Regional Development

Lord Peston Excerpts

Tuesday 12th March 2013 Lords Chamber

[Lord Newby]

My Lords, it is a very great disparity—and a disparity, as the noble Lord knows, of very long standing. The good news in terms of Wales is that in 2010 and 2011 GVA grew faster per head than in either England or Scotland, so there is a bit of progress. However, changing and reversing those regional disparities is going to be a long job and it will take a large number of measures to achieve it.

[Lord Peston]

My Lords, my noble friend asked the Minister a very good economics examination question, to which I am glad to see the Minister tried gallantly to find an answer. It is a very difficult question. Is he aware that most economists would argue in favour of the so-called convergence theory that free markets would lead to the right outcome and there would be convergence of the different regions? The only trouble with that marvellous theory, like so much economic theory, is that it is totally refuted by the facts. What the facts show—and this is a problem for any Government—is that once a region is ahead, it stays ahead. It is rather like the fact that very few teams win the Premier League, even though everybody could play marvellous football just by copying the best teams. Does that not mean that while the Government should intervene, particularly with infrastructure investment biased in favour of the relevant regions, they must proceed with the utmost caution in interfering with the way the markets are working?

[Lord Newby]

My Lords, as the noble Lord will be aware, we have had active regional policies to a greater or lesser extent in the United Kingdom since the 1960s. When I studied this at university, the figures were very much in my mind. The reason it is such a difficult issue to deal with is that, for example, in the north-east the proportion of people employed in the basic industries—mining, steel, shipbuilding and engineering—fell from something like 33% to well under 10% in a couple of decades. The challenge for government in trying to reduce regional disparities is how to put in place the kinds of long-term policies, such as infrastructure apprenticeships, that can begin to redress these wider economic forces. However, I do not think that government can reverse them, certainly not in the short term.