider than it is at present.

The reality is that the benefits of investing in London are more obvious and have more immediate impact. So when projects come to be evaluated by the Treasury, ones which show a rapid return on investment get prioritised. Therefore it is harder to justify transforming transport in a deprived area where the returns are harder to quantify and projects may take many years to pay for themselves in turns of a stronger economy.

That’s why the Social Market Foundation is calling on the incoming government to revise the Treasury’s Green Book which lays down the rules for evaluating spending proposals. If this regional equality is to be addressed this is a vital first step because the existing rules are responsible not just for creating inequality but entrenching and increasing it.

Many have argued for decades that London is effectively a different country. This report proves that.

Boris Johnson has made much of his desire to end austerity and level the playing field between the regions of the UK. There is much potential benefit for Northern Ireland if this proves to be the case.

If this is to be realised we perhaps need to start to see the UK for what it is – a series of very different regional economies with different challenges, the biggest of which is the obscene disparity between the very wealthiest areas and all the rest.

A new era of regional economic policy-making is required to address this. A bizarre twist to this is that what would mark a quiet economic revolution will not be sparked by a political speech or grand gesture but by the re-working of a dull Treasury text.

Unless and until that happens Northern Ireland’s economy will choke and wheeze along at the level of an eastern European state emerging from the Iron Curtain.  

Häid joule, as they say in Estonia.



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