How should policymakers respond to economic leakage from the North East?

Guest post by Luke Hildyard of the High Pay Centre

HPC

Most North Easterners will be familiar with the flawed narrative of dependency. The region is supposedly too reliant on public sector jobs. The North East receives more in public spending than it contributes in taxes. London and the South East are the motor of the UK economy, supporting poorer regions.

Research by organisations such as ipprNorth has done a great deal to challenge this crude characterisation. It is not just the amount of public spending in a region that counts, but the quality – the North East loses out in terms of the kind of transport and infrastructure spend that generates economic growth. The region does not have an especially high number public jobs. They just form a higher proportion of the total because of lower levels of private sector employment.

Nonetheless, the stereotype endures to some extent. Certainly there is a consensus about the need to ‘rebalance’ the UK economy – meaning stronger private sector growth in regions like the North East, reducing redistribution via public spending from South to North.

What this debate too readily overlooks is the transfer of wealth in the opposite direction via big corporations operating in the North East but based outside the region. Most private spending in the key sectors that account for most North East household income is eaten up by major companies – supermarkets, energy companies and mobile phone networks. Major clothing retailers, chain pubs and restaurants, betting shops, payday lenders. What jobs these companies provide are generally low-paid with limited opportunities for career progression. They do not create extensive supply chains within the region.

If a substantial proportion of whatever household’s earn is instantly transferred out of the North East, the task of growing the regional economy becomes that much harder. The High Pay Centre will publish a report this week with the intention of starting a debate about corporate economic dominance in the North East. The launch event takes place at Newcastle University on Friday October 25 at 12pm and readers of this blog are very welcome to attend.

Luke Hildyard

Head of Research

High Pay Centre

www.highpaycentre.org

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