Tuesday, 14 May 2013

The North South Divide - welfare reform adds to the problem

The UK is embarking on a long overdue revamp of its welfare provision, this includes unemployment benefits, incapacity benefits, pensions, housing benefits and a whole range of tax credits too numerous to name.  The aim of Mr Duncan Smiths reforms are to simplify the system, put the emphasis on work rather than paid-for idleness and to reduce the amount of expenditure.  These changes have been greeted with howls of anger from the Left, although Labour have made no firm commitment to reinstate these cuts if re-elected in 2015.

The main problem with these changes is the uneven spread of the benefits spend, is some northern cities reliance on social security is so endemic that, when fully implemented, these changes will eliminate 6.5 years of real household disposable income growth. In prosperous inner London, Surrey and Buckinghamshire just a few months' worth of income growth will be lost.  Prof Fothergill of Sheffield University tells us "A key effect of the welfare reforms will be to widen the gaps in prosperity between the best and worst local economies across Britain. Our figures also show that the Coalition government is presiding over national welfare reforms that will impact principally on individuals and communities outside its own political heartlands."
The North
Whilst the coalition may feel that they need to redress the balance following the largess of the last Labour government, who targeted increased benefits towards its core vote, there is definitely a whiff of unfairness in the air.  And here lies the greatest danger of these reforms, the coalition and specifically the Tories will be accused of funding their deficit reduction programme by taking money from those who can least afford it.  The study by Sheffield University estimates that about £19bn a year will be taken out of working-age social security between now and 2015, much of it from poorer parts of the north of England, Wales and Scotland.  The Tory brand is already in a parlous state in the North of England and Scotland and this could be the final nail in the coffin. The increasing sense of a fractured Britain may well lead to seismic changes in our political framework.  Benefits reform play into the hands of the Scottish independence movement, which has its referendum in 15 months.  The benefits culture is widespread north of the boarder and these cuts this may well play badly for the pro-Union campaign.  In addition to the danger Scottish separatism these cuts could also propel voters into the arms of Ukip, the right wing anti Europe party, who although sympathetic to the needs to cut benefits, (they would probably be more aggressive) have become the natural home for disaffected working class white voters.  The rise of Ukip may lead to the unintended consequence of us leaving the EU.
The regional effects of these necessary changes have not be thought through properly by the coalition who have been at pains to be fair as they dish out austerity.  What this initiative is lacking is a counterbalance.  Many of us agree that these changes will promote the desire to work rather than to be on benefits, and this has been at the heart of Mr Duncan Smith’s crusade, but where is the work.  The great failing of this coalition has been the complete lack of a compensating industrial policy that needs to bridge the gap between a thriving private sector in the South and a predominantly dying public sector in the North.  Where are the tax incentives for businesses, where are the infra-structure projects to improve the attractiveness of corporate relocation, where are the research grants for Northern Universities and most importantly where is the sense of urgency that we need more that a “sink or swim” attitude to our great northern cities.

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