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Alf Young: Taking a flyer on shared currency

Expanding Heathrow may be the current battleground, but it is only one part of a bigger question. Picture: Reuters

Expanding Heathrow may be the current battleground, but it is only one part of a bigger question. Picture: Reuters

Depicting London as the source of Scotland’s economic problems creates a post-referendum issue with sterlingzone, writes Alf Young

IT’s a commonplace complaint. Vince Cable, the UK coalition government’s Business Secretary, has joined the chorus of voices claiming London is sucking the economic life out of the rest of these islands. Some opt for stronger language. In August the former SNP leader, Gordon Wilson, described London as being at the core of a “southern cancer” holding Scotland and the North of England back.

Wilson, concerned at the lack of “vision, passion and emotion” in the Yes campaign so far, wanted a full-frontal attack on London’s growing economic dominance of the UK economy. Cable, whose Twickenham constituency lies right under the main Heathrow flight path, wants to prevent any early political take-off for the main findings of the Davies review into airport capacity around London.

Much to the frustration of London mayor, Boris Johnson, a commission chaired by Sir Howard Davies has concluded the best way to expand that capacity is to build a third runway at Heathrow by 2030, followed by a second runway at Gatwick by 2050, if needed. The mayor’s pet project – a brand new four-runway airport in the Thames estuary – seems to be regarded by the commission as, to all intents and purposes, permanently grounded.

However, as is clear from the language used by critics, from Cable to Wilson, the airport capacity spat is merely one facet of a much bigger question. Has London’s emergence as one of the world’s great hub cities been bought, cuckoo-like, by pushing the aspirations of the other nations and regions that make up the UK out of our shared economic nest, sending them crashing to the forest floor below?

It’s easy to construct a set of numbers that demonstrate sustained economic divergence as London outstrips the rest of the UK. Between 2007 and 2011 the rise in its economic output was double the rest of the UK. Average weekly wages there are nearly £140 higher than across the rest of these islands. The price of an average London house, now approaching half-a-million pounds, is almost double the UK average. It costs as much to rent the most basic London flat for a week as it does to rent a similar place elsewhere for a month.

However other numbers bring a quite different texture to the comparisons. Labour market data out this week shows London’s unemployment rate the fourth highest in the UK, at 8.5 per cent. The comparable figure for Scotland is 7.1 per cent, while two English regions – the East and the South East – have rates already well below 6 per cent.

In a report last month from the Joseph Rowntree Foundation, London emerged as the only part of the UK to experience a rise in the proportion of its people living in relative poverty between the start of this millennium and the end of its first decade. While the proportion in poverty hit 28 per cent in London, in Scotland it had fallen to 18 per cent, a low only matched, across the UK, by the South East of England (17 per cent) and the East of England (18 per cent).

The plight of London’s burgeoning poor is frequently eclipsed, in the minds of the UK capital’s critics, by the exploits of its super-rich. The bonus-hungry denizens of the City. The Russian oligarchs, Arab sheikhs and Greek shipping magnates pouring millions into top-end houses they’ll rarely inhabit. But it’s worth remembering, next time someone tells you London is bleeding the rest of us dry, that getting on for a third of Londoners are actually living in relative poverty.

There are plenty of other gripes about London’s insatiable appetite for more than its fair share. On capital investment, for instance. Look at Crossrail, they’ll mutter. The 2012 Olympics. HS2. The more they get, the more they’ll want. Some Londoners have already got other goodies it would be hard to better.

I bumped into an old friend the other week on a flight back north. As we chatted he proudly showed me his Freedom Pass. If you are 60 or over and have your main home in any of the London boroughs you are eligible for one. With it you can travel free on any bus, the entire Tube network, trams, the Docklands Light Railway and the London Overground. Even in the rush hour. You can also travel free on National Rail services within London, although there are some time restrictions apply. And you only pay half price on river services.

With London’s rich and varied patchwork of galleries, museums and other visitor attractions just a free journey away, little wonder my acquaintance regards his freedom pass the most valuable perk of moving back and making London his home again. It certainly casts Scotland’s clumsily-named National Entitlement Card for the over-60s in a second-class light.

As soon as Vince Cable joined the chorus castigating London for milking the rest of us dry, the SNP MP Stewart Hosie immediately suggested the only way to break free of the UK capital’s malign influence is to vote Yes next September. But as the Treasury spokesman for the nationalists knows only too well, the independence proposition we are being asked to vote Yes to, does not envisage breaking free of the one thing that has made London the global city it is today. The pound in all our pockets.

The independent Scotland the SNP seeks would embrace sterling, both the currency and the central bank, the Bank of England, charged with maintaining sterling’s international credibility. Stewart Hosie’s party has its heart set on a formal sterling monetary union post-independence and cites the close alignment of Scotland’s economic profile with that of the rest of the UK as the reason why such an arrangement would be in all our best interests.

If they mean what they say, it would have to be in London’s interests too. That is where the seat of government for what would then be the rest of the UK would still reside. That is where the Bank of England is rooted. Where, like it or not, the dominant financial power in these islands resides. How does Scotland escape London’s clutches, if that is to be the currency deal?

One other thing. Nothing in the way nationalist thinking has evolved on how to create a more dynamic Scottish economy persuades me that the SNP has turned its back on building up the economic clout of our cities as the principal driver of that advance. Quite the reverse. The Holyrood government has its own cities strategy. Its main economic development arm, Scottish Enterprise, decided, long ago, that growing the economies of Scotland’s cities is the key to growing our economy as a whole.

If that’s what they really believe, it’s passing strange that London, the one truly global city on these islands, is to be characterised as a city state apart, one that is hell bent on impoverishing us all.

 

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