Budget must address North-South divide to give Yorkshire a fair deal20 March 2012
WEDNESDAY’S Budget matters for Yorkshire. Households across the UK are under pressure. This region in particular faces significant challenges, with nearly one in 10 people out of work. With the right decisions, George Osborne can make real progress on tackling the North-South divide and support the growth of the whole UK economy.
Last year this newspaper launched its Give Us a Fair Deal campaign and made 60 demands on the Government for specific action. It was rightly concerned that Yorkshire is punching below its weight. After all, this region is an £80bn economy in itself, bigger than the whole of Norway.
It has a strong and broad-based economy which has survived previous crises, and will do the same again given the right Government help.
That does not mean big injections of extra public spending. Government spending was an engine of growth before the recession hit. This can no longer be the case and in truth not all of that extra money was well spent last time. The Chancellor needs a different agenda absolutely focused on helping businesses and families in these straitened times.
First, attacks on business and capitalism must stop. I recently spent time visiting businesses around Skipton with the active local MP, Julian Smith. I saw first-hand the negative impact that anti-business rhetoric targeted at the City of London is having on companies here. One businessman put it to me very simply: “It’s hard enough running a business. What is the incentive to create a successful one if Government is not on your side?”
Yorkshire already shows the good that business can do. It is a centre of industry with an important manufacturing sector and home to the second largest financial centre in the UK. Unemployment is still high, yet some areas are creating jobs. The financial services workforce grew by 13 per cent last year, particularly in Leeds. Boris Johnson, the Mayor of London, always defends the position of London as a global financial centre. At the same time he is defending the half a million people employed in financial and business services in Yorkshire.
This means that the Chancellor must reject demands from the Trades Union Congress and the Opposition for another tax on bankers’ bonuses. This will only drive skills out of the UK and reduce the amount of tax that the Government collects. He should also challenge some of the myths on top pay in big companies. Unpopular though it may be to say it, high pay for company directors did not cause the financial crisis. It is wrong to say that making someone else worse off will automatically make other people better off.
Second, the Chancellor must resist postponing the date by which the national deficit is paid off. He has already moved the goalposts once. Last November, he moved his target for a balanced budget by two years, from 2014-15 to 2016-17 and total Government debt will peak at an even higher level. The UK has been able to hold on to its top credit rating so far, but two of the expert agencies have now warned that it is at risk.
This may seem detached from day-to-day life in our communities, but the financial credibility of the country affects us all. A downgrade of our AAA rating would push up interest rates on mortgages and loans, putting more pressure on families and businesses. It would also push up taxes because the Government would need more money to pay off its debts. All round, it would make it even harder for the UK economy to return to strong growth.
Third, the Government can help Yorkshire companies take their business around the country and overseas. I recently visited a company, British Hardwoods, which now competes with firms in China after setting up a website two and a half years ago. The new government agencies to co-ordinate business policy in the region (Local Enterprise Partnerships) can do a great deal to help companies like this, by pooling their efforts and resources. A more expensive task is improving the infrastructure links between the northern cities. This will need new thinking now that the Government is so tight for money. The toll on the Humber Bridge is highly controversial but we may well need more tolls, and other charges on motorists, in future.
Finally, the Chancellor must recognise that we have been living beyond our means and must reduce our levels of debt and spending.
Yorkshire has the lowest savings rate in the UK but it also has among the lowest levels of debt of any English region. The Chancellor may lift the threshold for income tax towards £10,000. Yet this is a bad policy because it is a much greater help to high earners than low earners.
Yorkshire does need a fair deal, like many of the other regions in the north of England. The best thing that the Chancellor could do this week is to stick to his plan to reduce government borrowing and spending.