How To Rebalance The Economy

On Friday David Cameron gave his first major speech on the economy as PM. It contained much that was good: cut the deficit, cut red tape, stabilise the banking system, improve our schools, reform welfare to make work pay, fight protectionism.

He gets a big tick for all of that.

But his speech included another bit. One that we're not nearly as comfortable about.

It starts off fine:

"Today our economy is heavily reliant on just a few industries and a few regions – particularly London and the South East. This really matters. An economy with such a narrow foundation for growth is fundamentally unstable and wasteful – because we are not making use of the talent out there in all parts of our United Kingdom.

We are determined that should change."
Yes, good - we all agree that should change. Our depressed regions have remained depressed for far too long, and we have always believed they have huge potential (eg see our posts on the City by the Bay).

But it's Mr Cameron's next bit that makes us wince:

"That doesn’t mean picking winners but it does mean supporting growing industries – aerospace, pharmaceuticals, high-value manufacturing, hi-tech engineering, low carbon technology. And all the knowledge-based businesses including the creative industries...

An early task will be to reform and refocus regional support and the RDAs. And Yorkshire is a priority...

Support from government, civic leadership, business investment and expertise – this is how we’ll help to rebalance our economy across the country. And there really shouldn’t be any limit to our ambitions.

Let’s make Humberside lead the world in carbon capture and storage. Let’s make Bristol a centre for marine energy parks. Let’s make the Mersey a global trading centre once again..."
Oh, Mr Cameron. You're sounding soooo horribly familiar.

It's Harold Wilson with his catastrophic Selective Employment Tax to boost manufacturing, Mr Heath with his expensive lame ducks waddling themselves onto the public payroll in the name of industrial policy, Mr Callaghan with his zillions poured into hi-tech industries of the future scrapheap (see this blog), and even Mrs Thatcher with all that cash poured down the gullet of BL. And as for Mr Brown with his money burning Regional Development Agencies, R&D tax credits, etc etc, we don't even want to remember it (and er, Mr Cameron... weren't you going to axe the RDAs at one point?).

But look, we have no wish to carp until at least we've seen the budget. So we won't.

Instead, let us praise Cameron's good intentions, and his sincere wish to help the regions. And we'll simply make a helpful suggestion.

The best way to help our struggling old industrial cities would be to set them free. Slash taxes and regulation and watch private sector entrepreneurs do the rest. Instead of some hugely expensive and ultimately doomed attempt to force Hull into being the world leader in carbon capture and storage, set the city free. Give it charter status and watch it go. As we blogged in February:

"Given its prime location facing Europe, we've long believed Hull has huge potential, and yet it has failed dismally to exploit it. Suppose it became our own version of a Charter City - minimum wage and working hours regulations abolished, social benefits for working age citizens abolished (maybe a 5 year phased withdrawal), central government economic and planning and regulations abolished, no more central government development assistance but a 10% flat rate income tax, 10% Corporation Tax rate, and no capital gains tax.

Public spending as a percentage of GDP would obviously fall sharply, and those that depend on public spending would certainly feel the squeeze (although social welfare recipients could be given the option of staying on benefit if they relocated outside the City). But against that, Hull would attract entrepreneurs and private investment on an unprecedented scale - and with its easy European access, much of the inflow would come from overseas. There would soon be jobs for all.

Yes, yes, of course. We can't do it because of the 53rd EU Directive on not doing stuff. And there's also the question of human rights. And anyway, we might end up with all kinds of Coketown beastliness, and children being sent down the mines. And... well... anything might happen... it's impossible to predict.

Yes, yes, we know all that.

But have you ever been to Hull?

Do you honestly think faster trains and better broadband are the answer?"
Please Mr Cameron - think radically. All those people trapped in all those depressed areas far from Notting Hill deserve nothing less.
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