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In the 1970s it was decided to make London world mega-city. The rest paid for this as money was poured into the infrastructure of London and the surrounding south east towns. The rest of the country was largely ignored leaving a collection of 3rd rate cities in comparison. Even the high-speed rail HS2 lines are all planned to take all back to London - London will be the prime beneficiary.
London gets twice the level of public money pumped into it than elsewhere. Then there is the increased land values and rents created in the city emanating from the public money. This is never in the figures. The fringes of London also benefit from all that.
The south whines that the north of England get direct government jobs claiming they are paid for out of their taxes.
The south east gets taxes spent on them, but indirectly in infrastructure (mainly transport like rail) to the point it is twice of everywhere else. Economist Fred Harrison goes into it.
The advantage of the infrastructure spending is that it is permanent and creates economic growth. A region with top quality infrastructure is less likely to be directly affected by sweeping government cuts. This convinces the southerners they are propping up the rest of the UK, when they are not.
In the North East they have cried out for an extra lane on the A1M that runs through the region, as this would create economic growth. They are still waiting. The same with Liverpool in expanding Merseyrail and getting a station at the airport. Birmingham is the largest city in Europe without a rapid-transit rail network, while London has one of the largest in the world.
The volume and quality of the infrastructure in the south east ensures all will gravitate towards them - paid for mainly by taxpayers of all the UK.
Another point that makes the south easterners wealthy is the exceptional value of the land. The land values was created by public spending in infrastructure. The economic growth created soaked into the land as land values. This value is tapped into by the landowners, small and large in the region, making them far more wealthy than the rest of the UK.
The south east (excluding London) is the world's 20th largest economy. propped up by taxes from all over the UK.
Economist Fred Harrison highlights the bias towards London to the point that it is a black hole for investment at the expense of the rest of the country. "we see that public expenditure on a per capita basis is more than twice invested in London than other regions in the transport and housing sectors."
"thanks to the tax system - that there is an automatic bias in directing investment towards London."
Transport infrastructure projects are assessed on a Dept for Transport "good value for money" calculation.
Value for money category | Benefit to cost ratio | Prospects for the projects
Poor | less than 1 | None Low | Between 1 and 1.5 | None Medium | Between 1.5 and 2 | Some but by no means at all High | Over 2 | Most if not all
Even a 1 to 1.5 would be considered for London. When the value for money calculations were introduced in 2004, the Strategic Rail Authority head, Richard Bowker, stated that all outside the M25 will get little. Boy he was right.
Harrison:
"[London] in the growth years, makes a net contribution to the public coffers between 2 billion and £9 billion. This is disingenuous. The calculation ignores the capital gains that flow from public spending. Public money invested in London yields huge gains in the private sector - in the appreciation in capital assets - that far exceed the financial subsidies that are transferred to the regions."
Harrison:
The reason capital is not so readily invested in the North is that the privileged aggregation of rents at the centre [London] creates benefits such as the public subsidies to transport, and the opportunity to claw back one's tax payments as capital gains. This set of incentives encourages the financial institutions to concentrate close to each other in these areas. The cumulative effect is bias towards the centre [London].
The infrastructure of Docklands was paid from central taxes - about 1/3 of the total of Docklands. They built a whole advanced elevated metro for it, while Liverpool's docks, which closed down the same year as London's, rotted.
Harrison:
"In addition to private money, the people of the south east also relied on the expenditure of public money"
"The unequal distribution of opportunities is primarily to do with the bias in taxation and public spending. Not the defects in transport systems or the superior talents of the people of the south east."
"The subsequent lopsided evolution of the economy was due to a flaw in the business model that was employed to fund the investment of capital in infrastructure."
Harrison:
"One illustration of the favourable tax treatment directed at Docklands, which was deemed necessary to expand the commercial space available for insurance and banking corporations. £3.4 billion was invested in the Jubilee Line extension to Canary Warf, while other centres of high population (such as Liverpool) were denied a few hundred million pounds for the metros they needed."
Harrison:
The Thatcher government decided in 1980 that London's Docklands should be redeveloped. Its primary tool stood justice on its head. Instead of imposing public charge on vacant land - to force it into new uses [this also stops land speculating and financial crashes] - the government created an enterprise zone. One of the privileges was exemption from property taxation.
The result was predictable. Tax relief was capitalised into higher land values, and families which for generations had made Docklands their homes were pressurised out of the area. Those who did not own land were the losers. The windfall gains did enrich some people. Arnold Fulton purchased a plot of land in a derelict corner of Docklands for £650,000. Developers pursued him fending off their offers until he took £30 million.
All rail and road projects were from central government. Wembley only needed a little. The update of the stadium station had subsidies. The Olympics got a hell of a lot. The M1 from the M25 to Milton Keynes was uprated. The cost of the uprating would open Liverpool's needed urban Outer Loop line and even more.
Harrison:
A higher proportion of public spending in the regions is committed to welfare benefits to people who are rendered unemployable by payrole taxes. Those state subsidies are necessary to keep people alive. Unlike investment in (say) a new metro system, they do not produce windfall gains in the land market.
In London, however, a higher proportion of public money devoted to improving the quality of transport and schools. This raises the productive capacity of the population working in the capital. The spin-off takes the form of capital gains to land owners. And that means Londoners are more able to claw back the taxes they paid to the exchequer, leaving them with higher disposable incomes to be spent in the retail sectors - which, through the multiplier effect, gives a further boost to the London economy.
"The productivity gap is increasing rather than narrowing. It accelerated further during the height of the Dot.com boom. This is not primarily due to the natural trends within the economy, but the conjunction of costs and benefits prescribed by government through taxation."
"If the London property market is overheating, the chancellor may put up the national interest rate, yet property is not overheating in the north east and they suffer because of the raised interest rate."
"The boost to London's infrastructure out of the public purse overspills to higher land values, which translates to easier financing arrangements for entrepreneurs who secure an advantage to their competitors in the regions."
Everything is stacked towards London and the south east.
There shouldn't be any animosity towards London. You would want it to be successful. The last thing you want it to become is what Detroit (the city part not burbs) is to Michigan.
The thing is, all the other cities are to the UK what Detroit is to Michigan, LOL.
Okay, that's not true - they're far better than that - but we have one global city and a bunch of unimportant cities that have suffered from decades of neglect, mismanagement, underinvestment and even institutional decline. If I lived in London, I would be utterly ashamed knowing that the rest of the UK is so bad by comparison, with far less investment and inferior infrastructure.
If I lived in London, I would be utterly ashamed knowing that the rest of the UK is so bad by comparison, with far less investment and inferior infrastructure.
Those in London are convinced that they are propping up the rest of the UK. They consider that the rest are inferior and lack enterprise and go and that is why all the rest of the UK is not built up like London.
London has been a world mega city for over 200 years. As the UK has had an Empire, where do you think the administration of that Empire was centred?
In a way, the UK is no different to France, the USA, or frankly every country in the world. It's funny this guy is from Malaysia and criticises us, but I'd imagine Kuala Lumpur is richer by virtue of being his capital, then say the Malayasian exclave on Borneo..... And Americans, yep, this is why Chicago, LA, NYC and Houston are richer than Mississippi, Alabama and Tennessee....lol....
Those in London are convinced that they are propping up the rest of the UK. They consider that the rest are inferior and lack enterprise and go and that is why all the rest of the UK is not built up like London.
Yet London is only richer by having the City of London, the West End and the Docklands. Most of London outside central London is as poor as Brum, Liverpool, Leeds, Manchester, etc. They're stupid to claim credit for historical accident, and don't realise why London is the richest part of the UK.
Interesting. What I hear from Northern Brit husband sounds like jealousy but I do understand. In the US we don't seem to feel that way about cities in other states like NYC, LA but within our own state we can feel jealous, angry, cheated. In my state of Massachusetts, things are Boston centric. All of us pay taxes to Boston but the money STAYS in Boston--they have public transport and great roads, jobs. Not so in the rest of the state.
I think it's unfortunate that more money in England isn't directed to the down and out areas in the north. But I have no say--I'm just an American.
Yes, I know. But it's accident because London just so happened to become England's and then the UK's capital. To suggest that it's because London's are smarter is just laughable *******s, especially since most Londoners don't work in the City, the Docklands, or the West End or had a hand in making these top centres/attractions.
Can anyone from the UK please explain to me why is it that there is a great deal of animosity towards London from elsewhere in the UK, especially in the northern part of England? I've heard the explanation that London is sucking up all the wealth of the UK and all the jobs are shifting there from other parts of the UK, leaving the north impoverished.
But isn't that the whole point of being in one country? If there are less jobs in one part of the country, there is absolutely no impediment for me to move to another part. I don't have to apply for a work visa or anything like that. It's not like there is anyone preventing someone from say Blackburn from moving to London or the Home counties to seek employment, thereby improving his or her standard of living.
I ask this because I was from Singapore and I am genuinely confused about this. I lived in a small suburb in Singapore and there are absolutely no jobs there, only public housing. But I don't feel aggrieved because I can work in another part of the country without restriction.
Singapore is a city-state. The best comparison is London, not the whole of the UK.
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