Strangeways, Here We (All) Come

The news yesterday that Channel 4 would move its headquarters to Leeds is being trumpeted by some as another example of the economy rebalancing away from London and the South East.  It follows the successful relocation of much of the BBC to Salford, and the establishment of a financial services hub in Birmingham, driven by HSBC moving its UK headquarters to the city, and the growth of companies like KPMG who were already there.

Yet despite some fine words to the contrary, it is pretty clear that the Conservatives have been significantly less keen under Theresa May to talk about re-orientating the economy towards the North than they were under David Cameron and George Osborne.  This is not completely surprising, given that Brexit has sucked the life out of political debate.  It may also reflect the fact that the Cabinet’s ‘Big Beasts’ are almost exclusively MPs for Home Counties seats, whereas Mr Osborne’s roots in Cheshire obliged him to think about areas north of Watford.  But it is still a huge mistake.

The UK faces a number of big challenges once Brexit is finally, finally, over with.  Perhaps the biggest is housing.  Notwithstanding some recent small falls, house prices are out of control in London and the South East, usually far out of reach of anyone not already on the ladder, not earning astronomical wages and not able to access the Bank of Mum and Dad.  Finding a way to give a huge swathe of younger voters and taxpayers the stake in the economy that comes with property ownership is a necessity.  This isn’t just a ‘young voter’ issue; older voters increasingly worry too as their children cannot get onto the property ladder.  For the Conservatives, with Labour promising the earth in this as in so many areas, it is a particular challenge.

The Tories need to find an answer (and the usual promises of trivial bits and bobs won’t do anymore).  But as seems to be becoming typical of the Party lately (pace anything to do with Brexit), it has boxed itself in with a number of implicit and explicit red lines.  Implicitly it has done a deal with its base, promising them that their property prices will remain high, even if they are currently unnaturally puffed up.  Explicitly it has said it will severely limit building on the Green Belt.  A programme of construction in volume in the South East is therefore impossible.  And it would make little sense anyway when the region’s infrastructure is groaning.

So how to let the air out of the balloon gently and bring property ownership into reach?  Rebalancing, moving jobs and people to where there is often under-occupied existing residential property and space to build more, is the answer.

Let’s imagine you want a career in financial services: thanks to the agglomeration benefits being seen now there is a critical mass of companies in the city Birmingham is now a very real option for you – and could be even more so if the Bank of England moves some of its functions too.  Media more your thing?  Manchester (and Leeds?) beckon.  Encourage this and take some of the pressure out of the market and prices will settle back a bit (you could also, by the way, remove some more of the froth and maybe even clean up the stain on our national reputation by stopping dodgy money from Russia and elsewhere snapping up London flats en bloc as soon as they are built).

Of course, doing this will require the sort of boldness, taking the kind of leaps of faith, Government is bad at.  Specifically, the Treasury, whose focus on return on investment will always favour sticking money and infrastructure where productivity is already high, ie. London.  More on that subject another time.  For now, suffice to say the Conservatives need to be brave, visionary, and ambitious.  They need to want to change the country, and to see the balance of power shift, even a little bit, from South to North.

There is a potentially huge payoff for the Tories.  At the moment their electoral strategy (such as it is) is focused on adding seats in the Midlands to what it has already in the South and in the rural North.  This is unambitious; it is also dangerous for a party that still says it wants to be a truly national party.  So Conservatives, learn again to worry about every part of the country.  Be bold, and embrace rebalancing.  It will pay off in every way – other than in an abstract Treasury model.

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