Whose Recovery – Economic Disparities in Older Industrial Areas

Older Industrial Areas: Economic Disparities
Westminster Hall
Thursday 25 June 2015

It is a pleasure to serve under your chairmanship for the first time in this Session of the new Parliament, Mr Rosindell.

I take this opportunity to thank the Chairman of Ways and Means, who I understand has allocated the time for this important debate. It is significant not only to my constituents and other people living in some of the older industrial areas in England but to similar areas in Scotland and Wales.

Older industrial areas make up a substantial part of Britain. According to the definition used in the report that I will refer to extensively, 96 of the districts in England, Scotland and Wales account for 30% of the population of Great Britain, and these areas have been hard-hit by many years of job losses. I place on record my thanks to the Industrial Communities Alliance for helping me to prepare for today’s debate, and for its informative report, “Whose Recovery?”, which shows how the upturn in economic growth is leaving older industrial areas behind.

I draw the Minister’s attention both to that report and to early-day motion 171, “Industrial Communities Alliance report on the Economic Disparities in Older Industrial Areas”. That was tabled only yesterday, but it has already attracted more than 30 signatures.

The report provides an insight into the challenges faced by former industrial communities in the English regions, Scotland and Wales. It shows that the economic gap between London and former industrial communities continues to widen, not only during difficult economic periods, such as the one that we experienced after the global financial crisis in 2008, but throughout the recession, and even today, as the UK returns to modest growth.

I hope that during this debate the Minister will provide more details regarding the northern powerhouse initiative, which is of special interest to my constituents. In particular, will it be tasked with reducing the immense economic disparities between the north-east and London and the south-east? I welcome the Prime Minister and the Chancellor’s intention to create a northern powerhouse, but I must point out that good intentions will not get us very far. We need the political rhetoric to be translated into practical policies and targeted support for the poorest regional economies.

We need a strong voice in Cabinet as an advocate for our regions. I fear that such a voice is missing, particularly when I read comments by newly appointed Ministers, such as the Secretary of State for Communities and Local Government, who questions the existence of the widening economic inequalities between the regions and London, despite the fact that the evidence is absolutely clear and presented very concisely in the report that I have referred to. The first step on the road to recovery is acknowledgement of the problem.

That problem has been evident in the lack of support for my area, and in particular the lack of support from the DCLG for Durham County Council, which is my local authority. The rhetoric about the northern powerhouse has not been reflected in the council’s budget allocation, which has been cut by £250 million—or 40% of its total budget. That situation is mirrored in other local authorities, where there are huge pressures, in other older industrial areas in England, Scotland and Wales. They are experiencing similar problems to those in my area. That reduction in the council’s budget is despite the fact it is providing services and support to some of the most deprived communities in the country, including some in my own constituency of Easington.

The lack of support for the council is not only felt in terms of budget cuts. The recently published County Durham plan outlined ambitious targets to create 30,000 new jobs, build 31,000 new homes and create 500 hectares of space for business, warehouses and office development by 2030. Indeed, the scope of Durham County Council’s ambition has been welcomed by the local business community, and I also welcome it as we seek to promote economic development and prosperity in my constituency and throughout County Durham and the north-east.

However, the plan was dismissed by the Planning Inspectorate for being too ambitious and, despite our best efforts, Ministers refused to intervene to support its bold proposals. We had a debate here in Westminster Hall in the last Parliament on this subject, but it was not until Durham County Council filed legal papers with the High Court for a judicial review that the Government listened and became involved in the issue. My current understanding—perhaps the Minister can give an update on events—is that there is a 30-day stay to Court proceedings, but I am disappointed that the only way to get the Government to engage in economic development plans in County Durham seems to be to seek legal redress, which could have been avoided altogether if the Minister for Housing and Planning, who responded to that debate on 3 March, had been more forthcoming when we originally discussed the matter.

The report, “Whose Recovery?”, by the Industrial Communities Alliance found that the economic upturn since the recession had been much weaker in Britain’s older industrial areas than in London and the south-east. Whereas the number of jobs in London and the south-east was 540,000 higher at the end of 2013 than in 2009, in the older industrial areas the number of jobs was 70,000 lower. Similarly, the rate of growth in private sector employment in older industrial Britain during this period was just a 10th of the rate in London and the south-east.

When I am sitting in the main Chamber and listening to Government Members reciting examples of economic success and private sector employment, I often think that that is not reflected in the area that I represent, or indeed in many of the other older industrial areas, and part of the purpose of this debate is to draw these inequalities and problems to the attention of Government, to hold them to account, and to seek some redress.

Between 2010 and 2014, employment in older industrial areas rose by 230,000, or 2.9%, but during the same period employment in London and the south-east rose by 440,000, or 5.8%. When we look a little deeper at the figures, we see that there is not only a widening gap between the total number of jobs but a higher reliance on part-time work in the older industrial areas. In London and the south-east, virtually all the job growth since 2010 has been in full-time employment. By contrast, in the older industrial areas such as mine, almost a fifth of the increase in jobs has been in part-time jobs. In London and the south-east, the ratio between new full-time jobs and new part-time jobs is 16:1; in areas such as mine, in the older industrial areas in Britain, the ratio is just 4:1, so there is a considerable difference.

Another feature of job growth in older industrial areas has been the rapid rise in the number of people who are self-employed, which accounted for almost 40% of the increase in employment. An impartial observer might think that is a good thing, but I will drill down into this figure. A rising level of self-employment can be an indication of a vibrant economy, but it can also mask fundamental weaknesses in the labour market. This seems to have been confirmed by evidence gathered by the Department for Business, Innovation and Skills, in its self-employment evidence base, which found that in the south a higher proportion of the self-employed are in professional and higher-skilled occupations, whereas in much of the rest of the country, particularly the older industrial areas, more people are self-employed in elementary or low-skill occupations.

I am concerned that self-employment in older industrial areas, along with the expansion of zero-hours contracts, is creating a low-wage, insecure economy that is leading to the further casualisation of the labour market. Disparities in regional economies are deep rooted. In its report, “Northern prosperity is national prosperity”, the Institute for Public Policy Research North noted that

“regional inequalities date back nearly 150 years”—

this is not a new phenomenon—but

“despite some narrowing of the disparities between north and south in the post-war period, since 1985 the UK has had a higher rate of regional divergence than France, Germany, Italy and even the United States.”

It suggests that regional inequalities and disparities, far from being addressed, as they have been in many of our competitor countries in the European Union and in the United States, are getting worse in the United Kingdom.

We have allowed the north and south to pull apart. We should all be concerned about this, because it has led not only to an economic loss but to a loss of life chances for people in the poorest economies, in terms of education, health and income. I say respectfully to the Minister and the Government that there is also an impact on quality of life in London and the south-east, due to overcrowding and congestion.

Addressing the regional economic gap would provide significant benefits for the national economy. Halving the gap between the north and the national average would increase national economic output by £41 billion. If we are to achieve these gains, we need real commitments from the Government, but these are lacking.

I have some figures on transport investment that highlight the problems that we face. IPPR North found huge disparity between infrastructure spending in London and the north-east. London receives £5,426 per resident in capital investment, compared with just £223 per resident in the north-east; and a single project, Crossrail, is earmarked to receive nine times more funding than all the rail projects from the north’s three regions combined.

We are told of the benefits and economic importance of new projects such as High Speed 2, but I suspect that these will have little impact on vast areas of the north. The north-east has been entirely overlooked, with the line ending at Leeds—which many of us who live in the real north believe, with all due respect, is actually the midlands. We think HS2 will offer little practical benefit to the north-east or my constituents. It may have the opposite effect. A Network Rail consultation document suggested that the benefits to my constituents would be a cut in journey times from Durham to London of just 11 minutes by 2033, with the loss of direct services to the capital and slower journey times to major Scottish cities. At a cost ranging between £50 billion and £80 billion, I can think of few policies that are so expensive and likely to deliver so little to my community. A tiny shift in spending to constituencies like mine in east Durham would have a transformative impact on our transport infrastructure, as we seek to achieve our aim to improve connectivity to major lines and increase rail services.

In my constituency, I continue to work towards a new rail station at Horden, on the Seaview site. If the Government had shown the same commitment to my area as they do to London, I could press for an integrated public transport system, the extension of Tyne and Wear Metro and improvements to our bus network, which would expand access to a wider labour market for residents. There would be huge economic benefits to the area locally and to the wider economy.

Another matter of great importance in my constituency is housing. Other hon. Members wish to speak, so I will say less about this than I intended. The villages and towns that make up my constituency were established specifically to serve local collieries in this coal-mining area. The mines have gone, but investment to transform and redevelop the local communities has not followed. This is as true in terms of infrastructure spending on transport and economic development as it is in respect of housing. These issues have recently come to a head in the villages of Horden and Blackhall, following a series of problems experienced by Accent homes, a registered social landlord with properties in these villages. This situation was the subject of an Adjournment debate just before the old Parliament was dissolved. Accent cited the introduction of the bedroom tax as a cause of the fall in demand for its properties. As tenants vacated their Accent properties, the housing associations decided not to let them but to board them up.

It is soul-destroying to watch your community suffer. I invite the Minister and any of her colleagues to Horden and Blackhall to see at first hand the situation in the numbered streets as these properties fall into decay and disrepair. Many former tenants have vacated the area. Homeowners are trapped, unable to sell their property as there is no demand, and they have to live on streets with boarded-up properties, which are a target for antisocial behaviour, vandalism and crime. This situation is replicated elsewhere in the constituency, particularly in areas where private landlords have bought up properties at low cost and are seeking a return, mostly at the taxpayers’ expense, funded through the housing benefit system.

Local residents do not accept the situation. I commend the work of the Horden residents’ association, which has been engaged in meetings and discussions with Accent housing, the Homes and Communities Agency and the Coalfields Regeneration Trust, and other private and public sector partners and agencies, to find a way forward. Local councillors do not accept the situation, but the cuts to local authority budgets and the lack of any national housing regeneration fund is holding back the redevelopment of east Durham. This is disappointing, particularly given the level of funding that is available but seems to be diverted almost exclusively towards London and the south-east.

There is immense potential for redevelopment in older industrial areas, including my own in the north-east, especially as the properties that I mentioned are located in an area of immense natural beauty bordering the award-winning east Durham heritage coast—a newly declared nature reserve—and tracking one of the first stretches of the England coast path. These areas of natural beauty are at the forefront of our efforts to promote leisure and tourism on the east Durham heritage coast, but the Minister must accept that these efforts will continue to be hampered due to the deteriorating situation in the villages. Poor, derelict housing will also undermine our efforts to bring forward economic development, which is the only way to create jobs. We need to ensure that local people have skills and training and that those who acquire skills are not forced to move away from the region to find work.

We need to deliver a complete package of housing, transport investment and education if we are to attract new business and industries that will sustain our communities in the future and bring forward the economic development that is needed to narrow the wealth gap between the regions and London. We need a redistribution of economic activity to provide a new purpose for communities such as the ones I represent in east Durham, which have lost their core industry over the past 30 years.

We have had some recent successes. Only last weekend, I was delighted to attend a groundbreaking—a ceremony to mark the start of work on Dalton Park phase 2, which is a £45 million investment that we hope will deliver up to 1,000 new jobs in my constituency— 500 during the construction phase. The new retail and leisure facilities will be very welcome in east Durham and the wider region, after nearly two decades of campaigning by the local community, supported by the local council, to secure the investment.

We need greater economic diversification in east Durham and to grasp all of the opportunities available. We need new industries to sustain my constituency in the future. There is a rare opportunity in Easington to secure significant private sector investment for the proposed centre for creative excellence to be built on the east Durham heritage coast. The project would deliver more than £200 million of private sector investment and could create 2,000 jobs and training opportunities in a ready-made global film and media communications market. Our regional development agency, One North East, was supporting the project until it was abolished. I sought to discuss the importance of that project with Ministers in the previous Parliament, but I am afraid that I received little support from the Government.

In view of the Government’s conversion to a northern powerhouse, I will welcome the Minister’s input on any direct support that they are prepared to offer to that unique and potentially transformative project in my constituency. Unfortunately, I am yet to witness the positive impact of my local enterprise partnership, and the Government’s other flagship policy designed to support business development, the regional growth fund, which I feel has a misleading name. It should be called a national growth fund, since it is open to all regions. Widening economic disparities between the various regions, especially between the older industrial regions and London and the south-east, are proof of that fund’s failure. That is why I advocate direct Government intervention for the centre for creative excellence.

If the northern powerhouse is anything other than rhetoric, we need a real development fund that is targeted specifically at weaker regional economies to bring in developments such as the one in my constituency and to address the employment and skills imbalance between the regions. There is a moral duty on the Government to close the gap and address regional inequalities that damage our national economy and leave generations of people in the poorest economies behind, as well as reducing their life chances. There are development opportunities if the Government want to seize them.

The modest return to growth in the last quarter has not been a recovery for all. In older industrial communities, the recovery is in fact reinforcing existing economic divides. If we are to rebalance the economy and deliver a sustainable recovery, the Government need to back up the rhetoric. We need to ensure that the same level of resources and development that is directed towards London and the south-east is targeted at the weakest regional economies. Delivering those practical policies would give us an opportunity to narrow the economic gap and deliver much-needed jobs and growth to the former industrial communities that have been ignored by the Government for too long.

I have made a number of practical suggestions, and I hope that the Minister will reflect on them. They are opportunities to take forward the Government’s vision of a northern powerhouse in a practical, meaningful way that would benefit the region. I will be interested to hear her comments on my proposals.

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