You belong to a select club – the club of the hard-working, clever and creative people living in London and the South East who single-handedly are giving the rest of the nation a standard of living they can’t, or won’t, create for themselves.

George Osborne, the allegedly Conservative Chancellor, truly loves you. He loves squeezing the life out of your wallet. He loves your pain.

As a standalone entity, the people of Berkshire, Buckinghamshire, Sussex, Hampshire, Kent, Oxfordshire, Surrey and London are 18th in the global GDP league, just ahead of Indonesia and just behind Turkey.

If you took this region out of the UK economy, it would be called Ethiopia.

You wouldn’t have to be a genius to suspect the grasping Mr Osborne – the dimwit who increased benefits by 5.5 per cent a couple of years back and then discovered he would have to increase taxes to pay for the rise; d’oh! – will once more up stamp duty on houses.

This is a pernicious assault on London and the South East, since five London boroughs – Westminster, Kensington and Chelsea, Wandsworth, Camden, and Hammersmith and Fulham – already raise as much as the rest of the nation put together.

You don’t have to live in Notting Hill to suffer the pain of stamp duty down South.

I looked on Rightmove and discovered that, in the OK London suburb of Wimbledon, I could pay a tad more than £1 million for a clapped-out, three-bed detached house that looked like Swampy had been the previous owner.

Why should I cough up an extra £50,000 so that politicians can spray their largesse in other parts of the country?

The subsidy from London and the South East to the rest of the country is truly astonishing. While the difference between what London spends and what it earns is 10 per cent on the plus side, you go to Wales and it’s 36 per cent on the minus side.

This area needs its own party. It needs a leader who believes that the striving classes in the South are overtaxed and overburdened.

I want somebody to argue for me at the ballot box and not look on the ambitious and the wealth creators as another wallet to steal from.

Did anyone else see this?

Yes.

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I'm sure that he'd tell you that some of his best friends're Muslim.

You belong to a select club – the club of the hard-working, clever and creative people living in London and the South East who single-handedly are giving the rest of the nation a standard of living they can’t, or won’t, create for themselves.

But as Londoners and their informal representatives look on jealously as the bank notes disappear over the Watford horizon, it is perhaps worth revisiting this argument. And it is a complex issue that deserves balance and open-mindedness to understand the diversity of flows in a national economy.

It is a story that we have touched on in the past. In a previous paper titled Rebalancing The Economy we emphasised the importance of the state and para-state as a source of Gross Value Added (GVA) and employment growth in the regions. We also noted the growing GVA per capita relative to the national average in London and to a lesser extent the SE, and the growing presence of financial services GVA in London relative to the national average. So, in a very simplistic way using static data there is a degree of truth in the claim that private sector surpluses generated in London and the South East were recycled as public sector jobs in the regions. But this is to put arithmetic to a very basic misuse.


This story ignores the general problems of a national business model that relies less on the manufacture of things and more on the manufacture of credit. It is a startling fact that the real value of housing equity withdrawal under Thatcher and Blair was marginally larger than the real value of GDP growth, suggesting that for our national economy to grow we require free flowing credit pushing against asset prices which can quickly and easily be cashed out. It is within that context that we should perhaps understand the current attempts by the Bank of England, the State and its various exigencies to prop up house prices by keeping interest rates low, and by encouraging lenders to avoid repossessing properties where households are in arrears on their mortgage. This nervousness about feedback effects and the fragility of the finance sector shows what a truly sorry state of affairs we are currently in. And it is a state of affairs that can be directly traced to the attack on industry by the Thatcher government which has left us with a kind of modern day credit-based equivalent of Eisenhower’s military-industrial complex of the 1960s and 70s.

Perhaps more importantly this Londo-centric story also ignores the vast public costs of underwriting the capital’s financial services sector: by our calculations, the Treasury received taxes of £203 billion over five years up to 2006/7, which were substantially less than the cost of the UK bank bailouts, estimated at between £289 billion to £1,183 billion by the IMF. So Clegg is fundamentally wrong on this issue: the banks are a net recipient of State funds which the whole country must pay for, even though the private gains are largely realised in London and the SE. From this perspective, we, in the North, have also seen our bank notes disappear over the Watford gap to keep well-heeled investment bankers in a manner to which they are accustomed.

This might sound like cheap point scoring, but beneath it lie subtler questions about the direction of the financial subsidies in a national economy. Is a reliance on State support the preserve of the North, as Clegg and MacKenzie suppose?

If they instead massively redeveloped Birmingham Airport and connected it to London via HS2, would that mean Brummies were now the ones doing the subsidising?

They are extending the runway at Birmingham Airport right now.