04 August 2006
High levels of public spending are exacerbating regional economic disparities and leading to dependency on central government handouts in some areas, according to a free market think-tank, Reform.
It argues that public spending increases since the late 1990s have not helped the worst-off regions, but have instead increased reliance on southern taxpayers and made these areas less attractive to business.
The report, by Nick Bosanquet, professor of health policy at Imperial College London, and published on July 30, identifies wide disparities in the ratio of public spending to economic output around the UK.
According to Whitehall's last colonies, it is 61% in Northern Ireland, 54% in Wales and the Northeast and 47% in Scotland. By contrast, it is 29% in the Southeast and East and 34% in London.
It also found that while the population of London grew by 8.8% from 1991 to 2004 and one in four residents is a graduate, the population of the Northeast fell over that period and just 12% have a degree.
The report warns of a 'vicious circle' of economic activity, where state dependency and low incomes limit the opportunities for business start-ups. It calls for a reduction in public spending, business creation schemes to foster a strong private sector, and incentives to encourage graduates to move from the Southeast to other regions.
Bosanquet said: 'The regional imbalance of the UK economy is already stark. The danger is that it will become self-perpetuating, with some regions increasingly starved of talent and investment.
'Public spending discipline and reduced taxation should make a major contribution to breaking the cycle of dependence.'
PFaug2006
