Rebalancing acts

In his preface to the local growth white paper last October, Nick Clegg gave ‘rebalancing’ pride of place in the coalition’s approach to economic development policy when he noted that ‘Governments of the past have contented themselves with growth concentrated heavily in some areas of the country… and within a limited number of sectors – notably, financial services. Yet the banking crisis and ensuing recession have proved that model is unsustainable. Crucially, it is also deeply unfair’.

George Osborne introduced Scene II of the coalition’s rebalancing act in his Budget announcement on Wednesday when he insisted ‘[y]es, we want the City of London to remain the world’s leading centre for financial services, but we should resolve that the rest of the country becomes a world leader in advanced manufacturing, life sciences, creative industries, business services, green energy and so much more’.

During the course of his speech, the chancellor announced a number of measures that may make some modest contribution to rebalancing the UK (or, rather, English) economy, geographically and sectorally. Ten new enterprise zones, for example, could help transform urban sites in the north and midlands while ten others, plus one reserved for London, will be given the opportunity to start doing the same, somewhere else, in the summer. The £2bn extra funding awarded to the proposed Green Investment Bank could support the growing range of renewable and low carbon energy schemes in comparatively low growth areas, notably along the northeast coastline.

The £100m found for new science facilities could bring wider benefits to research-intensive businesses in the northwest, around the Daresbury science campus even though, pro rata, it will bring more to those in the London super-region with access to Harwell, Cambridge and Norwich. And £85m for the Ordsall Chord, linking Manchester’s Victoria and Piccadilly stations, could improve transport linkages and related economic efficiencies within northern England if it is followed up by the additional improvements that are needed to make the ‘Northern Hub’ a reality.

For those of us who keep a pinch of salt handy on Budget Day, though, this welcome collection of ‘mays’ and ‘coulds’, which begin to put flesh on the bones of the coalition’s explicit rebalancing act, have to be seen in the context of a set of ‘wills’ that are already serving other rebalancing goals.

The public spending cuts that even the most conservative estimates suggest will result in the shedding of half a million public sector jobs, for example, are proceeding more quickly, and resulting in a faster ‘rebalancing’ of public and private sector employment, in peripheral England than in the less affected south. Cuts in welfare per capita and the effects on the incomes of poor households follow a similar pattern.

The coalition has learned from its predecessor that setting measurable targets for rebalancing is fraught with political danger. It will take more than a handful of carefully orchestrated budget measures, however, to make its many rebalancing acts live up to the DPM’s and chancellor’s promises.