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Here's a strange thing. Certain types of spending, transport, R&D, housing, culture, are vital to boost productivity. Yet in Britain we spend more on these things in places where productivity is already high. @guymiscampbell and I have a report out exploring why. Thread ahoy!
First, transport. London is the big winner, followed by two other high-productivity places. Between 2007/8 and 2018/19 capital spending on transport in London was around £6,600 per head, nearly three (2.75) times the average in the rest of England (£2,400).
There are multiple reasons for this. Places with strong devolved governments (London &Scotland) have more capacity to bid. We spend a big chunk of the budget on rail, which is a big share of journeys in London, but v small elsewhere. London makes out like a bandit on rail spend:
There are deeper reasons too. Appraisal of economic benefits for new infrastructure is too narrowly focused on journey time savings rather than wider economic analysis, & that tends to favour better off areas. The process has historically been overridden in London's favour too.
Next, R&D. Again, the big winners are high productivity places: London, Scotland, the South East. Over the period
2001 to 2017 London saw funding per head nearly twice the national average - £3,900 compared to a national average of £2,300.
R&D spending in the UK is heavily focused on early stage research through universities, and funding within universities is very heavily concentrated in a few top performing institutions which happen to be mainly in the greater south east.
Looking at QR funding specifically, in 2018/19 a third of QR research funding was spent in the top 4 institutions (Oxford, Cambridge, UCL, Imperial). More than half of the budget was spent in the top ten institutions, leaving 48% split between the other 115.
The proportion of research council and higher education funding council spend allocated to Oxford, Cambridge and London (the so called “Golden Triangle”) has steadily increased. The Golden Triangle is receiving nearly half the core research budget.
In 2017, £2.7 billion was spent on R&D in the north and midlands, an area home to 26 million people. But £5.2 billion was spent in the greater south east (London, the South East and East) also an area with 26 million people. So funding per head was twice as high.
If we spent our R&D budget in ways that were more industrially-focused, we'd also see a better balance across the country. In London and Scotland the private sector spends a £ for every government £. In the West Midlands its £5.
Next housing. London gets half the affordable housing budget given to it straight off the bat. So spending per head is 5 x higher per head in the capital: £650 per head compared w. £120 per head in the rest of England. The logic is just that London is expensive. But hang on...
...London already has more social housing than the rest of the country: 22.6% of homes, compared to 17.1% in the rest of England. It doesn’t have half of people on waiting lists – it has a fifth. For 1 council house in an expensive area like London you can build 2 up north.
Some programmes like social housing have rules which effectively mean only high house price areas can bid. Here's a map of where is eligible. Can you spot a pattern Sherlock?
Same sort of logic is applied to funding for housing infrastructure - with similar results, skewing funding to the richest areas.
When it comes to culture, its the same pattern. Taking Arts Council England and direct DCMS funding of national institutions together, London received nearly half (47%) of the spending in England over the period 2010/11 to 2017/18. So five times the rest of England per head!
In culture spend, there isn't some kind of Value for Money argument for this distribution. Its historic. In fairness to Arts Council England they have gradually been spending more of their money outside London. Sloooowly.
Overall we see a major skew of productivity enhancing spending to places that are already productive and prosperous, and away from the places that need it most. Delivering the PM's ambitious "Levelling Up" agenda means we have to change that. And lots of other things too!
Thanks for reading this far! The full report is here. Thanks to Guy and others for their work on this.…
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