Spending cuts 'will widen North-South divide'

Yorkshire and the other northern regions will suffer the bulk of job losses in both and private and public sectors, while a greater reliance on benefits will also mean welfare cuts hit harder.

Significantly lower investment than in other regions will also hamper the North's efforts over the coming years, according to the report by left-leaning think-tank IPPR North.

The report is a blow to the Government's pledge to rebalance the UK's economy, Ministers having unveiled a series of measures targeted at growth outside London and the South-East.

Report authors Ed Cox and Katie Schmuecker said: "The ambition to rebalance the UK so there is less reliance on just one region – the Greater South-East – is an important one.

"But the Comprehensive Spending Review, in the absence of a coherent strategy for economic growth in the North of England, would suggest that the coming years will see even greater imbalance."

The divide between North and South grew in economic terms over the past decade even though northern economies did well in the boom years.

Ministers have based their economic policy on the private sector leading the recovery and soaking up the job losses from the public sector. Measures aimed specifically at regions more reliant on the public sector – such as Yorkshire – include a National Insurance holiday for new firms and a 1.4bn Regional Growth Fund to aid growth.

But the IPPR report claims that the North – Yorkshire, the NorthWest and the North-East – will fare "significantly worse" over the next four years as the effects of last week's Spending Review kick in and Government spending is cut by 81bn.

It uses research by PriceWaterhouseCoopers which suggests 82,000 jobs in the public and private sector will go in Yorkshire and the Humber as a result of the spending cuts. The region is more vulnerable to cuts because parts are highly dependent on public sector jobs, and a weaker private sector is considered less likely to step in and take up the slack in unemployment.

The report also contrasts the 6bn Tube upgrade and 14.5bn Crossrail scheme in London with much smaller investments in transport in Yorkshire.

It questions what impact the Regional Growth Fund will have in rebalancing the economy when the 1.4bn being spent over three years is the same as invested in Regional Development Agencies over a single year.

"England is an economically divided country. The North-South divide has become part of the political lexicon, although in reality the divide could be more accurately described as the Greater South-East and the rest," said Mr Cox and Ms Schmuecker.

"The economies of the North grew substantially in the period leading up to the recession, but they suffered disproportionately the effects of the recession and rising unemployment.

"This report explores the extent to which the Spending Review will ameliorate or exacerbate the North-South divide. In considering jobs, welfare, capital investment and public services it draws a stark conclusion: things look set to become significantly worse."