By Stephen Fisher, Martha Kirby and Eilidh Macfarlane
The government have pledged to “level up all parts of the United Kingdom,” because, as Boris Johnson put it in his first speech as prime minister, “it is time we unleashed the productive power not just of London and the South East but of every corner of England, Scotland, Wales and Northern Ireland.” Our new research suggests that if levelling up primarily replicates the experience of London and the South East then it might not bring greater wellbeing to the north as many are hoping for.
London has long been the richest city in Britain, and over the last four decades its economic growth has exceed that of other regions. One indication of that is in house prices. Figure 1 below shows how house prices in London and the other southern regions (including the East of England) have risen far faster than in those regions further north. The main economic divergence in recent decades has between the south of England and the north (including the English Midlands and Wales). As Philip McCann, in the opening sentence of his 2016 book put it, “inequality between the regions [is now] as marked as it has ever been.”
Figure 1 – Residential property prices by Government Office Region over time
There is little argument that the north could benefit from more economic development, but it is not quite clear from the academic literature what personal and social benefits that would bring. Most of the research is based on variation between countries, but if we want to understand what might happen as a result of levelling up the north, it might help to know what has happened within Britain as regional economic gaps widened. Has rising economic prosperity been accompanied by a corresponding rise in health and happiness in the south, relative to the north?
In our project for the Social Macroeconomics Hub of the Rebuilding Macroeconomics initiative, we investigated the socio-political consequences of regional economic divergence in Britain. As well as measures of health and happiness, we considered pro-social outcomes such interpersonal trust, and political outcomes such as engagement, alienation, values and party support. We were surprised to find (Working paper here) that there was relatively little by way of social or political divergence between regions to match the major economic regional divergence in Britain in recent decades.
Take health for example. Figure 2 shows a summary health score calculated using twelve questions from the Health Survey for England. After an initial divergence in the late 1990s, the average score in the south has been better than that in the north, but not by much, and the gap has not widened noticeably in the last two decades. Perhaps most striking is that the experience of Londoners is more similar to that of people in the north than it is to others in the rest of the south.
Figure 2 – Mean General Health Score (GHQ-12) by region (high scores worse)
There is a similar story for self-reported happiness in Figure 3, which shows the percentage of people who have recently been feeling “less”, or “much less”, happier “than usual”. Again, we see slightly better outcomes in the south, but not much better. Moreover, happiness in London has often been on par with that in the north, and never significantly better than in the other southern regions.
Figure 3 – Self-reported recent feelings of being less happy than usual, by region
So, despite being on average much richer, Londoners are less happy and feel less healthy than average. Furthermore, even though the south outside London has become richer faster than the north, southerners have not been reporting correspondingly better levels of wellbeing relative to northerners.
Perhaps part of the reason for this may be inequality. Income growth has been much greater at the top, and that is truer of the south, especially London, than the north. In Figure 4, the bottom set of lines show income at the 10th percentile, that is the level below which we find the 10% of people with the lowest incomes. Those lines are all bunched together and have risen only slightly over the last twenty years. By contrast the lines at the top, showing the income you have to achieve to be in the top 10%, show a big north-south divide getting wider. This means income gaps within the south, and especially within London, have increased even faster than they have within the north. In the north the gap between 10th and 90th percentiles rose from £21k in 1999 to £35k in 2019, but for those working in London the corresponding gap rose from £36k to £74k.
Figure 4 – Income at 10th and 90th percentiles for full-time employees by region of work
The fact that income growth in London has been concentrated at the top means that most Londoners have not been feeling the benefit of greater economic growth in that region, but they have still suffered faster rising housing costs, as we saw in Figure 1. That could go some way to explaining why Londoners on average have not been reporting greater levels of health and happiness in line with their faster increasing average income.
Our analysis of regional socio-political outcomes over the past four decades does not imply that that levelling-up the north would necessarily produce more inequality in the north, nor necessarily fail to produce better wellbeing outcomes. But it alerts us to the risk that it might not. How the north is levelled up might be more important for achieving widespread benefits than how much regional convergence is visible in macroeconomic statistics.
Furthermore, our research also reminds us that it is not just people in “left behind” parts of the north that deserve consideration from economic policy makers. Many in the south, and especially London, have not shared much in their regions’ income growth but have suffered the rising costs of living. Their plight needs attention too.
For further details of our findings, and the methodology behind them, please see our working paper HERE.
The book cited is: Philip McCann (2016) The UK Regional-National Economic Problem. Routledge.