James Mitchell: Rebalancing economy begins in London

I MUST admit, my initial response to David Cameron's speech was that it was all really what we were expecting.

It reflected a lot of what he was saying during the election campaign, when he argued that certain parts of the country rely too heavily on the state.

It is also the case that he clearly needs to deal with the fiscal deficit, and when you add all that up it is not surprising that he is looking to shift the focus from the public to the private sector.

The one issue we in Scotland should look closely at is when he spoke about rebalancing the economy, so that there is less reliance on London and the south-east – well, that works both ways.

London has to come to terms with the fact that it is the most subsidised part of the UK. If David Cameron is going to look at the public sector, he has to start with London.

The Olympic Games is a classic example. It is presented as a UK-wide project with UK-wide benefits, when what it is really doing is regenerating the east end of London.

Now that's not a bad thing, and it's fine if they want to do that, but let's do it honestly and across the board.

The state still has major responsibilities that it cannot walk away from. For instance, it has responsibility for creating infrastructure, which is badly needed for businesses.

Up here we have the Forth Road Bridge, which is vital for the economy and which needs state support.

This is an area which highlights the fact that the whole issue of borrowing powers for the Scottish Parliament has to be sorted out. David Cameron has got to deliver borrowing powers for Scotland, that is the bare minimum.

If Scotland was able to borrow money itself and fund major capital projects, such as a new Forth crossing, that would be a much better way of addressing issues in regard to infrastructure.

Let's not forget, these projects are designed to keep the economy going; it's a form of economic investment and only the state can do that.

Sometimes we have to spend money in order to save, and invest in order to get a return. We must be very careful that we don't choke off the economy through cutbacks.

We need to be very wary of the demands that certain parts of the estate should see spending cuts, when heavy subsidies are going elsewhere.

There was a very interesting debate during the election campaign when Jeremy Paxman was trying to grill a Plaid Cymru economic adviser. He was suggesting that Wales was heavily subsidised, and the adviser turned round and said that London is the most subsidised part of the country.

OK, Mr Cameron, if you want to push this agenda, then push it to its logical conclusion, and stand up to the over-subsidising of London.

• James Mitchell is a professor of politics at Strathclyde University.