One huge problem that the Chancellor has is that virtually all his policies presume the UK to be one homogeneous economy. That Drumchapel, Easterhouse and the Gorbals are just like Hampstead, South Kensington and Mayfair. Which is patently stupid and ridiculous. True we have had regional development agencies, but they have just been cumbersome mechanics to waste taxpayer’s money. And whilst the Chancellor’s “Powerhouse of the North” is admirable in very many ways, the mechanisms to achieve it lack force.
So here is a way to use fiscal mechanics to achieve far better the policies of government and the effective management of the UK economy.
Firstly divide the country into, say, four zones based on business activity, wealth, unemployment and other economic criteria. Here, just for example, is the sort of thing I mean:
- Zone 1. Inside the M25.
- Zone 2. The South East including Oxford and Cambridge.
- Zone 3. The Midlands, Bristol, Manchester.
- Zone 4. The North. Scotland, Wales, Northern Ireland, Devon and Cornwall.
Now we can do all sorts of clever things. Wage inflation in London? Increase employers NIC in Zone 1. Unemployment not going down fast enough in the North, remove employers NIC in Zone 4. Wanting to boost manufacturing? Raise the CT threshold in Zone 3. Housing bubble? Add 50% to stamp duty in Zones 1 and 2. Mansion tax could be for Zone 1 only!
As you can probably see the permutations are infinite. And there are so many advantages:
- Every government fiscal action can be zonal. Both revenue collection and expenditure.
- It costs nearly nothing to implement.
- We can get rid of all the current, useless, public sector bodies for regional policy, saving billions.
- Necessary economic management changes can be made virtually instantly.
- It can be used to increase overall government revenue.
- It would make our society far fairer.
- The market would be allowed to work. Which always produces a better outcome.
- Our overall economy would become far more efficient as we managed it to make better use of the available resources. Everyone wins.
So let’s do it!