Karel Williams: Regions should put an end to their capital punishment

Why? Under successive Conservative and Labour governments, London has become a city state that is economically and socially detached from the rest of the UK

while London finance has an arm lock on how our national political elites, both in government and opposition, formulate economic policy.

London finance is now running an entrepôt trade in money at the intersection of the international time zones, like early modern Italian city states such as Genoa or Venice at the intersection of the trade routes. The main beneficiaries are a couple of football stadiums full of the working rich from finance.

We are told we should be proud of this national success but there is little benefit here for British firms or British-born citizens. Foreign firms dominated

the new City after the Big Bang of the 1980s, so the City is a success in much the same way as the Wimbledon tennis championship without a British champion.

More generally, the entrepôt trade in money has created something rather like an offshore financial centre which is not on a sandy Caribbean island but on the

banks of the muddy Thames.

London imports non-UK migrant labour to fill low-pay, low-skill jobs as well as well-paid expats for executive positions in and around finance.

Between 1997 and 2006, around 317,000 new jobs were created in London workplaces but only 2,000 were filled by UK-born residents.

As a result, the success of London finance is associated with great inequalities because povert co-exists with great wealth inside the city state.

As for London finance’s contribution to the regions, thats exaggerated. The direct benefit of finance are limited. When so much employment is clustered

in London, finance accounts for no more than 2.5 per cent of employment in the North East and 3.5 per cent in Yorkshire and Humberside.

Our national political elites bought the PR story that the London-based finance sector paid the taxes that funded national public services like health and

education. But, on CRESC calculations, finance provided only about seven per cent of Government’s total tax receipts between 2002 and 2008 while

manufacturing provided 13 per cent.

Worse still, London-based finance produced the crisis which (according to all three national parties) now requires swingeing public sector expenditure cuts

which are, in effect, an anti regional policy.

So what to do politically and economically? The national politicians of all parties live in a metropolitan bubble so they are either in denial or actively making things worse.

It is time to press the reset button on regional politics as the Scots have already done and connect English regional government (which New Labour didn’t deliver) with a new economic policy agenda (which the North urgently needs).

What is the point of Sheffield returning an MP like Nick Clegg to Westminster to press generic low tax, pro-enterprise policies which have failed his city and his region?

Since the national political elite are captured by the interests of the city state in London, the English regions need to think about new economic policies that are driven by a social agenda for growth. Some of this depends on national policies for the private sector, like corporation tax geared to output and employment growth.

But job creation in the North requires empowerment of regional government to raise new taxes in order to invest in clever co-operation with private sector

and mutual enterprises.

Why not social housing, universal care for the elderly, better transport infrastructure with moderate fares and low-carbon retro-fitting, recycling and

maintenance? If not now, when?

Professor Karel Williams works for the Centre for Research on Socio Cultural Change at the University of Manchester (cresc.ac.uk). he is the co-author of a

report on the City State.