Brown Study

My very occasional look at the speeches of Gordon Brown, and in this one, he addresses the issue of the way in which Britain is divided into a poor North and a rich South.

Extracts from Gordon Brown’s speech to the Fabian Society, delivered on 3 November 2016:

I want to suggest today that there is now an overwhelming case for a UK-wide people’s constitutional convention, mandated with setting a roadmap towards a more federal constitution that empowers all of the nations and regions.

The convention would focus on the areas of concern to people right across the country – jobs, the economy and standards of living – and then ask what constitutional settlement can best meet their needs and aspirations.

We need wholesale reform because today the United Kingdom appears united in name only.

Politically, the strains of Brexit are already showing, as different nations, regions, sectors and companies desperately seek their own opt-outs from a hard Brexit and call for their own à la carte version of Brexit.

Economically, the vote on June 23 revealed that Britain is becoming two nations divided – a highly-prosperous South East and a permanently struggling North – with London effectively decoupling from the economy of the rest of the UK.

Lying behind the popular revolt are huge structural inequalities that the current Government has failed to address.

Sadly, the post-referendum optimism felt by Leave voters in the North whose rebellion gave Leave a majority will be short-lived. The reality is that the North is more dependent on trade with Europe than the South – for example, 58 per cent of goods exports in the North East go to the EU compared to 39 per cent of London’s goods exports – and we could see discontent turn into anger as standards of living fall faster and jobs start to go.

It is clear that the UK, in its present form, is not working for everyone. To prevent the harmful divisions that now exist from deepening, we need to reimagine the United Kingdom for new times.

Two Nations Divided

The referendum on June 23 entailed a revolt of Britain’s regions – driven by deep-seated resentments based on very real inequalities they suffer.

Northern unemployment rates – 6.8 per cent in the North East – are almost twice as high as in the South – 3.7 per cent in the South East.

Last year, the number of workforce jobs in the North East fell by 40,000 and rose by only 1,000 in the North West. In comparison, London and the South East saw an increase of 277,000 jobs.

Since 2010, the North East with four per cent of the population and three per cent of the country’s Gross Value Added secured only two per cent of the new jobs. The North West with 11 per cent of the population and nine per cent of the GVA secured only seven per cent of the new jobs. And Yorkshire and Humberside with eight per cent of the population and 6.5 per cent of the GVA secured only six per cent of the new jobs. By contrast, London and the South East with 26.8 per cent of the population has 37.7 per cent of the GVA and secured 39 per cent of the new jobs. In fact, half of the new jobs created since 2010 went to London, the South East and the East.

According to a recent path-breaking study by Professor Philip McCann, UK regional inequalities in income are now amongst the largest in Europe. Professor McCann shows that the average household adjusted disposable income is almost 60 per cent higher in Greater London than in many regions of England as well as Wales and Northern Ireland. In fact, gross disposable household incomes per head in the North of England, Wales and Northern Ireland hover at around £15,000 – almost unchanged since 2010 – while in inner London it is £23,600, as inter regional inequalities rise.

According to the most recent data, published in December 2015, more than half of the UK population live in regions whose GVA per capita averaged below £22,335. Meanwhile there are areas of London – Inner London, West – which, with a GVA per head of £135,000, are richer than any comparable part of mainland Europe. In comparison, GVA per head in Tees Valley and Durham is £17,055 and in West Wales and the Valleys it is £15,745. Digging further down, we can see that GVA per head in the Gwent Valley, at £13,417, is 54 per cent of the UK average and 10 per cent of Inner London, West.

The North of England, Wales and Northern Ireland, according to the latest OECD data, have GDP per capita levels lower than Mississippi and West Virginia, two states seen to have long-term intractable economic difficulties. The latest Eurostat data, published in February, 2016, shows that the Welsh Valleys and Tees Valleys have GDP per capita levels, expressed in Purchasing Power Standard, which are 75 per cent of the EU average: respectively 69 per cent and 74 per cent. This places these two UK areas below Lithuania, Slovakia and Slovenia – as well as parts of Poland, southern Italy and the former East Germany – in terms of GDP (PPS) per capita levels. The greatest variation in GDP per inhabitant in Europe is to be found in the UK.

These economic and social inequalities which distort the UK not only reflect an increased polarisation between the core of the UK – London and South East – and the periphery, but also something much more fundamentally problematic from a governance perspective. Professor McCann argues that London’s economy has virtually decoupled from that of the rest of the UK. This is not just because it is primarily a financial services capital focused on its global role, but because few benefits other than tax revenues flow to the regions from London’s success. Professor McCann shows there is little spill-over, from London, in jobs, in the diffusion of technology, in businesses relocating or in Northern businesses servicing the wealthier South-East economy. In other words, policy actions which enhance London’s economy do little or nothing to strengthen the economies of the rest of the UK.

The divide has not only grown – it is growing and it will continue to grow. Yet there is nothing in current government policy that will narrow that divide or even stem its rise. The Northern Powerhouse has obscured a cut in regional aid from £3.3billion a year over the period 2000-10 to two-thirds of this level over the past six years. This is despite the fact that the Regional Development Agencies established by the Labour Government delivered a regional GVA increase by £4.50 for every £1 spent and job creation in areas that traditionally trailed behind, such as Yorkshire and Wales, outperformed the national average. As much as 76 per cent of Government and Research Council research and development spending is in the southern third of the country and only seven per cent in the North of England. And historic gaps in infrastructure spending are only set to widen over the next few years: transport infrastructure spending per head is £1,900 per annum in London between now and 2020-21 but less than £300 in the North East.

We know also that regional inequalities will only worsen if we continue to centralise decision-making on the basis of a hub and spoke approach – with everything from transport to infrastructure centralised in and flowing out of London in the hope that London’s benefits will eventually come to the regions.

The Case for a UK-Wide Constitutional Convention

The centralist constitution that evolved during the first Industrial Revolution, which was led from the North and served the UK in the days of Empire, does not suit the new world. Quite simply the British constitution can no longer meet the needs and aspirations of all of the British people in a world where the regions and nations need to have the power, status and resources to realise their potential.

But a rewriting of the constitution will help London, too. A London-centric view of the United Kingdom no longer works even for the capital – as it struggles with congestion, overheating, high house prices and poor housing supply, while the regions face depopulation, forced emigration, high structural unemployment and deprivation. A balanced approach to regional economic development is in the interests of not just the North and the regions but London and the whole country.

A people’s convention is the starting point if we are to give fairness, hope and opportunity to the regions. The convention is also needed if we are to satisfactorily resolve the question of Scotland, Wales and Northern Ireland’s role in the UK. Yet there is another conclusive reason why the Convention is needed. When Brussels repatriates its powers to Westminster and Whitehall, Britain will become an even more centralised country. Instead of repatriating powers over regional policy, agriculture, fisheries and social funds to London, we should instead devolve them to the regions and nations of the UK.

The regions and nations need the power to innovate, to form partnerships and to co-ordinate activities between regional borders. In short, to get the balance right between the autonomy that communities desire and the co-operation and sharing they need. The convention should consider placing bottom-up economic power in the hands of the regions, including the devolution of regional policy from London. And there is also a case for reforming the House of Lords into a Senate of the Nations and Regions.

Seven proposals for a post-Brexit UK Constitution

Today I want to outline seven potential reforms that should be examined by the constitutional convention.

First, the constitutional convention should consider the repatriation of powers from Brussels not to Whitehall or Westminster but to the regions and nations of the United Kingdom. Specifically, we should devolve powers over regional policy, agriculture, fisheries and social funds to the Scottish Parliament, the Welsh and Northern Irish Assemblies, the new City Mayors and local authorities.

Second, we should consider the case for devolving further powers from the UK to Scotland, Wales and Northern Ireland in light of the Brexit vote. For instance, as the UK will no longer be part of the EU Social Chapter – and the Tories threaten to abandon workers’ rights – employment law could come within the ambit of the Scottish Parliament.

Third, there is an argument for creating areas of co-decision making between the four nations on a number of fundamental issues. This would ensure that Scotland, Wales and Northern Ireland could not be forced out of the European Convention on Human Rights against their will. We should agree that if England wishes to leave the ECHR, Scotland should have the ability either to veto that decision or to remain part of it. This would involve recognition that some policy areas should be considered neither fully devolved nor fully reserved, but in fact shared between central and devolved government.

Fourth, the constitutional convention should examine the merits of giving Scotland, Wales, Northern Ireland and the English regions the power to directly negotiate with the EU and to determine what type of presence they will have in Brussels. In the case of Scotland, Wales and Northern Ireland, negotiations could cover the Erasmus program; access to EU research funding for universities; and co-operation on policing, such as the European Arrest Warrant.

Fifth, Scotland, Wales, Northern Ireland and the English regions should have new powers to develop an international presence in respect of their devolved powers. This would enable the Scottish Parliament and the Welsh and Northern Irish Assemblies to sign up to agreements with international bodies where their responsibilities are affected.

Sixth, Scotland, Wales, Northern Ireland and the English regions need a new financial settlement arising from Brexit. This would not obviate the Barnett Formula for the nations and would also mean new money for the regions. The new financial settlement could potentially devolve £2-3billion of the £4billion spent annually by the European Union in the UK.

Seventh – and finally – there is a strong case for the convention going further and codifying the division of powers between the centre of UK and Scotland, Wales, Northern Ireland and the English regions. It should also consider replacing the unelected House of Lords with an elected Senate of the Nations and Regions.

But the starting point – and the initiative I am personally putting forward today in the hope my party will support it – is to secure a UK-wide constitutional convention.

The government should be asked by the Labour opposition to sponsor a convention. If they fail to respond – as happened in Scotland in 1989 – then Labour and the other political parties should come behind a convention with a remit to engage people outside traditional political parties.

The constitutional convention presents an opportunity for Scotland

Scottish politics is now nothing more than a battleground. And as the stalemate between the extremes of the SNP and the Tories continues, Scotland risks not just a groundhog day but a groundhog decade.

The SNP Government in Edinburgh wants our country to be in Europe but not in Britain, while the Conservative Government at Westminster wants us to be in Britain but not in Europe.

In the 2014 independence referendum, the SNP proposed to break the political union but made a virtue of keeping most of the economic union. They favoured being part of the UK single market and the UK single currency, with Alex Salmond even suggesting he would agree a fiscal pact with the UK. Now they are preparing to abandon the UK single market, despite the fact it takes 64 per cent of our exports, preferring the European single market which takes only 15 per cent of our exports. They are prepared to put at risk Scotland’s £48.5billion of trade with the UK, which helps create one million Scottish jobs, and risk a hard border with England, focusing on trade less important – the £11.6billion with mainland Europe and worth only a quarter the number of jobs.

The Conservatives also embrace a more extreme position. Their Scottish leadership is simply toeing the hardline Theresa May policy that would simply exclude Scotland from European single market membership without any plan to repatriate powers now held in Brussels to Scotland or to give the Scottish Parliament some form of international presence in Europe. The Conservatives should be arguing for new thinking on powers over agriculture, fisheries, regional policy and environmental policy and even potentially powers over VAT being devolved from Brussels to Edinburgh, but instead they would take powers now held in Brussels to London and centralise more decision making in Whitehall.

I believe the time has come to reframe the debate and show that there IS an option for Scotland that is far more in tune with meeting our need for jobs, better public services, more fairness and more security and one that is capable of commanding the support of around 80 per cent of the Scottish people.

This means understanding what can unite Yes and No voters in both ideals and objectives – and seeing whether and how these ideals and objectives can be reflected in a fresh post-Brexit constitutional settlement. And I believe the Scottish people can find common purpose in shaping a structure of government that advances social justice.

There is in my view a fairer, more positive and more federal way forward that the overwhelming majority of Scots can support.

Conclusion

The United Kingdom needs new answers for a new age of globalisation.

If we are to meet and master the global challenges ahead we need to get the balance right between the autonomy people desire and the cooperation we need.

We should begin with a constitution that empowers the UK’s nations and regions. Instead of frustrating their potential, we should help the nations and regions realise it and give them the power to do so.

The alternative is a Britain that looks in on itself without the means to bridge its divisions and to bring people together.It is time to build a fairer, more federal Britain – a Britain we can all believe in.