Scotland and London

A few days ago I wrote about the Shirley Porter affair and said that Glasgow was one of the poorest cities in the UK.

Stuart Dickson pointed out that Glasgow was in fact the poorest British city. David Rainey responded by drawing our attention to this:

...the Sheffield study analysed the census data in blocks of Local Authorities structures. Accordingly, Glasgow City council was a single unit in the study and did very poorly. However, in England (London, especially) the Local councils are smaller and often many are needed to cover an entire city.

This means that many London Boroughs (as opposed to the whole city) are in the poorest categories. Even Westminster is "deprived" with almost 40% of its population in "poverty".

Nevertheless, I don't see how anyone can deny the fact that the southeast of England dominates the UK economy in an unhealthy way. I know that Scotland is just about average in the UK in terms of GDP per capita (with northern England being much less productive) but we are exporting a very high proportion of our qualified young people to London and its surroundings. That shouldn't be necessary and our population is now declining and ageing.

I normally agree with most of the commentary from the Scotsman's George Kerevan. In his article George maintains that London's dominance is primarily due to its competitive private sector and not to its capital status:

How did London achieve this spectacular growth, and why did other UK cities fail to emulate it? One theory is that London was especially privileged by being the political capital of the UK. Over 90 per cent of the UN’s 185 member countries have an embassy or high commission there. London also hosts 14 international organisations, including the European Bank for Reconstruction and Development and the Commonwealth Secretariat. London attracts company head offices anxious to be close to the centre of things. It is home to more corporate HQs than any other European city: 33 per cent of the Fortune Global 500 firms have their European HQ in the city, compared with only 9 per cent in Paris and 3 per cent in Frankfurt.

However, the balance of the evidence suggests that London’s political clout stems from its economic weight and not the other way around. Contrary to popular mythology, only 18.4 per cent of all UK civil servants work in London.

I don't really agree with George on this. Taking the civil service numbers for a start, London's population share would entitle it to more like 13% of the UK total so already it's about 40% ahead of the game. But what's really important is that London is the base of the civil servants who matter. The Sir Humphreys are there, not the junior clerks relocated to the "provinces". That's why almost all of the UK's top companies are headquartered in London - far more than in any one city in the USA or Germany. In turn it makes commercial sense for all of those highly paid creative industries described by George to be in London too.

There is a fascinating article in the latest issue of the IEA's Economic Affairs. Victoria Curzon Price writes that:

Switzerland has a tradition of decentralised government, decentralised tax setting and direct reference to the voters through referendums. Such mechanisms should give rise to lower taxes, better provision of public goods and higher economic growth. However, these mechanisms have not been effective in the last 30 years at preventing the growth in government spending and centralisation. This is partly because of the consensus in favour of centralisation that exists among institutionalised politicians. The performance of the Swiss economy since 1970 has consequently been dismal. Real per capita post-tax incomes have been stagnant. There is now an opportunity for the growth of centralisation to be reversed.

The article maintains that the Swiss economy has suffered from the transfer of power and tax collecting from the cantons to the federal government. Compared to the UK, Switzerland remains very decentralised but it's clearly been moving in the wrong direction. Elsewhere in the article a chart shows that the proportion of UK taxes collected centrally has risen from 71% in 1975 to 79% in 2000. Of the 19 countries listed only Ireland (a geographically small country) collects more at the centre. The German federal government collects a mere 31% of all the country's tax (down from 34% in 1975) - the rest being collected at the land or local level. Even France collects only 48% of its tax take nationally.

I remain convinced that British national life (think of our transport "system") is distorted by the dominance of the southeast. This in turn is largely the result of more than 40% of the economy being under state control and being almost entirely run from one end of a long and narrow country. My own preference is for that 40% to be reduced to more like 4%. Then it wouldn't matter too much where the capital was located - just like Switzerland in its good old days. If we don't want to fire all of those public servants we should move the capital to the other end of the country. Sir Humphrey will enjoy living in Easterhouse.