The sham of Osborne’s “Northern Powerhouse”

Submitted by Matthew on 28 October, 2015 - 12:12 Author: John Cunningham

It is alarming and deeply disturbing to see that some people, many of whom should know better, have swallowed George “high-vis” Osborne’s fantasy-speak about building a “Northern Powerhouse”.

This is more amazing when you consider that ever since the Industrial Revolution there has always been a “Northern Powerhouse”, and it was the Conservative Party and Thatcher that destroyed it.

Without the coal, iron and steel, shipbuilding, engineering and textiles of northern cities like Manchester, Leeds, Bradford, Sheffield and Newcastle (to which Scotland and South Wales must also be added), Britain would have remained, as in early Tudor times and before, a rather unimportant European offshore island. Take away the north, and the industrial revolution would have happened somewhere else, with British capitalism ending up a mere shell, reduced to making cuckoo clocks or stuck in an agrarian-based economy.

Instead Britain for a time was the most powerful nation on earth, with a huge empire backed up by the largest navy the world had yet seen. It was no idle boast that Britain was the workshop of the world. Manchester, for a time, became its second wealthiest city. Britain produced over half the world’s cotton, coal and iron and totally dominated manufacturing. Most of this came from the north.

According to an 1835 survey Britain had 1113 cotton mills. Of those 943 were in Manchester and the surrounding region. If today it has become a cliché to say that you can’t buy anything that isn’t made in China, think what the situation must have been like in 1870 when Britain produced 46% of the world’s manufactured goods. In 2007 Chinese products accounted for 17% of the world’s exports. When Karl Marx and Friedrich Engels penned the Communist Manifesto they wrote eloquently and with admiration for the dynamic thrust of capitalism and the way it had transformed the world (as right wing historians are always telling us, as if they are the only ones to have ever read the Manifesto!).

Yet, it is the north of England, probably more than any other part of the world, that inspired and informed the famous lines “All that is solid melts in the air, all that is holy is profaned”. While Marx wrote Das Kapital in the scholarly seclusion of the British Library Reading Room in London, its analysis, observations and rich detail are rooted in the Manchester of Friedrich Engels.

Clearly Osborne has latched on to the north at least 150 years too late. In a sense Osborne is talking about a phenomenon that has been around for a long time — regional disparities in development.

It’s just that idle throwaways about a Northern Powerhouse sound so much “sexier” in our era of sound bites and spin. Most countries have some kind of “regional” question or problem which arises out of the uneven development of capitalism and the nation state, for example the disparity between the industrialised north of Italy and the agrarian-rural south; the divisions and rivalry between Catalonia and the rest of Spain. The UK has not been immune to this and there are regional divisions between highland and lowland Scotland, between England and Wales, Cornwall and the rest of England and of course there is the much-discussed north-south divide.

Since World War Two there have been various attempts by central government at “engineering” and reviving the economies of the regions, particularly as traditional industry declined.

The Midland Bank was encouraged to shift its major operations HQ to Sheffield in the early 1960s (much to the chagrin of its employees who are reported to have stepped off the train in Sheffield and burst into tears); vehicle licensing was moved to Swansea; the DHSS is now based in Newcastle and the BBC has, in recent years, moved some of its operations to Salford.

In 1999, the Labour government established nine Regional Development Agencies (RDAs) and talked about devolution and elected assemblies, although looking back it is difficult to see if the RDAs ever made much impact (the Tories killed them off in early 2012). Likewise the proposal for elected regional assemblies went down like a lead balloon in the few places where the waters were tested.

One of the problems was that the proposals were muddled and it was never clear what meaningful powers Regional Assemblies would have (if any). The north-south divide remains and no-one, including George Osborne, has ever paused to think why all previous attempts at regional development have failed or, best only met with very limited success. The UK remains very much a country dominated by its capital city and its immediate periphery: Between 2010-14 London created six times as many jobs as in the north west and twice as many as Yorkshire. The dominance of London is a major factor in the disparities between north and south. Part of the rise of UKIP can be accounted for by the way it has exploited the popular perception of a detached London elite running the country for its own benefit (conveniently ignoring Nigel Farage’s previous incarnation as a City investor).

Whether or not this is true or an oversimplified exaggeration is neither here nor there — it brings in the votes. Does all this mean that George Osborne, like the Tin Man in The Wizard of Oz, has suddenly discovered he really does have a heart?

At a speech in Manchester in June 2014, Osborne reeled off a tasty shopping list which was rather short on detail. The main idea seems to be that the northern cities from Liverpool to Hull will be joined together by developing transport links into a “northern hub” — a neat cliché which can mean just about anything you want. Northern Universities and their research facilities are to become “Catapult Technology Centres”; while power will be devolved through “City Deals”; Liverpool will have a new “Mersey Gateway Bridge” and the “Atlantic Gateway” will “go from being a brilliant concept to a transforming reality”.

Cut away the guff and three elements appear central.

First, Osborne wants to co-opt and integrate local council decision-making with that coming from Westminster and in doing so reduce councils’ ability to make effective local decisions. Osborne wants the northern cities to introduce elected mayors. Councils will now receive their income from the local business rates and there will no longer be a block grant from central government which is then “divvied up” among the local services. However, this will probably mean councils will set aside “brownfield sites” for new industrial expansion at the expense of providing new housing.

At the Tory Conference Osborne made quite a bit of noise about a new programme of house building, but as yet this contradiction appears not to have registered with him. Whether or not the local councils can generate enough income from the local businesses they already have or hope to develop remains to be seen. The people of Redcar and Scunthorpe cannot be filled with much optimism in this respect. Given the rate of industrial decline in the last 30 years, the Northern Powerhouse is starting from a very low point. Nor should it be forgotten that all this comes on top of an overall 40% cut in central government grant.

The Office of Budget Responsibility predicts that by 2018, across the UK 800,000 public sector jobs will have gone. In short, the Tories want local councils to take on the responsibility of administering their austerity programme while clouding this aim with a cartload of goodies, most which have minimal substance.

The second element is that Manchester is absolutely central to Osborne’s whole strategy. The Greater Manchester Combined Authority consists of ten councils, eight of them Labour held, and Osborne clearly wants to erode Labour control of this huge conurbation. If he can achieve this then the political landscape of Northern England will have changed dramatically in favour of the Tories.

Thirdly, there is High Speed Two (HS2) — the development of a high speed rail link between London and Manchester with a branch line linking Sheffield and Leeds. HS2 is monumentally expensive and has been a source of controversy since the idea was first mooted. Estimates of the cost vary; currently it is £32 billion, but it could end up costing £80 billion according to one source.

The main argument for HS2, incredibly, appears to be that it will shorten the journey time from Manchester to London to about one hour. Quite how this will engender the predicted boosts to productivity, local employment and infrastructure remain to be seen. While some of the opposition to HS2 comes from the NIMBYism of the Tory shires and from solid environmental concerns, there are strong arguments that the money could be better spent elsewhere.

The New Economic Foundation have produced a report, High Speed Two: One Track Mind which debunks most of the government rose-tinted vision, arguing that these kind of “prestige” projects do little to benefit the economy, are monumentally expensive, and rarely achieve any of their goals. It did not augur well for Osborne that in June this year the plans to electrify and update the TransPennine Express Railway and the Midland Mainline between London and Sheffield had to be dropped because it was too expensive. However Network Rail has announced that this project is now back on track, sort of. Work on the electrification programme has been “unpaused” (more idiotic jargon) and will restart. Even so, full electrification will now miss the original target date of 2020 by three years.

No-one, surely, can object to the building up and strengthening of industry and the creation of jobs. Nor can anyone, particularly those unfortunate souls who regularly travel on the overcrowded, dirty, clapped-out rolling stock of companies like TransPennine, complain about investment in the northern railways. Yet, these developments need to be for the benefit of the people who live in the north of England, not for speculators, hedge funds and the like.

There is a crying need for more manufacturing industry particularly engineering, where workers can earn guaranteed wages, enjoy decent working conditions, and young people will be able to learn a trade. What we do not need is any more growth in the precariat with more “Macjobs”, more zero-hour contracts, more part-time work, more call centres. There need to be guarantees that industrial speculators will not be allowed to “grab and run” — like the US businessman John DeLorean who persuaded the Tory government of the time to part with £77 million of taxpayers’ money to establish a car manufacturing plant in Northern Ireland which closed within a year. If there is to be devolution and the establishment of regional assemblies, then we need to ask why.

Devolution for what? So that the responsibility for further cuts can be foisted onto the regions’ councils? What can be learned from the Scottish and Welsh experiences with devolution? There is no need for yet another layer of government bureaucracy, even if this is locally based. The left should be cautious about embracing these ideas until it is clear what is needed and what is not needed. It is imperative that there is a detailed discussion about our responses and what alternatives should be put forward. A toothless regional assembly which can only “advise” central government will simply be a waste of time.

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