London punishing the north is no accident: it’s how England is run

Since the first brush with autumn, “local” measures to contain coronavirus have multiplied to span entire regions. Merseyside and Lancashire sit together in the new tier 3 alert level, with Greater Manchester resisting the categorisation due to insufficient financial support. The whole of north-east England has been placed in the tier 2 alert level, along with much of Yorkshire, Cheshire, and London and neighbouring Essex. In sum, 14 out of 16 million people in the north of England are now living under additional restrictions, joined by 9 million Londoners.

The deliberate suppression of economic activity indicated by tier 3 hospitality closures and tight curbs on households mixing in tiers 2 and 3, however necessary, is going to make for a tight winter. The true unemployment rate in Liverpool was already 19% before the pandemic. Half of renters and a quarter of mortgage holders in the north-west lack the “financial resilience” to cover a 20% loss of household employment income lasting into the new year. Rishi Sunak’s local furlough scheme implies a 34% reduction in wages for hospitality workers potentially through to March.

Things would have gone better had there been a locally run test-and-trace system that cut out the FTSE-listed privateers; a state-provided basic income irrespective of whether employed, furloughed or self-isolating; and regulation of blue-collar workplaces where the virus is easily spread. As it is, Bolton, Manchester, Oldham and Rochdale “never really left the epidemic phase”, says Public Health England.

Britain went into the pandemic with the highest regional inequalities of any major economy. How might it come out the other end? Either London or the south-east has bounced back strongest from every recession since at least the 1973 Opec crisis. While London’s path through the contagion looks fairly fraught, lower infection rates in much of the rest of southern England make living with the virus a more viable proposition there. “It may be grim up north, but that’s no reason to lock everyone down,” insists the Telegraph.

Northern England, on the other hand, is exposed to the austerity that the pandemic will leave in its wake. Ever since May, the Treasury has been agitating for spending cuts as well as tax rises to “enhance credibility and boost investor confidence”, which is the context for Sunak’s attempt to scale back emergency outlays and the resultant standoff between Whitehall and Manchester.

It’s a mistake to present the north-south divide as a challenge for a well-intentioned government to overcome, rather than a geographical reflection of how Britain is run, and for whom. As Tom Nairn observed in The Break-Up of Britain, the rule of thumb in UK politics is that the City controls the Treasury, and the Treasury controls the state – one of the most centralised in the rich world. No longer is this a case of northern industry versus London finance, but of the latter calling the shots over anaemic services-based regional economies. How much of an exception the pandemic crisis will prove remains to be seen.

For ordinary Londoners – half of them cooped up in flats, one in 11 precariously employed – 2020 has obviously been dreadful. The capital recorded the highest number of excess deaths through the first wave of Covid-19, with working-class Newham and Brent worst afflicted. It also suffered the most job losses between March and June, with the low-paid likely bearing the brunt. Owen Hatherley notes in his book Red Metropolis that given the extremes of wealth and poverty in the capital, “the first victims of London’s system” are typically Londoners themselves.

The government of London, as Hatherley puts it, hasn’t answered to the needs of poorer inhabitants for some time. Affluent London, on the other hand, “never had it so good” as after the financial crisis, according to David Cameron’s enterprise tsar, Lord Young. Median household wealth in the capital soared by 78% between 2008 and 2018. Existing house-price and financial-asset bubbles were inflated to new heights by Bank of England quantitative easing, although it also increased rents and mortgage debt. The Bank has acknowledged that, by 2014, quantitative easing had pushed up the value of assets held by the richest 10% of households, clustered in and around the capital, by £350,000 per household.

Quantitative easing has now been extended to £745bn to steady the financial markets, while Sunak has found room within his fiscal lifeboat for a £4bn stamp duty holiday, presented as helping buyers, but really a boon for existing homeowners. The Evening Standard celebrates that “surging London house prices have hit a new all-time high as the remarkable post-lockdown property boom gathers momentum”, although “the increases will dismay first-time buyers struggling to get a toe hold on the property ladder”.

The Financial Times mused in March this year that “the City, like any construct of the mind, will adapt and recover” from coronavirus. Deal-making had already moved online, and though a shift from supervised workplaces to remote working might raise compliance issues, the regulator would simply have to “unbutton its collar”, assuming it still had its shirt on.

A former Goldman Sachs analyst and hedge-fund partner, Sunak is unlikely to let former colleagues in the financial sector down. Meanwhile, shadow City minister Pat McFadden, a holdover from New Labour, assures fund managers that the Labour party is once again “as interested in wealth creation as it is in the fair distribution of wealth”.

Whatever alert level it finds itself in, the stockbroker belt will be helped to adapt and recover all right. Life for much of the rest of the country is looking grim indeed, and a white paper promising “devolution and local recovery” is delayed.

Tom Hazeldine is the author of The Northern Question: A History of a Divided Country

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