Institute for Fiscal Studies provides further reasons for ditching talk of a ‘north-south divide’

A new report on geographical inequalities in the UK from the Institute for Fiscal Studies (IFS) underlines yet again the flimsy thinking behind the government’s “levelling up” big talk. New output from the revered researchers looks at patterns of wealth and income across the UK and how they have changed during this century. Lo and behold, the picture they paint bears only limited resemblance to populist rhetoric about a problematic “rich London” and a so-called “north-south divide”.

The report’s authors, Sarthak Agrawal and David Phillips, explore a range of data, measuring inequalities across the country in different ways. Taking London as a whole, they find, for example, that although economic productivity and earnings are “a third to half higher than the UK average”, median household incomes after housing costs (AHC) are taken into account are only one per cent higher.

Another regional comparison shows that AHC income inequality between London and rest of the UK has actually lessened since 2002: by that measure, median household income in London has gone up by six per cent in that time compared with 13 per cent in the rest of the UK – a pattern the researchers says “is evident both before and after” the recession that hit in 2007/8.

Again, it’s housing costs that have made the big difference. A greater proportion of Londoners rent their homes than counterparts elsewhere do, and rising rent levels have claimed a relatively bigger slice of their incomes. Also, the soaring cost of buying a home has meant that Londoners have had to take out bigger mortgages. A flip side of that, of course, is that the high value of London property has meant regional inequalities in terms of wealth – as distinct from incomes – have, on the whole, widened.

But, of course, far from every Londoner is a home owner, and only some of those who are don’t have a mortgage. Which brings us to inequalities within regions of the UK, rather than between them. The IFS researchers alert us to the great significance of what it calls these “local inequalities” across the country. These are “even larger than inequalities between regions,” they write, and “especially in London and the South East”.

A vivid example is provided by the difference between median full-time earnings in the London borough of Kensington & Chelsea and the rest of the country and that between the London borough of Barking & Dagenham and the rest of the country: in the case of the former, they are 53 per cent higher than the UK average; in the case of the latter, they are three per cent lower. And, as the IFS has shown us before, London’s poverty rates are shocking: measured AHC, 28 per cent of us live in poverty compared with 22 per cent across the UK as a whole.

The above are just the headline findings from a report that runs to over 30 pages and sets out the many factors the government should take into account as it “seeks to turn ‘levelling up’ from a soundbite into actionable policy”. We wait with bated breath.

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