Almost half of Brits live in areas where economic growth is about as useful as a chocolate teapot, according to a new report that confirms the North-South divide is alive, well, and checking its bank balance.
Researchers at consultancy firm PwC found that every region in the north of England, the midlands, and Wales has lower spending power than the national average, while London and the South East sit pretty, comfortably above the rest. The report, released on Thursday, calculated that the equivalent of 12.5 million households - 46% - live in parts of the country where economic growth, often seen through increased business investment and job opportunities, fails to translate into better living standards.
Households in the north east of England have spending power 6.6% below the national average, equivalent to £1,542 less a year. The north west is £1,493 worse off, while Yorkshire and the Humber take the biscuit with spending power down £1,917 comparatively. Meanwhile, households in the South East enjoy spending power 9% above the national average, worth an extra £2,154 a year, followed by London.
Household spending power - which PwC measures by looking at income after taxes and housing costs, adjusted for household size and makeup - is considered a reliable yardstick for whether economic growth is actually improving living standards. And the UK has had years of weak growth, although the economy did manage a 1.2% expansion in the first six months of this year, according to official figures.
Most countries chase economic growth because it usually means more spending, more jobs, more tax revenue, and better pay rises. In theory, everyone ends up better off - but it takes time, and it doesn't necessarily benefit everyone. PwC notes that "only a fraction" of a rise in GDP actually leads to increased spending power.
The report also highlights that prosperity gaps exist even within better-off areas. For instance, Richmond's average annual disposable income is the highest in London at £35,448 - almost double the £18,384 recorded in neighbouring Hammersmith and Fulham. Rachel Taylor, government and health industries leader at PwC, said the research shows "just how differently prosperity is experienced across the UK, with stark variations not only between regions but on each other's doorstep."
Though higher housing costs in the south impact spending power, higher incomes soften the blow, and the divide remains. Scotland and the south west of England are exceptions, with lower housing costs and smaller households pushing spending power slightly above the national average.
The report argues that the next phase of devolution - transferring power from central government to local authorities - "must allow local areas to retain more of the revenues generated by local growth alongside more freedom on how best to use resources." But success "should be judged not simply by whether local economies grow, but by whether that growth leads to greater prosperity, wider opportunity and better lives for the people and communities within them."
Devolution has been a central part of Prime Minister Andy Burnham's leadership vision, with pledges of creating "the conditions for good growth in every postcode." A government spokesperson said the creation of No10 North is part of the growth mission to reshape "how the country is run," adding that English mayors have been given "unprecedented financial powers" to receive a share of income tax revenues to boost local economies and improve public services.
Conservative leader Kemi Badenoch, however, is not impressed. She said Burnham's "diagnosis" and "theory of growth is completely wrong," and that he thinks "if government spends more money, we will all get richer - that is not how this works." She has also called the establishment of No10 North a "gimmick."
Burnham, for his part, promises more devolution and public control of essential services. But with surges in UK government borrowing costs set to impact public spending choices, questions remain over how these grand plans will be funded - because, as we all know, growth doesn't just happen, and neither does money.