The UK is the most unequal high income country in the world
Some shocking stats
Probably the most shocking thing I heard in this interview is that the UK is the most unequal of high income countries in the world. I'm not quite sure what to do with that info tbh.
This comes from Sir Paul Collier, a development economist at Oxford University who just wrote the book, Left Behind: A New Economics for Neglected Places.
Basically Sir Paul, or Sir P as I now like to call him, says that if you’re born in the right place with the right sort of parents, then the UK is the best place in the world because you’re almost guaranteed to have a successful life. But the inverse is also true.
By the ‘right sort of parents’, he just means having parents in London who had a university degree so not particularly fancy.
And by 'successful', Sir P means being in the top 40% of income earners by the time you're 30 years old so not crazy success either.
Roughly 70% of children who have affluent parents (parents who have a degree) go onto have a successful life.
By contrast, at the opposite end of the scale, the poorest fifth of the country have a 17% chance of being successful.
The top 1/3 of performers in GCSEs have a 70% chance of success, whilst the bottom 1/3 of performers at GCSE level have only a 4% probability. Let me say that again: 1/3 of society have just a 4% chance of being in the top 40% of earners.
The most unfortunate group in the country is that of a white woman born in South Yorkshire whose parents didn’t go to uni (and nor did she). Her chances of earning in the top 40% - well, Sir P says “forget it”.
This is the data on which Sir P says the gap between the lucky and unlucky is highest in the UK out of all high income countries because social mobility is so poor.
It also begs the question, how much lost potential do we have in this country?
Who is to blame?
Power in the country country is very centralised in London, and in particular, the Treasury.
A crazy number of high value decisions happen at The Treasury so Sir P argues we need to devolve more power to local areas, e.g. having 'elites' in London decide on the bus route in Sheffield is madness.
The Treasury is very exclusive, says Sir P. Everyone goes to public school and then onto Oxbridge. He once spoke to a Permanent Secretary to the Treasury who was made to feel like an outsider even though he had gone to a public school and a good university - because he hadn't gone to Oxbridge. FFS.
Sir P says the number of people in the Treasury who have lived experience from anything other than privilege is slim to none.
To give you some idea how little has been invested in the North, the budget for levelling up (the North) was £4 billion, whilst the cost of the overrun of the Elizabeth Line was £5 billion. Oh, and that £4 billion was over 4 years - and 90% of that money has never been spent. This is because local governments had to put in bids to spend that money but 90% of those bids were rejected by, you guessed it… the Treasury.
Side note, Sir P says the 1950s were the best decade to be born in the UK across many financial dimensions like being able to buy a property - and then it's steadily got worse every decade after that.
Do we have something to learn from the Germans?
After the fall of the Berlin Wall, when East Germany was reunified with West Germany, the government made a cross party commitment to invest in East Germany for 30 years. They knew they needed to invest a huge amount of money for a long time so they were clear with the people that they needed to raise taxes - but they framed it compellingly. They explained to the West Germans that it was a moral commitment to pay higher taxes because they’d been lucky - and they were all part of a new Germany.
How much needs to be spent in the North? Germany spent 70 billion Euros a year for 30 years. Power also got devolved effectively to regions in Germany, e.g. Dresden recovered. Other places spent their money less well. But the local governments learnt rapidly from doing different things in different places.
In the German constitution, public spending on infrastructure has to be the same in every region of the country, which just seems sensible.
At the time of reunification, East Germany was 20% as productive as West Germany. Now that figure is at 85% (a lot of Germans are annoyed it's not at 100%).
East Germany was in a much worse state than South Yorkshire, so if they were able to do it, why can't we?
So what’s the solution for levelling up the North?
Britain used to be place where people thought they were lucky to be born but how true is that now (unless you’re born into the lucky few here), asks Sir P?
The European Union tried seriously to bring up poorer areas, so they invested in places like Manchester (that wasn’t Westminster investing!)
Humans evolved to be the most social mammal. Sir P argues we need to dial into that natural characteristic -getting back to being more social and communal in the UK - with the South caring more about the North.
This is what happened in the Basque region. 40 years ago it was a dreadful mess, a post industrial area where the industry and money had left. It was desolate and it was bitterly divided internally because there was a big separatist movement who didn’t want to be in Spain. Wind forward to today and it's looking pretty rosey. How did they do it? They turned to cooperative social and business structures to raise each other up - they worked together. Sir P asks if we can do that here.
Why don’t we invest in the North if it can deliver economic returns for the whole country? T asked this question actually. It's because of the short termism in government, says Sir P. The government would need to see returns before the next election and this kind of change takes much longer.
You can crush a country pretty fast, but building it back up takes a lot longer.
Don’t get us started on HS2.
