Monday, October 24, 2005

The "two nations" of Britain

The Business:

Wealth-Creating Britain, which takes up only 16% of the British landmass, nevertheless generates 42% of Britain’s economic annual output with 35% of the population. Wealth-Creating Britain is the country’s California (without the sunshine but with more than just Hollywood culture): it is where the private sector generates most of the country’s wealth, where most folk work for the private sector, a bulwark of the new knowledge industries, a key region of the global economy and a magnet for capital, migrants and university graduates from around the world. London is now the undisputed economic and cultural capital of Europe, the City of London the most powerful global financial centre in the world. Like California, Wealth-Creating Britain has problems, including a crumbling infrastructure, terrible state schools and serious pockets of poverty; but like California (and unlike Dependency Britain) it is also being driven by a dynamic market economy. Without Wealth-Creating Britain, the United Kingdom would not qualify for membership of the G7 or OECD, the two leading clubs of the world’s richest nations. If London were an independent country, its gross domestic product (GDP) per person would be the fifth-highest in the world, almost as high America’s and beaten only by special cases Luxembourg, (oil-rich) Norway and Switzerland. The average person in Wealth-Creating Britain generates £36,717 of gross value added (a good measure of economic output) per head compared with a pathetic £9,525 in Cornwall and £10,524 in the Scottish Highlands.

Total government spending in Wealth-Creating Britain comes to only 32% of GDP, below even low tax-and-spend countries such as Ireland (34%), America (36%), Switzerland (36%) and Australia (35.5%), despite the fact that those are all usually considered to be low tax-and-spend economies. Indeed, according to a new report from London brokers Williams de Broë, if it were an independent country, the South-East of England would boast the ­second-lowest public expenditure burden in the OECD (after South Korea, where government spending is a mere 27.7% of GDP), while Dependency Britain Wales approaches Swedish levels of state spending (57% of GDP), as does the North-East of England (56%), which means these parts of Britain are essentially socialist economies. But über-Dependency Britain Northern Ireland exceeds them all: public spending has now reached a fantastical 64% of GDP in Northern Ireland, the kind of number associated with a miserable People’s Republic of the 1970s. By contrast the size of the state in Scotland (50% of GDP) and the North-West of England (47%) is more in the European social democratic mainstream – though there are pockets in both where the size of the state approaches Soviet proportions, such as Ayrshire, where government accounts for over 70% of GDP.

Scotland is a pretty good case study in how not to run a country, which probably explains why the rest of the world ignores the socialist excesses of its recently devolved parliament in Edinburgh. Last year the state employed 28.4% of the Scottish workforce, according to unpublished ONS Labour Force Survey data; on top of that 17% of Scots were either unemployed or claiming incapacity benefit – in other words almost 50% of the potential Scottish labour force depends on the state for its income. Glasgow, Scotland’s largest city and once such an industrial powerhouse it was known as “Second City of the Empire”, is now the undisputed capital of Dependency Britain. More than 50% of Glaswegian households have no earned income, the highest ratio in Britain and a new high watermark for the dependency culture. According to some estimates, state-financed health spending per head in Glasgow is now higher than any other city in the world. Sadly the avalanche of money is not generating healthy lifestyles: the latest available figures from the World Health Organisation and Britain’s Office for National Statistics show that Glasgow’s average male life expectancy (68.7) is lower than Bulgaria and Bosnia (both 69 years), China (70 years) and Libya (71 years). Parts of the east-end of Glasgow have a lower life expectancy than Iran or Iraq. A similar story can be told in the rest of Dependency Britain: a boy born in Norfolk (part of Wealth-Creating Britain) can expect to live to 80, higher than any country in the world; but Liverpool’s male life expectancy (73) is closer to that of El Salvador (68) than that of leafy Elmbridge (79).

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