How the Government can unlock better productivity here in the North - Bill Carmichael

West Yorkshire produces just 86 per cent of the English average and South Yorkshire 77 per cent.

The IPPR researchers say that regional inequalities in productivity are far more marked in the UK than in comparable countries in Europe.

If we could close this productivity gap by making the North more productive, it would not only boost living standards in our region but also significantly improve growth in the UK as a whole.

So why are workers in the North less productive than those in the South East? It turns out it has little to do with laziness and everything to do with investment in machinery, new buildings, transport, new homes, software and in education and training.

The report points out that the North is a “low investment” economy. Using a measure called the Gross Fixed Capital Formation, the North of England would rank near the bottom of OECD members - behind countries such Slovakia, Poland, Latvia and Hungary and only ahead of Greece, a country wrecked by a sovereign debt crisis just over a decade ago.

The researchers point out that growth-enabling public investment has been concentrated in London and the South East. Had the North received the same level of spending per person as London between 2015 and 2020, it would have provided an extra £51bn in investment.

Of course, we in the North need no reminders of these stark inequalities. Last year we were still trying to digest the bitter pill of the downgrading of Northern Powerhouse Rail, a fast line between Leeds and Manchester, because of a lack of money, when we were forced to look on in envy as the new £19bn Elizabeth Line was opened in London.

As the report points out, better transport links are essential to increase productivity, as it improves the accessibility of skilled jobs for workers and skilled employees for employers. The researchers call for a sustained and higher level of public spending in the North, using as an example the largely successful ‘levelling up’ in eastern Germany, an area immiserated by decades of communism.

Under the Solidarity Pact ll, the German government spent 0.4 per cent of national GDP on states in former East Germany for 15 years. If the British government spent a comparable amount in the North it would provide £7.6bn annually.

I am less convinced by one of the report’s other recommendations - more power and money for local and regional governments. I don’t see much evidence that more layers of politicians and bureaucrats have had a transformative effect on the lives of ordinary people.

The report was released to coincide with a Convention of the North, held in Manchester and featuring the Labour Mayors of West and South Yorkshire, Greater Manchester and Liverpool.

Levelling Up Secretary Michael Gove spoke at the convention and stirred things up a lot by telling attendees that he would “harness the spirit of Thatcherism” to raise living standards in the North.

He pointed to Baroness Thatcher’s role in regenerating the London Docklands in the 1980s adding: “Government created the environment, the private sector created the jobs.”

Perhaps it is a model we could follow, but it seems unlikely that the Labour metro mayors will buy into this idea.

There are some other interesting ideas in the report. For example developing “clusters” of specialised companies, supported by local governments and involving universities to provide skills and training.

And in Japan, say the researchers, residents living in prosperous areas can opt to make tax donations to their hometowns. So for example, young people who have moved to the big cities for work can support the poorer areas where they grew up.

One thing is for sure, the issue of productivity and the regional inequalities in our country are holding back both the North and the UK as a whole. If we can find the key to unlock this problem we would all be better off.