Corbyn is wrong: stopping London’s growth won’t rebalance the economy

Labour leader Jeremy Corbyn attends the Durham Miner's Gala last month. Image: Getty.

A few weeks ago, before we all got caught up in Brexit, Jeremy Corbyn used his six questions at PMQs to challenge David Cameron on his failure to re-balance the economy since taking office in 2010. The Labour leader argued that, in future, the government should look to re-allocate resources away from London, towards other parts of the country which had been “left behind” by Westminster policymakers for too long.

This line of argument is not new, but it has gained new credence and energy in the aftermath of the EU referendum. A lack of attention from policymakers, or investment from government, has quickly been ascribed as one of the chief reasons why many ex-industrial communities voted so overwhelmingly to leave the EU, while those in Greater London tended to vote to remain.

Seeing growth across the country as a zero sum game – where if one place benefits, another must be losing out – is superficially appealing. But as the recent Centre for Cities report shows, in reality the situation is far more complicated. And there are huge risks for the wellbeing and performance of places all across the country should London’s performance diminish in the years ahead.

The report shows that the national exchequer has become ever more reliant on London over the course of the last ten years to generate a bigger share of the tax revenues, that are then spent on public services or invested in transport and skills all across the country. The capital generated just under 30 per cent of national “economy taxes” in 2014-15 (these include all tax revenue dependent on the growth of the economy, such as income tax, land and property taxes, and VAT).

That’s an increase of 5 per cent on its share of the national “economy tax” intake in 2004-05. Indeed in 2014-15 alone, the capital generated £91bn in income tax and national insurance contributions – more than the next 60 cities combined.

In contrast to London, the other UK cities which contribute most to the national finances have seen little or no growth in their tax intake in the past decade. For example, while the amount of tax generated in London increased by 25 per cent (£28bn) in real terms between 2004-05 and 2014-15, Manchester’s tax intake grew by only 1 per cent, while Birmingham, Glasgow and Leeds all saw significant decreases in their tax intake.


These trends have in large part been driven by London’s ability to recover from the 2008 recession, while three quarters of British cities (47) continue to generate less tax now than in their pre-recession peak. And this doesn’t just reflect a north/south divide – for example, Swindon and Norwich generated 20 per cent and 21 per cent less tax respectively in 2014-15 than immediately before the recession.

Being so reliant on just one city to generate so much tax revenue for the country clearly carries many risks for the national finances. That’s particularly true given the uncertainties facing the country in light of the EU referendum, with many financial services firms openly saying they would consider their position should the UK not secure access to the single market.

But imagining that simply withdrawing investment from London and redirecting it to other places could fix the problem is to ignore the fact that any slowdown in London tax receipts would have a direct impact on how much money is available to spend in other parts of the country – both now and in the future.

It simply isn’t possible to flick a switch, and move the thousands of highly skilled people and fast growing businesses based in London to other parts of the country, overnight. If investment in the capital’s economy were to stop, its economic activity and the tax revenues it generates are unlikely to relocate to other parts of the country: instead, they will be lost to other global cities.

So while Jeremy Corbyn is right to be concerned about the UK economy’s increasing dependence on London, instead of crafting a crude narrative that pitches London against the rest, we need to focus more on the absolute gains that can be made by strengthening the economies and tax bases of other city regions such as Greater Manchester, the West Midlands and the North East.

But let’s be clear. Achieving these gains at the expense of growth in London – even if it could be achieved – would be potentially catastrophic for the national economy. And those areas which currently have weak economies would be likely to suffer most.

Ben Harrison is director of partnerships at the Centre for Cities.

 
 
 
 

Which nations control the materials required for renewables? Meet the new energy superpowers

Solar and wind power facilities in Bitterfeld, Germany. Image: Getty.

Imagine a world where every country has not only complied with the Paris climate agreement but has moved away from fossil fuels entirely. How would such a change affect global politics?

The 20th century was dominated by coal, oil and natural gas, but a shift to zero-emission energy generation and transport means a new set of elements will become key. Solar energy, for instance, still primarily uses silicon technology, for which the major raw material is the rock quartzite. Lithium represents the key limiting resource for most batteries – while rare earth metals, in particular “lanthanides” such as neodymium, are required for the magnets in wind turbine generators. Copper is the conductor of choice for wind power, being used in the generator windings, power cables, transformers and inverters.

In considering this future it is necessary to understand who wins and loses by a switch from carbon to silicon, copper, lithium, and rare earth metals.

The countries which dominate the production of fossil fuels will mostly be familiar:

The list of countries that would become the new “renewables superpowers” contains some familiar names, but also a few wild cards. The largest reserves of quartzite (for silicon production) are found in China, the US, and Russia – but also Brazil and Norway. The US and China are also major sources of copper, although their reserves are decreasing, which has pushed Chile, Peru, Congo and Indonesia to the fore.

Chile also has, by far, the largest reserves of lithium, ahead of China, Argentina and Australia. Factoring in lower-grade “resources” – which can’t yet be extracted – bumps Bolivia and the US onto the list. Finally, rare earth resources are greatest in China, Russia, Brazil – and Vietnam.

Of all the fossil fuel producing countries, it is the US, China, Russia and Canada that could most easily transition to green energy resources. In fact it is ironic that the US, perhaps the country most politically resistant to change, might be the least affected as far as raw materials are concerned. But it is important to note that a completely new set of countries will also find their natural resources are in high demand.

An OPEC for renewables?

The Organization of the Petroleum Exporting Countries (OPEC) is a group of 14 nations that together contain almost half the world’s oil production and most of its reserves. It is possible that a related group could be created for the major producers of renewable energy raw materials, shifting power away from the Middle East and towards central Africa and, especially, South America.

This is unlikely to happen peacefully. Control of oilfields was a driver behind many 20th-century conflicts and, going back further, European colonisation was driven by a desire for new sources of food, raw materials, minerals and – later – oil. The switch to renewable energy may cause something similar. As a new group of elements become valuable for turbines, solar panels or batteries, rich countries may ensure they have secure supplies through a new era of colonisation.

China has already started what may be termed “economic colonisation”, setting up major trade agreements to ensure raw material supply. In the past decade it has made a massive investment in African mining, while more recent agreements with countries such as Peru and Chile have spread Beijing’s economic influence in South America.

Or a new era of colonisation?

Given this background, two versions of the future can be envisaged. The first possibility is the evolution of a new OPEC-style organisation with the power to control vital resources including silicon, copper, lithium, and lanthanides. The second possibility involves 21st-century colonisation of developing countries, creating super-economies. In both futures there is the possibility that rival nations could cut off access to vital renewable energy resources, just as major oil and gas producers have done in the past.


On the positive side there is a significant difference between fossil fuels and the chemical elements needed for green energy. Oil and gas are consumable commodities. Once a natural gas power station is built, it must have a continuous supply of gas or it stops generating. Similarly, petrol-powered cars require a continued supply of crude oil to keep running.

In contrast, once a wind farm is built, electricity generation is only dependent on the wind (which won’t stop blowing any time soon) and there is no continuous need for neodymium for the magnets or copper for the generator windings. In other words solar, wind, and wave power require a one-off purchase in order to ensure long-term secure energy generation.

The shorter lifetime of cars and electronic devices means that there is an ongoing demand for lithium. Improved recycling processes would potentially overcome this continued need. Thus, once the infrastructure is in place access to coal, oil or gas can be denied, but you can’t shut off the sun or wind. It is on this basis that the US Department of Defense sees green energy as key to national security.

The ConversationA country that creates green energy infrastructure, before political and economic control shifts to a new group of “world powers”, will ensure it is less susceptible to future influence or to being held hostage by a lithium or copper giant. But late adopters will find their strategy comes at a high price. Finally, it will be important for countries with resources not to sell themselves cheaply to the first bidder in the hope of making quick money – because, as the major oil producers will find out over the next decades, nothing lasts forever.

Andrew Barron, Sêr Cymru Chair of Low Carbon Energy and Environment, Swansea University.

This article was originally published on The Conversation. Read the original article.