WWW.IPPR.

ORG/NORTH

ThePublicSector
intheNorth:
Driverorintruder?
Paper2fromtheNorthernEconomicAgendaproject
ByOlgaMrinska
November2007
©ipprnorth2007

InstituteforPublicPolicyResearchNorth
Challengingideas– Changingpolicy
2 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

Contents
Aboutipprnorth ...................................................................................................................................................................... 3
Abouttheauthor...................................................................................................................................................................... 3
Acknowledgements ................................................................................................................................................................... 3
Listofabbreviations.................................................................................................................................................................. 3
Executivesummary.................................................................................................................................................................... 4
Introduction ............................................................................................................................................................................... 7
1.Theroleofthepublicsectorineconomicgrowth:areviewofthetheoreticalandhistoricalcontexts.......................... 8
Theoriesandconcepts .......................................................................................................................................................... 8
Historicalbackground ......................................................................................................................................................... 10
2.ThesignificanceofthepublicsectorinNorthernEngland .............................................................................................. 11
Spending............................................................................................................................................................................. 13
Employment ........................................................................................................................................................................ 15
3.AreviewoftheGovernment’spublicsectorreform ........................................................................................................ 18
4.HowshouldpublicsectorchangebemanagedintheNorth?......................................................................................... 20
Relocationtotheregions .................................................................................................................................................... 20
Skillslevels............................................................................................................................................................................ 22
Efficiencyinthepublicsector ............................................................................................................................................. 23
TheeffectofthepublicsectorintheNorthofEngland ....................................................................................................24
5.Conclusionsandrecommendations................................................................................................................................... 26
References............................................................................................................................................................................... 28
Appendix1................................................................................................................................................................................30
Appendix2.............................................................................................................................................................................. 31
3 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

Aboutipprnorth
ipprnorth,theNewcastle-basedofficeoftheInstituteforPublic ipprnorth
PolicyResearch,producesfar-reachingpolicyideas,stimulating BioscienceCentre
solutionsthatworknationallyaswellaslocally.Theseareshaped CentreforLife
fromourresearch,whichspansthenortherneconomicagenda, NewcastleuponTyne
publicservices,Anglo-Scottishrelations,foodpolicyandruralissues, NE14EP
aswellasastrongdemocraticengagementstrandwhichinvolvesa
widerangeofaudiencesinpoliticaldebates.
www.ippr.org/ipprnorth
Tel:01912112645

RegisteredCharityNo.800065

ThispaperwasfirstpublishedinNovember2007.
©ipprnorth2007

Abouttheauthor Listofabbreviations

DrOlgaMrinskaisresearchdirectoratipprnorth. CSR ComprehensiveSpendingReview

Acknowledgements DCLG DepartmentforCommunitiesandLocalGovernment

DfES DepartmentforEducationandSkills
ipprnorthisgratefultoTheNorthernWay,ONENorthEast, DTI DepartmentofTradeandIndustry
YorkshireForward,NorthWestDevelopmentAgency,Deloitteand
DWP DepartmentforWorkandPensions
theCentreofExcellenceforLifeSciences(CELS)fortheirgenerous
financialsupportoftheresearchproject‘ANorthernEconomic GDP grossdomesticproduct
Agenda’andtheirvaluablecommentsonthispaper. GVA GrossValueAdded

TheauthorwouldalsoliketothankHowardReedatipprand HMT HerMajesty’sTreasury

MichaelJohnsonatipprnorthfortheiradviceandsupport HO HomeOffice
throughouttheproject.Sheisalsogratefulforthefeedbackand ICT informationandcommunicationtechnology
commentsreceivedfromcolleaguesinacademiaandvoluntary, LFS LabourForceSurvey
nationalandregionalinstitutions,whoattendedaseminarto
N8 NetworkofeightNorthernuniversities(Durham,
discussadraftofthepaperinLondoninJune2007.
Lancaster,Leeds,Liverpool,Manchester,Newcastle,
ThanksalsogotoKatieSchmueckerandSueStirling(ipprnorth), SheffieldandYork)
andKatherineGlossopandKateStanley(ippr)fortheiruseful NAO NationalAuditOffice
comments.ThankstoSianStephens,formerinterninipprnorth,for
NWRA NorthWestRegionalAssembly
initialanalyticalwork,andtoGeorginaKyriacouatipprforcopy
editingandtypesettingthereport. ODPM OfficeoftheDeputyPrimeMinister
OECD OrganisationforEconomicCooperationandDevelopment
OGC OfficeofGovernmentCommerce
ONS OfficeforNationalStatistics
PESA PublicExpenditureStatisticalAnalysis
PSA PublicServiceAgreement
PSE publicsectoremployment
RA RegionalAssembly
RDA RegionalDevelopmentAgency
RES RegionalEconomicStrategy
SOA SuperOutputArea
4 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
Executivesummary
Thisisthesecondpaperproducedforipprnorth’smajorNorthern
EconomicAgendaproject,whichaimstoprovideadetailedinsight
intotheeconomicperformanceofEngland’sthreenorthernregions:
theNorthEast,theNorthWest,andYorkshireandtheHumber.The
focusofthispaperisontheroleofthepublicsectorintheNorthin
drivingorinhibitingsustainableeconomicgrowth.
Dramaticdisparitiesinproductivityandwelfareacrossregions
underminethenation’sprosperityandreducetheBritisheconomy’s
competitiveness.AmongareasoftheUK,theNorthEast,North
WestandYorkshireandtheHumberfitthedescriptionofregions
sufferingfromalackofskills,initiative,capitalandsuitable
infrastructureparticularlystrongly.Analysingtheeconomic
performanceoftheseregions–andinparticular,theroleofthe
publicsectorintheireconomies–isthusofvitalimportancebothto
theregionsthemselves,andtotheUKasawhole.
Thescaleofthepublicsector
Boththeoreticalandempiricalanalysesinourresearchsuggestthat
thepublicandprivatesectorsarenotmutuallyexclusiveentities.It
isthereforecrucialtoallowpublicinterventionintotheeconomies
ofrelativelydeprivedareasthatarecharacterisedbyhighlevelsof
unemploymentandlowincomes.However,thescaleandcharacter
ofthissupportshouldnotnurturetheregionaleconomy’s
dependencyonpublicfunds.Onlywell-balancedpoliciesand
activitieswillkick-startpositivechangesandboosteconomic
growth.
SomepartsoftheNorthofEnglandarecurrentlyexperiencing
growthratesabovethenationalaverage(forexamplein2003–05,
theNorthEasthadaGrossValueAdded[GVA]growthrateof2.5
percentcomparedwithaUKaverageof2.0percent).However,it
stillreceivesarelativelylargeproportionofpublicfunds.In
2005–06,theNorthEast,NorthWestandYorkshireandthe
Humberreceived24.2percentofthe£448billionofidentifiable
expendituresintheUK,whichisequaltotheregion’sshareofthe
nationalpopulation(24percentin2005),butaboveits
contributiontonationalwealthmeasuredbyGVA(20.7percentin
2005).Thepublicsectorcontributesaroundaquarterofthe
regionalGVAintheNorthEastandaroundafifthintheNorthWest
andYorkshireandtheHumber,whichisabovetheEnglishaverage.
Spendingorinvesting?
Inassessingflowsofpublicspending,itisimportanttolookequally
atcurrentandcapitalspending.Allthreeregionsreceivespending
perheadabovetheEnglishaveragelevel(theNorthEastactually
receives£1,000morethantheaverage).Atthesametime,the
amountofcapitalexpenditureperheadisnotnearlyashigh:only
theNorthWestreceivesasubstantiallyhigher-than-average
amount,whiletheNorthEastreceivesslightlymorethanthe
nationalaverageandYorkshireandtheHumberreceiveslessthan
theEnglishaverageperhead.Therelativelylowlevelofpublic
capitalexpenditureshowsthattheinvestmentsinpublicsector
reformarefailingtoaddressthechallengesfacedbythemost
deprivedregions.
Thequality ofpublicfunding– itsabilitytostimulateneweconomic
activityandinvestmentintheprivatesector– isnolessimportant
thanthe amount offunding.Highqualitypublicfundingshould
leadtoagradualreductionintheneedforstateinterventionand
financialinjections;simplyspendingmore,however,maynot
achievethis.Thisisespeciallythecasegiventhattherecently
publishedComprehensiveSpendingReview2007(CSR07)signalled
thattheyearsofplentyforthepublicsectorareabouttocometo
anend.
IftheGovernmentistoachieveitsaimofstimulatingthenorthern
regionstograduallycatchupwithotherpartsofthecountry,itwill
havetomakemorecapitalinvestmentintheNorth.Moreover,core
publicspendingwillalsohavetochangetoreflectchangingneeds
indifferentregions.Amodern,needs-basedapproachto
distributingfundsacrosstheEnglishregionshastobedeveloped.At
theregionallevel,thepublicsector’senablingfunctionsshouldtake
precedenceoveritsintrusive,regulatoryelementsinordertounlock
regions’potentialanddrivehigherinvestmentflows.
Costsofprovidingservicesandallocationof
spending
Itisimportanttonotethatitcostsmorethanaveragetoprovide
servicestolargeregionswithrelativelysmallpopulations:thelower
thepopulationdensity,thehigherthecosts.TheNorthhasgreater
needsbecauseithasincomelevelsthatarerelativelylowerthan
thoseofotherregionswhileitscostsarehigherduetothepresence
oflargeruralareasandarelativelysmallnumberofbigurban
centres.Itsgreaterneedsarealsoexplainedbytherelativeweakness
oftheprivatesectorintheregion,whichisstillstrugglingtofindits
placeinthenew,post-industrial,socio-economicenvironmentand
cannotprovideadequateservicestothepopulation.
InthecontextoftheNorthofEngland,spendingfortheregion(in
theterminologyusedbytheTreasury,spendingthatdirectly
contributestothedevelopmentoftheregion)couldbeparticularly
importantincatalysinggrowth.However,adramaticadvancement
inthenortherneconomiesrelativetotherestoftheUKremains
unlikely,sincethedistributionofspendingforspecificregions
remainsalmostentirelydrivenfromthecentre.Thecurrent
opportunitiesareavailabletoallEnglishregionsequally,butsome
areas,notablytheGreaterSouthEast,aremoreentrepreneurialand
successfulthanothersandarethuslikelytobebetterplacedto
exploitsuchspendingandwillremainbetteroffasaresult.
ThepublicsectorintheNorthplaysanimportantroleincreatingan
enablingenvironmentfortheprivatesector.However,itisnot
simplyamatterofusingconventionaleconomicinstrumentssuchas
interestrates,fiscalstability,financialsupportandlabourmarket
interventions.Nowadays,thepublicsectoralsoplaysakeyrolein
buildingandimprovinglinksbetweenbusiness,innovativescience
andhighereducation.Achievingsuccessfuleconomicgrowth
requiresarangeofsupportingmechanisms,fromfinancialincentives
toencouragingparticipationincollaborativeprojects,through
adequatetransportandcommunicationsinfrastructuretoan
5 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

effectiveregulatoryenvironment.Thepublicsectorisalsoemerging graduatingfromtheregion’suniversitieswhowishedtostayinthe
asaleadingactorinensuringthattheUKanditsregionsare area,whomightotherwisemovesouthtogetthosejobs.
followingpatternsofenvironmentally-friendly,sustainableeconomic
Thereisnoclearevidencethatthepublicsectorhasbeen‘crowding
growthandprovidingequalopportunitiestopeopleregardlessof
out’privatesectorjobsintheNorth.Intheseregions,thetwo
theirsocialclassorplaceofresidence.
sectorshavequitedifferentjobprofiles.Furthermore,theprivate
Leadershipandcapacity sectorcanstilloffermoreattractiveremunerationpackages,though
Publicspendinginthenorthernregionsshouldbecomemore itisworthrememberingthatthepublicsectortendstoattractmore
developmentalinnature.Itshouldstimulateandnurtureinitiative employeesduringeconomicrecessionsbutappearslessattractive
andgrowth,challenging,ratherthansupporting,thestatusquo. duringperiodsofstrongeconomicgrowth.
Unfortunately,thetraditionalinstrumentsofpublicpolicyand
Theexistingqualityandscopeofdatalimitstherigouranddepthof
spendinghaveledtosymptomsofclientelism1 appearinginthe
anyanalysisoftheimpactanddynamicsofthepublicsectoronthe
North.Asaresult,adeficitofinitiativeandregionalleadershipis
labourmarket.ItisthusrecommendedthattheGovernmentmakes
underminingtheseregions’drivetowardseconomicgrowthand
fundingavailableforthefurtherdevelopmentandgatheringof
prosperity.
statisticsonpublicsectoremployment.Administrativedatashould
Anewapproachtopublicinterventionshouldstemfromtheidea beproducedfortheEnglishregionsasitisforScotland,Walesand
thatregionsandsub-regionsareself-sufficientandrelatively NorthernIreland.TheLabourForceSurveydefinitionofpublic
autonomousunitscapableofformulatingtheirownpriorities, sectoremploymentshouldbeusedasabasis,sinceitisthemore
unlockingtheirpotential,anddeliveringservicesthatmatchthe accurateofthetwostandardmeasuresavailable(theotherbeing
needsofthelocalpopulation.Regionalandlocalauthoritieshave theNationalAccountsclassification).
alreadybeengivenfunctionsthatallowthemtoidentifycertain
Efficiencyatthelocallevel
needsanddeliversomepublicservices(see,forexample,theSub-
Publicsectorreformiscurrentlylargelydrivenbyanagendathat
nationalReviewofEconomicDevelopmentandRegeneration),as
stressesmodernisation,efficiencyandvalueformoney.Duetotheir
wellastoplanandimplementpoliciesintheareasofeconomic
rigidity,theefficiencytargetshavecausedproblemsatthelocaland
growthandregeneration.However,theyshouldenjoygreater
regionallevels.Althoughefficiencyundoubtedlyshouldbeakey
flexibilitytousedifferentapproachesintheirattemptstoachieve
priorityforgovernment,theuniformityofapproachandthelackof
higherstandardsofpublicservices.Forthis,capacityiscrucial.Even
well-designed‘positivediscrimination’havebeenpartlyresponsible
whenformallygrantingtheregionstheopportunitytoexploretheir
forhinderingtheNorth’schancesofradicallyimprovingits
localpotential,Whitehallstillperformstheroleof‘backseatdriver’
performance.Thesameresultscouldbebetterachievedthrough
throughinstrumentsofcentralisedplanning,itspassionfor
othermeans,forexamplebycreatingasystemofincentivesto
uniformityinpolicymechanismsanditsrigorouscontrol
boostcollaborativeinitiatives,orbysettingupaconditionality
mechanisms.Whatlocalandregionalauthoritiesdoneed,however,
principle(wherebenefitsareonlyreceivedifspecifiedobligations
ismoresupportinbuildingtheirowncapacitytodosuchthingson
aremet)forprovidingfinancialresources(ontopoftheminimum
theirown.
required)tospurinnovationandcreatebettervalueformoneyin
Employmentandskills thepublicsector.Greateremphasisonthespatialefficiency of
Theroleofthepublicsectorinprovidingjobsisequallyimportant. publicservicesisalsoneededtoenhancetheclustereffectsthatcan
Atthemomentthemostsignificanttaskistoimprovetheskillsand begeneratedfromrelocatedofficesanduseoflocalfactorsand
qualificationsofcurrentandfutureemployees.Whiletheshareof resourcesmoresuccessfully.
publicsectoremploymenthasbeengrowingoverthelasttenyears,
WhiletheGovernmentshouldcontinuetoimprovetheefficiencyof
therelativeproductivityofthenortherneconomy(measuredby
publicprocurementproceduresbyintroducinghigherstandards,and
GVAperhead)hasbeengoingdown.Thisisbecausemostoldand
solutionsbasedoninformationandcommunicationtechnology
alsomostnewjobsareconcentratedinthelow-skilledsegmentof
(ICT),itshoulddosoinawaythatincreasesthechancesfor
themarket.Ourresearchdidrevealapositivetrendintherelocation
regionalandlocalcompaniestoparticipateintheprocess.These
ofpublicsectormanagerialpoststotheNorthWestandYorkshire
companiesshouldreceivesupport,adviceandtrainingonhowto
andtheHumberduringthelatestroundofrelocation(2004–06).
complywithnewstandards,howtousenewtoolsinpublic
However,itisstillnotenoughinabsoluteterms,andthistrend
procurement,andhowtobecomemorecompetitive.Thiscould
needstobesustainedanddistributedacrossallnorthernregions.
enablethemtoprovidegoodsandservicesnotonlylocally,butalso
Toreallycontributetowardsregionaldecentralisationandtoclose topublicagentslocatedinotherregionsoftheUK.
theproductivitygapbetweentheNorthandtheSouth,thepublic
Followingtheirownway
sectorshouldmovemorepolicyandresearchpoststotheNorth,
Thecurrentpathofreformscanonlyleadto‘linear’changesand
thusstrengtheningtheexpertiseandscientificcapacityofthese
improvementsintheregion,forexamplethroughtransitionfroman
regions.RelocatingpublicsectorjobsfromLondonandtheGreater
industrialtoaserviceeconomy.YetiftheambitionisfortheNorth
SouthEastwouldalsomakejobsavailabletoyoungspecialists

1.Clientelismisaformofpersonaltwo-wayexchange,usuallycharacterisedbyasenseofobligationandunequalbalanceofpowersbetweeninvolvedparties.Itisoften
usedasasynonymforthepoliticalmachine,denotinganunofficialsystemofpoliticalorganisationbasedonhierarchicalpatron-clientrelations(Hopkin2006).
6 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
toperformbetterthan–oratleastaswellas–otherpartsofthe
country,itwillhavetobemorecreativeand‘leapfrog’through
severalstagesquickly(perhapsmissingoutoramalgamatingsome
stages).Itneedstolearnfrombothpositiveandnegative
experiencesfromotherpartsofthecountryifitistocreateitsown
uniquerouteofprogress,trulyrootedinthelocalenvironment.The
threenorthernRegionalEconomicStrategies(soontobecome
IntegratedRegionalStrategies)oftenconsiderthepublicsector(and
publicspendingoneconomicdevelopmentandregenerationin
particular)asoneofthekeydriversofsustainableeconomicgrowth
andasapotentialcatalystofamultipliereffectforthelabour
marketandbusinesses.Thecentrally-drivenprocessofrelocation
shouldbeplannedinsuchawaythatitisfullyintegratedintothe
implementationofregionalstrategiesandtheseprocessesare
mutuallyreinforcing.
Recommendations
OurresearchconcludesthattherearewaysfortheGovernment,
jointlywiththeregionalandlocalauthorities,toincreasethe
efficiencyofthepublicsectorintheNorthofEngland.Inparticular,
policymakersshouldfocusonthefollowing:
• TheGovernmentshouldincreasetheamountofcapital
investmentinthepublicsector,especiallyfortheNorthEastand
fortheYorkshireandtheHumber.
• HerMajesty’sTreasuryshoulddevelopamodern,needs-based
approachtowardsallocatingcurrentspendingacrosstheregions.
• Publicspendingshouldchallengetheexistingstatusquointhe
threeregionsbyplayingamoredevelopmentalrole.
• RegionalDevelopmentAgenciesandlocalauthorities,with
supportfromcentralgovernment,shouldinvestmorein
leadershipandcapacityinordertoperformnewplanningand
implementationfunctionseffectively.
• TheGovernmentshouldrelocatemoremanagerialandexpertjobs
totheNorthofEngland,coordinatingthisprocesswiththe
prioritiesofRegionalEconomicStrategies.
• TheCabinetOffice,inimplementingitsefficiencyagenda,should
gobeyondefficiencytargetsandusemorevariedmeansto
improvevalueformoneyinthepublicsector.
• TheOfficeofGovernmentCommerce,jointlywithlocaland
regionalauthorities,shouldsupportandbuildthecapacitiesof
localbusinessesinorderforthemtobenefitfrommodernICT-
basedprocurementsolutions.
• TheGovernment’sefficiencyagendashouldtakeintoaccountthe
spatial efficiencyofthepublicsector.
• TheOfficeofNationalStatisticsshouldimprovethequalityof
publicsectoremploymentdatafortheEnglishregions.
7 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
Introduction
TheimportanceofthepublicsectorintheeconomyofNorthern
Englandishardtooverestimate.Thethreenorthernregionshave
receivedamuchhigherthanaverageproportionofpublicspending
perheadforthelast50years:theNorthEasthasconsistentlybeen
topofpublicspendingtables(afterLondon),followedbyYorkshire
andtheHumberandtheNorthWest.TheNorth’sinabilitytoadjust
totheneweconomicsituationfollowingthecollapseofits
traditionalindustrialeconomyhaspromptedtheGovernmentto
directmoneytodifferentinstrumentsaimedatindustrial
regenerationandsocialprotection.However,questionsremaintobe
answeredoverhoweffectivethisspendinghasbeen.
AsthestatisticsinourpaperTheNorthinNumbers (Johnsonetal
2007)show,thereisnodoubtthattheoverallsocio-economic
situationintheNorthhasimprovedconsiderablyoverthelasttento
twentyyears.Nonetheless,performancehasnotbeenstrong
enoughtocatchupwiththemoreproductive,moreinnovative
regionsintheGreaterSouthEast,andsoinrelativeterms,thethree
northernregionsstillremainatthebottomofmanynational
rankings.Weareinterestedinthequestionofwhatrolepublic
spendinghasplayedintheriseofcertainpartsoftheNorth(big
citiesincludingLeedsandManchester),andtherelativestabilityof
others(NewcastleuponTyne),andwhypublicspendinghasnot
beenabletopreventthecontinuationofdeclineinsmaller,mono-
functionaltownssuchasRochdaleandRedcar.
Theaimofthispaperistoanalysetheroleofthepublicsectorin
theeconomyoftheNorth.Westartbyreviewingtheoreticaland
policyperspectivesontheeconomicimpactofthepublicsectorin
ordertoputtheempiricalevidenceincontext.Weexaminedifferent
setsofdatatoillustratetheinfluenceofthepublicsectoronthe
productivity,performanceandstructureoftheregionaleconomy
anditslabourmarket.Wethenlookatthecompositionand
dynamicsofspending,theemploymentopportunitiesbrought
aboutbythepublicsector,andhowthesizeofthesectorisrelated
tolocaldeprivation,totalregionaloutputandpopulationsize.
Thedrivingquestionthroughoutthepaperiswhetherthepublic
sectordoesindeedplayavitalroleinthenortherneconomy,and
whetheralessinterventionistpolicywouldbringgreaterprivate
initiativeandinvestment.
Thisleadstoanumberofsubsidiaryquestions:
• Oneofthemostcontroversialissueswhendiscussingtheimpact
ofthepublicsectoronthelabourmarketistheso-called
‘crowding-out’effect:whetherthestrengthofthepublicsector
inhibitsthecreationofprivatesectorjobs.Weaskhere:does
crowdingouthappenintheNorth?
• Willcurrentreformsthatareaimedatimprovingtheeffectiveness
ofthepublicsectoractuallycontributetotheNorth’s
development?
• Finally,howfarisitpossibletoachievemoreequitablesocial
standardsacrosstheregionswithouthamperingtheirpotentialfor
growthandimprovedproductivity?
Thispaperaddressestheseandrelatedquestions.
8 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
1.Theroleofthepublicsectorin
economicgrowth:areviewofthe
theoreticalandhistoricalcontexts
Theoriesandconcepts
Theroleofthepublicsectorinthedevelopmentofnationaland
regionaleconomieshaslongbeendebatedandresearched.From
thebeginningofthe20thcentury,whenthestatestartedtoplaya
moreactiveroleineconomicdevelopmentontheonehand,and
tookmoreresponsibilityforthelifeofitscitizensontheother,
theoristsapproachedtheanalysisofstateinterventionsinseveral
differentways,withcorrespondinglydifferentresults.
Somepeoplehavearguedthatthestate’sroleinsecuringnational
prosperityiscrucial,sinceitisonlythestatethatcanmaintainstrict
regulationsandachieveamoreequaldistributionofwealthacross
differentsocialgroupsandpartsofthecountry.Othershave
insistedthatfreemarketforcesshouldbeallowedtoexecutetheir
unrestrictedpositive(ornegative)effectsontheeconomy,since
onlyinthiswaywilllimitedresourcesbeusedmostefficiently,
resultinginthehighestoverallproductivity.Twocontradictorytrends
thusexist:oneadvocatingastrongroleforthestate(whichweshall
refertohereafterasthe‘Keynesian’model),theothercallingfor
minimalstateintrusionintheforcesthatformthefreemarket(the
‘neo-liberal’model).Theseconflictingtrendsembodytheeternal
dilemmaofthestate’sinterventionintheeconomy:efficiency
versusequality.
Thefirstfundamentalanalysisofterritorialinequalitiesandtherole
ofthestatewasdevelopedintheKeynesiantraditionbyMyrdalin
histheoryofcumulativecausation.Heclaimedthatregional
inequalitiesarecausedbyprimarydifferencesinlocalfactorsand
conditions,andthattheyareaggravatedbythefiercecompetition
ofamarketeconomy.Insuchsituations,freeeconomicforcesalone
cannotreversethisdivergenceandstateinterventioniscrucial
(Myrdal1957).Kaldor,anotherbroadlyKeynesianeconomist,
suggestedthatthedisparitiesinregionaldevelopmentcanonlyin
partbeaccountedforbygeographicaldifferences,andthatthe
unequaldevelopmentofindustrialactivityisthefundamental
explanatoryfactor.Theprincipleof‘cumulativecausation’then
exacerbatesthisdisparity,forexampleinareaswhereproduction
ratesgrowfasterthanaverage,wagestendtofallatasimilarly
disproportionaterate,givingtheregionafurthercompetitive
advantage(Kaldor1970).
Historyhasshownthatunlimitedtop-downinterventionsapplied
overasubstantialperiodoftime,usuallyundertheinfluenceof
theoristsintheKeynesiantraditionofMyrdalandKaldor,donot
alwaysleadtopositiveresults.TheexampleofItalianregional
2.Since2000Italyhasbeengoingthroughamajorreformprocessofdevolutionandregionalisationwhichseekstoencouragemorerelianceon‘bottom-up’initiatives.
3.Clientelismisaformofpersonaltwo-wayexchange,usuallycharacterisedbyasenseofobligationandunequalbalanceofpowersbetweeninvolvedparties.Itisoften
usedasasynonymforthepoliticalmachine,denotinganunofficialsystemofpoliticalorganisationbasedonhierarchicalpatron-clientrelations(Hopkin2006).
developmentuntil20002 isaninformativecase.Morethan50years
ofcentrally-drivenpoliciesdidnotreducethegapbetweentherich
NorthandthepoorSouth(the‘Mezzogiorno’)ofthecountry,and
insomecasesthedisparitiesactuallybecamemoredramatic.The
centralministriesmaintainedfullday-to-daycontroloftheprocess
usingtheinstrumentsof‘extraordinaryintervention’,whilelocal
leaderswerenotgivendiscretiontoinitiatelocally-driven
programmes.Thispreventedtheformationofeffective,self-
sufficientregionalinstitutions.
TheItaliangovernmentformulateditspoliciesattheendofthe
1940sonthebasisofRosenstein-Rodan’s‘BigPush’theory.
Rosenstein-Rodanarguedthatthestatecouldpromoteeconomic
developmentinbackwardregionsbyinvestingsimultaneouslyinan
interrelatedsetofindustries,whichwouldgeneratestrongexternal
economiesandmigration(Rosenstein-Rodan1943).Instead,
however,thesepoliciesledtothepoliticsof‘clientilism’3 and
localism,orientatedtowardsdistributionratherthandevelopment
(Trigilia1992).
Manyanalystsarguethatthereisnostrongcorrelationbetweenthe
scaleofthepublicsectorandthedynamicsofeconomicgrowth
(Ram1986,Rubinson1977),whileothers(SinghandSahni1984)
claimthatgovernmentexpansionhasapositiveimpactoneconomic
growth.Therearealsothosewhobelievetheopposite:thatthereis
anegativecorrelationbetweentheexpansionofthepublicsector
andthedynamicsofeconomicgrowth(Gwartneyetal 1998).
TheeconomiesoftheOrganisationforEconomicCooperationand
Development(OECD)areoftenusedtoillustratethesuccessof
oppositemodelsandconcepts.Severalrecentanalysesofdatafrom
OECDcountriessuggestthattheeffectofthepublicsector(in
termsofpublicspending)isneitherverypositivenorverynegative.
Thesestudiesgiveexamplesofdevelopedcountrieswithlowpublic
spending,someofwhichhaveachievedstrongeconomicgrowth
(Ireland,SouthKorea),andothersofwhichhavenot(Switzerland
andJapan).
Historically,therearegoodexamplesofnationaleconomiesthat
havebeensuccessfulwithastrong,paternalisticstate(the
Scandinaviancountries),whileothercountrieshaveachievedhigh
productivityandcompetitivenessbyapplyingminimalregulations
andhavingrelativelysmallpublicsectorexpenditure(Australia,New
Zealand,Canada).Someofthefastestgrowingeconomiesinthe
world,suchasTaiwan,MalaysiaandCyprus,havearelativelyhigh
shareofpublicspendingasaproportionofGDP.Contemporary
9 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
analysesoftheseissuesalsosuggestthereisnoevidencethat
countrieswithhighlevelsofpublicspendinghavepoorereconomic
performancethanthosewithlowerspending(CumbersandBirch
2006).However,higherpublicspendingisimportantfor
encouragingmoreevendistributionofwealthacrossthecountry.
Someanalystsintheneo-liberaltraditionarguethatpublicsector
growthhindersthegrowthofprivateinvestmentandthatit
generallycauses‘crowdingout’.Therearetwokeyaspectsof
possiblecrowding-outeffects(CumbersandBirch2006):(i)the
macroeconomiceffectoninterestratesandinvestment,and(ii)the
structuraleffectonemploymentandfirms.Othershaveexpressed
reservations,suggestingthatcrowdingoutdoesnotalwaysoccur,
andinfacta‘crowding-in’effect,leadingtoeconomicgrowth,is
moreplausible.Crowdinginhappensbecausetheprivatesector
actuallybenefitsfromincreasedpublicinvestmentand
improvementstothelegalandinstitutionalframework.
ApaperbytheInstituteofFiscalStudiessuggeststhatdespitethe
declineinpublicsectorinvestmentandexpenditureoverthe20
yearsthatfollowedapeakintheearly1980s,theUKstilllags
behindcountrieslikeGermany,FranceandtheUSintermsof
privatesectorinvestment(BloomandBond2001).Cumbersand
BirchalsoarguethattheUK’sstrongeconomicperformance
comparedwithmuchoftheEU’sinthefirsthalfofthe2000swas
duetoincreasedpublicsectorinvestmentatatimewhenprivate
sectorinvestmentandgrowthwererelativelystatic(Cumbersand
Birch2006).
Publicspendingplaysanimportantroleintheregionaldevelopment
ofacountry:byredistributingnationalwealthacrossthecountry,
thestateaimstoreducetheinequalitiesbetweendifferentregions
thathavediverseindigenousconditionsanddiversefactorsof
development.IntheUKpersistentwideningofregionaldisparities
promptedtheGovernmenttointroducetheregionalperformance
PublicServiceAgreement(PSA)target,whichisthekeyindicatorto
measuretheprogressofeconomicconvergence.(Thetargetis
discussedinagreaterdetailinJohnsonetal 2007).Itiswidely
recognisedthatdifferentregionsmighthavedifferentpublic
spendingneeds,andalsothatthecostsofdeliveringthesame
rangeandqualityofservicesmightdifferfromregiontoregion.
Anotherimportantdeterminantinthedifferentiationofpublic
spendingislocalpoliticalchoice(Morgan2001).Iflocalpoliticians
choosegreaterexpenditureontopofnational‘equality’measures,
thereisastrongargumentthatthedifferenceofspending(the
surplus)shouldbecoveredfromlocalsources.
Thetotalamountofpublicspendingisthusdeterminedbythe
threefactorsofcosts,needsandpoliticalchoice.Ifthestateisto
provideequalaccesstobasicpublicgoodsregardlessofplaceof
residence,itshouldcoverspendingforrealcostsandneeds.This
meansthatthestateshouldcoverthedifferenceintheunderlying
costsofprovidingtheservicesindifferenttypesofareas
(urban/rural,densely/sparselypopulated,remote/islandterritories
andsoon)andrespondtothediversityoflocalneedsstemming
fromthevaryingeconomic,socialorenvironmentalattributesof
differentregions.
Anexampleofthisisthatitcostsmoretoprovideservicestolarge
regionswithrelativelysmallpopulations,suchastheNorthEastand
YorkshireandtheHumberthanviceversa:thelowerthepopulation
density,thehigherthecosts.TheNorthofEnglandhasrelatively
largeruralareasandarelativelysmallnumberofbigurbancentres
(orcorecities),andthisaffectsthetotalcostofprovidingservices
(asthedatabelowillustrates).Theneedforpublicinvestmentinthe
Northisalsogreaterthanelsewhere,sincemarketforceshavefailed
torestructureproductionfacilitiesintheNorthawayfrom
manufacturingandtowardsservicestothesameextentashas
occurredinmostoftherestoftheUK(seeFigure2.4inJohnsonet
al 2007).Allofthisraisesthethresholdforthetotalamountof
publicspendingrequired.
Thecrowding-outeffectisoftenraisedasakeyconcernwhenthe
impactofthepublicsectorontheregionaleconomyisanalysed.
Manyarguethatahighdegreeofdependenceonpublicinvestment
andjobshindersthegrowthandexpansionoftheprivatesectorin
deprivedregions(Bosanquetetal 2006).Othersinsistthatthe
publicsectorhasapositiveenablingfunctionforregionsthat
experiencedifficultiesinboostingandsustainingtheprivatesector
(PearceandPaxton2005).
Inpractice,itissometimesdifficulttotrackthe‘competition’
betweentwosectorsinthelabourmarketsincepublicandprivate
sectorjobstendtohavequitedifferentjobprofilesanddiverse
remunerationpackages,whichisespeciallynoticeableatcertain
stagesoftheeconomiccyclesuchasgrowthorrecession.For
example,intheNorthEastthereisastrongopinionamongkey
employersandrecruitmentagenciesthatthepublicsectordoesnot
causecrowdingoutintheprivatesector(especiallyathighand
mediumskilllevels)becausethenatureofskilledworkinthepublic
sectorisquitedifferentfromthatintheprivatesector.Moreover,
thepublicsectorcannotcompetewithsalariesintheprivatesector,
exceptinperiodsofrecessionwhenpublicagenciestendtobecome
moreattractiveasemployersduetotherelativesecurityof
employmentinthepublicsectorcomparedwiththeprivate.
However,therelativegenerosityofpublicsectorpensionscompared
withprivatesectorpensions(onaverage)remainsasignificant
factorthatattractsworkerstothepublicsector.Alsothegapin
pensiongenerositybetweenthesectorshasincreasedoverthelast
decadeasmoreandmoreprivatesectorfirmshaveshiftedaway
fromfinalsalaryschemestowardsdefinedcontributionschemes,
whichtendtobelessgenerous.
Itisalsoworthnotingthatatdifferentstagesofeconomic
developmentandsocialprogress,differentviewshavedominated
theacademicandpolicydebateaboutthesignificanceofthepublic
sectorandthedegreetowhichitcanimpactontheregional
economy.Ithasbeenobservedthatthelevelofinterestincollecting
andanalysingdataontheroleofthepublicsectorintheUKhas
traditionallybeencloselylinkedtothelevelofinterestinregional
developmentanddevolution(McLean2003).Inperiodswhere
regionalpolicywasundergoingarenaissance,datasetsbecamemore
extensiveandresearchbecamemorerigorous.Atothertimes,when
disenchantmentwithregionalpolicysetin(especiallyduring
Conservativerulefrom1979to1997)therewasacorresponding
dropindatacollectionandanalysis.Thismeansthatstartingfrom
the1960s,thereareunfortunategapsinthedataandanalysis
availableontheroleofthepublicsectorintheeconomy.
10 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
Historicalcontext
Itisimportanttoputtheroleofthepublicsectorinthe
contemporaryeconomyoftheNorthofEnglandinsomesortof
historicalperspective.Twomaininitialobservationscanbemade.
First,forlongperiodsoftime,theeconomiesoftheNorthhave
beendominatedbypublicsectorjobsandinvestment(compared
withotherpartsofEngland).Second,itisrevealingtoconsiderthat
atcertaintimesinthepastastrongerpublicsectorwasadvocated
asawaytoregeneraterelativelydeprivedregions,withlittle
considerationgiventoprivatesectorinitiativesortheimplications
foreconomicgrowthingeneral,whileatothertimesthestrengthof
thepublicsectorhasbeentreatedwithsuspicion.
ThehistoryofthepublicsectorintheNorthofEnglandhasbeen
particularlydramaticandcomplicatedsincethe1930s.Followingthe
declineofthetraditionalcoalandtextileseconomyoftheNorth
East,NorthWestandYorkshireandtheHumber,newsourcesof
employmentandprosperityneededtobeintroducedtoreversethe
deeplynegativeeffectsoflostjobsandlackofincome.Alongwith
biginitiativesaimedatattractingexternalcompaniestoinvestinthe
region,theroleofthepublicsectorwasadvocated,inKeynesian
tradition,asthekeyconsumeroftheexcesslabourforceandthe
providerofsufficientincometothelocalpopulation.Fromthe
1930sonwards,thenorthernregionsbecamea‘policylaboratory’
wheremanydifferentregionalpoliciesweretested,noneofwhich
provedtohaveasustainablepositiveeffectontheregional
economy(Tomaney2006).
TheeconomicdeclineintheNorthhadalreadybegunatthestartof
the20thcentury,butitwasidentifiedasa‘problem’onlybetween
thetwoworldwars.Thefirstmeaningfulpolicymeasureswere
appliedin1947whencoalproductionwasnationalised,followedby
thenationalisationofsteelandshipbuildingindustries.However,a
seriesofmergersandacquisitionsmeantthatcontrolofthese
enterprisesmovedawayfromtheregion.Evenafterthis,these
industriesstilldidnotappeartobeeconomicallyviable.Inthe
1970sand1980s,majorcontractionsinthecoal,steel,textile,and
shipbuildingindustriesledtotheircollapseasmajoremployerswith
hugejoblosses.Therestructuringofstatecompaniesandtheir
consequentprivatisationbytheConservativegovernmentinthe
1980spromptedthefinaldefeatoftheregion’straditional
industriesanditstraditionaleconomy,withsevereconsequencesfor
employmentratesinthenorthernregions.
Thescaleofstateinterventionwashighlysignificantthroughoutthe
periodfromthe1940stothe1980s,leadingforexampletothe
NorthEasttakingontheappearanceofa‘state-managedregion’to
someanalysts(Hudson1989).Afundamentalproblemwiththis
approachwasthatitwasnegativeanddefensiveratherthan
forward-looking;therewasnorealplanforindustrialrenewalvia
newindustriesintheregions,whichmeantthatwhenbigjoblosses
didoccurinthe1980s,theNorthsufferedveryhighunemployment.
Inthenextsectionwegoontogroundouranalysisintheavailable
data.
11 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

2.Thesignificanceofthepublic
sectorinNorthernEngland
AnyanalysisoftheeffectivenessofpublicspendingintheNorthof extenttheNorthWest,verymuchreliantonpublicsector
Englandmustbegroundedinappropriatedataandinformation. investmenttosustaineconomicgrowthandraisepersonalincomes.
Thissectionillustratesthekeytrendsinthethreenorthernregions ThebreakdownofthecompositionofregionalGrossValueAdded
regardingthepublicsectoranditsimpactontheregionaleconomy. (GVA)inTable2.1showsclearlyjusthowimportantthepublic
sectoristothenortherneconomy.
Thepublicsectorhastraditionallyplayedasignificantroleinthe
economyofNorthernEngland.Longanddramaticindustrialdecline Itisimportanttohighlight,however,thatinallthreeregionsprivate
haslefttheNorthEast,YorkshireandtheHumber,andtoalesser servicesplayamuchgreaterrolethanthepublicsector,andtheir
strengthintheeconomyisgrowing.In
Table2.1:StructureofregionalGrossValueAdded(GVA),2004,percent(the particular,ManchesterandespeciallyLeedsare
publicsectorcontributionisshowninbold) experiencingadramaticgrowthinhighvalue-
addedservicesectorssuchasfinanceand
Sector NorthEast NorthWest Yorks& UK
banking,andretailandrealestateservicesplay
Humber
acrucialroleinallthreeregions.
Agriculture,hunting,forestry 0.6 0.7 1.1 1.0
Furthermore,thisisjusta‘headline’sectoral
andfishing
split,whichdoesnotshowtheoverall
Miningandquarryingof 0.1 0 0.2 0.1 economicimpactofdifferentsectors.For
energy-producingmaterials example,spendingonhealthandsocialwork
mighthavepositivespill-overeffectsonthe
Otherminingandquarrying 0.3 0.1 0.1 0.2
regionalperformanceoverandaboveits
Manufacturing 19 18.4 18.2 14.4 currentmonetaryvalueresultingfrom
increasedwell-being,andresearchand
Electricity,gasandwatersupply 2.8 1.4 1.5 1.7
development(R&D)spendingcanhavea
Construction 7.3 6.4 7.1 6.3 positiveimpactonmanypartsoftheeconomy
(asdiscussedindetailinJohnsonandReed
Wholesaleandretail(including 10.8 13.3 13.3 12.4
2007).Ontheotherhand,thenatureof
motortrade)
spendinginmanysectorsmaybewasteful,
Hotelsandrestaurants 3.0 3.2 2.9 3.2 thoughthisisdifficulttoevaluatesincemany
publicsectoroutputsarenotsoldontheopen
Transport,storageand 6.6 7.9 7.8 7.7
market.
communication
Thepublicsector’seffectontheregionaland
Financialintermediation 4.6 6.2 6.5 8.4
localeconomycouldbemeasuredbyassessing
Realestate,rentingand 18.4 21.8 19.3 25.2 itsimpactonregionalproductivityand
businessactivities performance,aswellasonemployment
dynamics,butthemostimportantfactoris
Publicadmin.,nationaldefence, 6.5 4.8 5.6 5.3
probablythestructureandqualityofjobs
compulsorysocialsecurity
offeredbythesector.Qualityofspendingis
Education 8.1 6.5 6.7 6.0 alsocrucial:currentspendingusuallyreflects
thesatisfactionofneedsbasedonexisting
Healthandsocialwork 9.5 8.0 8.8 7.4
practicesandcapacities,whilecapital
Otherservices 4.7 4.7 4.2 5.5 investmentsinthepublicsectorshowhow
muchisbeingspenttoimprovethesystem,its
Financialintermediationservices -2.3 -3.4 -3.6 -4.8
strategicfunctionsanddeliverymechanisms.
indirectlymeasured(FISIM)*
Thedynamicsofcapitalspendinginthepublic
TotalGVA(£m) 34,419 102,336 75,260 1,024,088 sectorregionallyarethusextremelyimportant,
andareanalysedindetaillaterinthispaper
*Note:FISIMisameasureoftheindirectchargesmadeforfinancialservices,for
(seesectiononspending,below).
examplethedifferencebetweeninterestpaidbyconsumersandinterestreceivedby
lenders,acrossthewholeoftheUKeconomy. ApartfromtheNorthWest,thenorthern
Source:ONS2006c regionsdonotcontributemuchtothetotal
nationaloutput(Figure2.1).Forexample,the
12 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

NorthEast’sshareofnationalGVAisonly3percent.Thisisthe experiencedquitedifferentdynamicsofpopulationgrowth(as
secondlowestintheUK,higheronlythanNorthernIreland(2per showninFigure2.1inJohnsonetal 2007).Duringtheperiod
cent),andlaggingfarbehindnotonlytheSouthEast(15percent) 1991–2004London,theSouthWest,theEastandtheEast
butevenneighbouringYorkshireandtheHumber(7percent).In Midlandsexperiencedmuchhigherthanaveragegrowth(4.2per
total,thethreenorthernregionsprovide20percentofnational cent),theNorthEastandNorthWestweretheonlyregionsto
GVA;Londonaloneproduces17percent.(Cautionshouldbe experiencefallsinpopulation(-1.6percentand-0.2percent
exercisedwhencomparingthesefigures,however,giventhespecific respectively).
functionsexecutedbythecapitalcityastheadministrative,political
ThemainsourceofpopulationgrowthintheUKoverthisperiod
andfinancialcentreofthecountryandasaglobalfinancialcentre.)
wasnotnaturalgrowthbutimmigration;theNorthofEnglandhas
Itis,ofcourse,importanttounderlinethatthesefiguresreflectthe notexperiencedanysignificantmigrantinflowsandthusithasnot
relativepopulationsofeachregion.Forexample,theNorthEastis hadtheopportunitytoexperiencethepotentialeconomicbenefits
theleastpopulatedEnglishregionwithonlytwoandahalfmillion thatmigrantscanbring(seePillai2006).Theregionalsohasan
people.Moreover,overthelast15yearsdifferentregionshave ageingpopulation,whichreducestheeconomicallyactive
populationwhileincreasingtheburdenon
healthandsocialservices.Itisobviousthatthe
costsofsomepublicservices,therefore,will
Figure2.1:StructureofGVAperregion,2005(inrealprices)
increaseoverthenexttento15years,though
thismightbeoffsetbyarelativecutin
Extra-reg
N Ireland 2% educationspending(iftheabsolutenumberof
2% North East childrenintheregioncontinuestofall)and
3% North West efficiency/technologysavings(whichwe
Sc otland
8% 10% explainbelow).
Yorkshire
Wales and
Inrecentyears,theeconomiesofthenorthern
4% Humber
7% regionshaveunder-performed.Weanalyse
South theirrelativeperformanceindetailinJohnson
Wes t East etal 2007.Hereitneedonlyberecalledthat
8% Midlands theseregionsperformmuchbetterif
7% productivityismeasuredusingGVAperhour
workedratherthanGVAperheadofthe
West
S outh E as t Midlands population(Figure1.2inJohnsonetal 2007).
15% 8% Acleartrendisevidentovertheperiod
1998–2004:inworse-offregions,per-hour
Eastern productivityissubstantiallyhigherthanper-
L ondon 10%
16% headproductivity,whereasinbetter-offregions
theoppositeistrue(Table2.2).Nonetheless,it
Source:ONS2006c
shouldbenotedthatinallthreenorthern
regionsproductivitymeasuredperhourworked
Table2.2:Relativelabourproductivitybyregions,UK=100,1998,2001and declinedagainstthenationalaveragebetween
2004 1998and2004,althoughthepatterninthe
Region 1998 2001 2004 NorthEastandYorkshirewasuneven.
Perhour Perhead Perhour Perhead Perhour Perhead AcrossEngland,thereisastrongcorrelation
worked worked worked betweeneconomicperformanceand
UK 100 100 100 100 100 100 deprivation.IntheNorthofEngland,itis
NorthEast 94.5 79.8 98.2 79.2 93.5 79.9 notablethatalthoughcertainlocalitieshave
shownstrongtrendsofregeneration,in
NorthWest 95.1 88.8 94.2 89.0 92.4 89.9
generaltherearehighlevelsofdeprivationin
Yorkshire&Humber 93.3 88.8 94.7 87.8 91.1 88.8 thearea.Almostacenturyofeconomicdecline
EastMidlands 95.0 92.5 96.6 91.4 98.7 91.5 isreflectedinconsiderablylowerthanaverage
WestMidlands 91.0 92.3 94.5 91.6 93.7 91.2 personalincomesinthenorthernregions(see
East 100.7 107.6 97.9 109.4 101.6 108.7 Johnsonetal 2007).In2005,theNorthEast
hadthelowestgrossweeklyincomeper
London 119.2 133.0 116.1 131.4 118.2 132.1
personintheUK,andthefiguresforthe
SouthEast 104.1 115.6 106.0 117.4 105.8 116.1 NorthWestandYorkshireandtheHumber
SouthWest 94.3 93.1 96.6 93.4 95.3 92.9 werenotmuchbetter.Atthesametime,the
England 100.9 102.0 101.2 102.0 101.2 102.0 NorthEasthadthelowestnationalgross
weeklyspending.However,thesefiguresdo
Source:ONS2006a
notreflectthedifferencesinthecostofliving
13 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

indifferentregionsofUK(seeTable1.5inJohnsonetal 2007). Spending

TheNorthisalsolaggingbehind(relativetoEnglandandoftento
thewholeoftheUK)onvariousotherindicators,includinglife
expectancy,levelofeducationalattainment,qualityofhousing,
healthconditions,joblessnessandsoon.Thisiswellreflectedinthe
IndexofMultipleDeprivationdesignedbywhatwastheOfficeof
theDeputyPrimeMinister(ODPM)in2004.AsthedatainJohnson
etal 2007shows(Table1.4),allthreeofthenorthernregionsare
affected:together,thethreehavethehighestproportionof
localitiesthatliein20percentmostdeprivedsuperoutputareas
(SOAs)inEngland.
Figure2.2.Revenueandexpenditureperregionandnation,2004–05
100
80
£ thous ands
Therearetwomaintypesofpublicexpenditure:(i)identifiable
expenditure,incurredforthebenefitofindividuals,enterprisesor
communitieswithinparticularregions;and(ii)non-identifiable
expenditure(namelyforoverseasactivitiesanddefence),incurred
onbehalfofthewholecountry(ONSandHMT2007).
Thereisalsoadifferentiationbetweenpublicspending‘in’and‘for’
theregion.Publicexpenditureisdefinedas‘in’theregionifit
physicallytakesplacethere,whileitis‘for’theregionifitdirectly
benefitsthatregion,nomatterwhereitisspent(McLean2003).In
somesectors,suchasdefenceandsecurity,theregionalallocation
ofpublicbodiesandgoodsdependsonthe
needsofthestateasawhole,notonlocal
needs.Suchpublicspendingisreferredtoas
spending‘in’theregion,andtheOfficefor
NationalStastics(ONS)providesregular
accountsofhowitisdistributedacrossthe
country.Ontheotherhand,HMTreasuryalso

60
providesaccountsofspending‘for’theregion
40 thatgoesdirectlytotheregionalpopulation
andisaimedatfacilitatingandbuildingon
20 regionalpotential,contributingtoimproved
0 economicperformanceandsocialjustice.Itis
thusimportanttotreattotalpublicspending
NE NW Y& H E M WM E L S E S W W Scot NI
-20 acrosstheregionscarefully,bearinginmind
Region/nation thatnotallspendingisdirectlytargetedata
Revenue, by residence
Revenue, by workplace regionitself:somegoestosupportingthe
Expenditure basicfunctionsofthestate,especiallyina
Difference between expenditure and revenue, by residence situationwherenational-levelpublicsector
jobsaregraduallybeingrelocatedtothe
Source:OxfordEconomics2007
regions.(Wereturntothisissuebelowinthe
section‘Relocationtotheregions’).

Table2.3:Totalidentifiableexpenditureonservicespercountryandregion, ItiswellknownthattheNorthofEngland
perheadinrealterms1,2001–02to2005–06,accruals2,£perhead receivesaproportionallygreatershareof
Region 2001–02 2002–03 2003–04 2004–05 2005–06 publicspendingthanotherpartsofthe
country,andthatthenorthernregions
NorthEast 6,815 6,984 7,398 7,572 7,814
contributemuchlesstothenationalcoffers
NorthWest 6,360 6,567 6,954 7,228 7,481 thantheyconsume(Figure2.2).Thereisan
Yorkshire&Humber 5,948 6,121 6,431 6,708 6,949 emergingtensionwithintheUKbetween
EastMidlands 5,359 5,423 5,747 6,057 6,205 ‘donor’and‘recipient’regions,whichislargely
promptedbythewaymoneyisdistributed
WestMidlands 5,687 5,838 6,223 6,512 6,757
betweentheUK’sfourconstituentnations.
Eastern 4,926 5,145 5,504 5,716 5,928 ThisisstartingtofueldiscontentintheSouth
London 6,611 6,932 7,608 7,781 8,164 ofEngland,whichisnolongerhappyto
SouthEast 4,951 5,126 5,495 5,825 5,960 supportlucrativepublicspendingnotonlyin
Scotland,WalesandNorthernIreland,butalso
SouthWest 5,519 5,536 5,931 6,200 6,398
inthepoorerNorth.Thistensionmayleadto
England 5,753 5,930 6,342 6,603 6,835 moreserioussocialandpoliticalconsequences
Scotland 6,980 7,152 7,630 7,729 8,179 inthefutureifitisnotaddressednow.
Wales 6,675 7,019 7,318 7,514 7,784 Themechanismusedtodistributemoneyto
NorthernIreland 7,792 8,016 8,240 8,451 8,713 Scotland,WalesandNorthernIreland,known
UKidentifiable 5,962 6,148 6,554 6,796 7,049 astheBarnettFormula,wasintroducedin
expenditure 1978andhasproveditsworthbyhelpingto
Notes:1.2005–06prices2.Accrualsarewhereincomeisdueoracostisincurred reducesomeofthewidestdisparitiesbetween
duringanaccountingperiod,butforwhichnoinvoicehasbeenreceived. publicspendingontheUK’sfournations.
Source:PESA2007:Table9.4 However,itisnowinneedofamajorrevision
14 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

inordertoreflecttherealneedsofeachnation,and Table2.4:Totalgovernmentexpenditureperregionperhead,2004–05
alsotheEnglishregions,ifwearetoavoidfurther Region Identifiable(£) Totalmin(£) Totalmax(£)
accusationsthatthereisuneventreatmentof
NorthEast 7,167 8,200 8,700
differentpartsofthecountry(McLeanetal 2007,
forthcoming). NorthWest 6,930 7,600 8,500
YorkshireandHumber 6,363 7,500 7,800
RecentfiguresfromthePublicExpenditure
StatisticalAnalyses2007(ONSandHMT2007) EastMidlands 5,865 6,800 7,300
illustratethat,inabsolutefigures,Londonreceives WestMidlands 6,291 7,100 7,800
thehighestamountofpublicfunds.TheNorth Eastern 5,605 6,900 7,100
Westisinsecondplacewith11.7percentofall
London 7,530 9,000 9,500
identifiablespending.Itisimportanttounderline
thatthisisoneofthemostdenselypopulated SouthEast 5,624 6,900 7,800
regions(containing11percentoftotalUK SouthWest 5,962 7,300 9,000
population)whiletheNorthEasthasoneofthe Scotland 7,597 8,700 9,300
smallestsharesofpopulation(4.2percent).The
Wales 7,248 8,000 8,900
SouthEastreceivesthethirdgreatestamountof
publicfunds.Aregionalbreakdownoftotal NorthernIreland 8,216 9,700 10,100
expendituremeasuredagainstpopulationgivesa UK 6,563 7,600 8,500
differentpicture(Table2.3). Source:PESA2006,OxfordEconomics2007
In2005–06,theregionsoftheNorthofEngland
received24.2percentofthe£448billionofidentifiable
expendituresintheUK(slightlylessthanthe25percentin Figure2.3:Identifiablecapitalexpenditureonservices
2004–05)–equaltotheregion’sshareofnationalpopulation(24 perregion,2006–2007
percentin2005),butaboveitscontributiontonationalwealth South West North East
measuredbyGVA(20.7percentin2005).InallUKregionsapart 8% 5%
North W es t
fromLondonpublicspendingisdominatedbycentralgovernment 15%
agencies,andlocalgovernmentspendingisequaltoonlyaround30 South East
15%
percentoftotalspending(inLondonthefigureishigher,at38per
cent).
Yorkshire and
the Humber
Itismoredifficulttoaccountforregionaldistributionof 9%
unidentifiableexpenditures,whicharemainlyspentondefence,
security,andsomefinancialservices.OxfordEconomicsrecently East Midlands
madesomeestimatesoftheseexpendituresandallocatednon- London 7%
identifiableexpendituresthatbenefitUKresidentsacrossthe 23%
West Midlands
regions(Table2.4).
Eastern 10%
8%
Itisarguedthatevenunidentifiablespendinginareassuchas
defencemightindirectlycontributetoregionaldevelopment Source:PESA2007,Table9.10b
throughpatternsofemploymentandtaxation(OxfordEconomics
2007).Forexample,innovationsbroughttotheregionbyhigh-tech
defencecompaniesmightbeasmallbutimportantstimulusforthe expenditureonpublicservicesinEnglandin2006–07,theNorth
regionaleconomy.Duetothedifficultyofidentifyingtheexact West’sshareisequalto15percent,whileYorkshireandthe
amountthatgoestoeachregion,theauthorsoftheOxford Humberhas9percent,andtheNorthEastonly5percent.Evenif
Economicsstudyallowforarangeprovidingminimumand theamountofcapitalexpenditureismeasuredagainstthe
maximumamounts. populationsize,theNorthWeststillreceivesahigher-than-average
amountat£664perhead,comparedwiththeNorthEastreceiving
Itisalsoimportanttodistinguishillustrationsofcurrentspendingon £632,andYorkshireandtheHumberjust£572perhead.Average
publicservicesfromillustrationsofcapitalinvestment.Theformer capitalexpenditureperheadinEnglandis£619.
showsonlythecurrentdynamicsofspendingonroutinetasksina
situationwherethingsremainthesame,whilethelattermightshow DespitecomplaintswithintheNorthWestregion(see,forexample,
trendsintermsofwhatisspentonimprovingtheinfrastructureand NorthWestRegionalAssembly2003)thatitisnotreceiving
practicesusedtoprovidepublicservicesandpublicsectoractivities sufficientbenefitsfromtheGovernmentrelocationstrategy,at
–whichintheendshouldleadtogreaterproductivityanda £4.53billiontheNorthWestactuallyreceivesthethirdlargest
substantialimprovementinquality. amountofcapitalinvestmentafterLondon.TheSouthEastreceives
£4.5billionandLondonabsorbsalmostaquarterofallinvestments
Lookingatidentifiablecapitalexpenditureonpublicservices,the – £7.04billion.TheNorthWestalsoreceivesmorethantheEast
NorthWestisinamuchbetterpositionthantheothertwonorthern andWestMidlands,wheremorepublicsectorjobswerecreatedin
regions(seeFigure2.3).Outofatotalof£31billioncapital 2006–07astheywereintheNorth.Furthermore,thistrendof
15 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

capitalinvestmentdistributionacrosstheregionshasbeensteady
Figure2.4:Identifiablecurrentexpenditureon overthelastfiveyears.
servicesperregion,2006–2007
Itisinterestingtocomparethispicturewiththeregionalstructureof
South West North East
6%
currentexpenditure(Figure2.4).London’sshareofcapital
10%
investmentismuchgreaterthanitsshareofcurrentspending(23
North West
15% percentversus17percent),whileinrelativetermsotherregions
South East
14%
arereceivingcapitalinvestmentthatislessthancurrentspending.In
theNorthWest,however,bothcapitalandcurrentspendingareat
thesameratio–15percent.Londonalsoreceivesmuchgreater
Yorkshire and capitalinvestmentmeasuredrelativetopopulationsize,andthus
the Humber
10% hasmoreopportunitytomoderniseservicesandincreasethe
effectivenessofservicedelivery.
London
16% ThedatainAppendices1and2alsoillustratethesectoral
East Midlands
8% breakdownofcurrentandcapitalspending.Thisclearlyshowsthat
Eastern West Midlands currentspendinginallregionsisdominatedbyexpenditureon
10% 11% socialprotection,healthandeducation;noparticularregionhasa
muchgreatersharespentontheseservicesthananother(Figure
Source:PESA2007,Table9.10a
2.5).Infact,inallregionsbutLondontheshareofexpenditureon
socialprotectionisbetween43and44percentof
totalcurrentexpenditure(inLondonitis39.5per
Figure2.5:Identifiablecurrentexpenditureonservices,perregionand cent).
perfunction,2006–2007
However,thepicturechangeswhenexpenditureis
60, 000 mappedagainstlocalpopulationsize.Alongwith
Social protection
London,allthreenorthernregionshaveabovethe
50, 000
Education and Englishaveragepercapitaspendingonsocial
tra ining protection.Thisamountsto£3,390intheNorth
40, 000
Health East;£3,161intheNorthWest;£2,939in
£ million

30, 000 YorkshireandtheHumber;£3,018inLondonand

Environmental protection
20, 000
£2,842inEnglandonaverage.Thistrenddoes
Transport
reflectthegreatercostandgreaterneedsof
10, 000 Agriculture, fisheries and northernregionsforthistypeofservice:inorder
forestry
tobeinapositiontoprovideaminimumlevelof
0 Employment policies publicservices,lesspopulatedbutterritorially
th s t

Ea Hu s t

ut st

t
Lo rn
So on
ds

Ea s

es
M be

largeregionswithageingpopulationsand
nd

So Ea
e
a

e
nd
es d la n

Public order and safety

st
st m
an W
No h E

la

h
h
ut
id
rt

generallynegativedemographictrendsrequire
i
tM
r
No

moreexpenditurethanregionsthatdonothave
W
re
hi
ks

thesefeatures.
or

Source:PESA2007,Table9.10a
Y

Whenitcomestocapitalexpenditureon
particularservicesbyregion(Figure2.6),the
Figure2.6:Identifiablecapitalexpenditureonservicesperregionandper situationchangesagainbutintheopposite
function,2006–2007 direction.Forexample,inboththeNorthEast
andYorkshireandtheHumber,investmentin
8,000
Education and transportperheadissubstantiallylowerthanthe
7, 000 training Englishaverage:£115and£107respectively,
6, 000 Recreation, culture and comparedwithanaverageof£157forEngland.In
religion theNorthWest,thesituationisalittlebetter
£ million

5, 000
Health (£134).Ofcourse,thisfigureis‘distorted’by
4, 000
3, 000
Housing and London,where£308perheadisspenton
community amenities
transport;bycomparison,thefigureintheSouth
2, 000 Transport
Eastisveryclosetothenationalaverage.
1, 000 Enterprise and
0 economic development Employment
Public order and safety Accordingtostatisticsonpublicsector
an th W t
Ea Hu est

Ea ds

t
Lo ern
id ds
r as

ut on
ut st
W Mid ber

es
lan

So h Ea
tM n
No E

W
So nd
st
es la
st m

employmentfromtheONS,inthefourthquarter
rth

General public services

No

of2006thetotalnumberofpublicsector
re
hi

employeesintheUK(seasonallyadjusted–that
ks

Source:PESA2007,Table9.10b
r
Yo
16 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

Table2.5:Totalcivilserviceemploymentinthenorthernregions,1997–2002 thisdataisavailableinacoherentformfrom
administrativesources,intheEnglishregions
Civilservice Civilservice Actualchange Percentage
thereisnosuchdataavailable.TheONShasto
employees(1997) employees(2002) change
constructdatasetsusingacombinationofdata
NorthWest 55,138 57,378 2,240 4.06 fromtheLabourForceSurvey(LFS)andthe
Yorkshireand 24,717 29,915 5,198 21.03 publicsectoremploymentestimatesbasedon
theHumber multiplereturnsfrompublicsector
NorthEast 32,323 34,819 2,496 7.72 organisationsthatusetheNationalAccounts
classification4.
Source:CabinetOffice2002
However,thecombineduseofLFSand
NationalAccountsdatahassomelimitations
Table2.6:DynamicsofpublicsectoremploymentintheUK,1991–2006
duetoproblemswiththeinconsistencyoftheir
Year Centralgovernment Localgovernment Publiccorporations
classifications.EventhoughLFSestimateshave
(’000s) (’000s) (’000s)
beenadjustedtomatchtheNationalAccounts
1991* 2,336 3,078 569 definitionsmoreclosely,thedifferencebetween
1994* 2,241 2,760 434 estimatesfromthetwosourcesgrewoverthe
1997* 2,107 2,734 338 period1995–2005(Millard2007).Thegreatest
2000 2,154 2,776 359 differencebetweenthetwoseriesisinthe
sphereoflocalgovernment,inparticular
2003 2,434 2,838 373
educationandpublicadministration.One
2006 2,560 2,942 348 possiblereasonfortheincreasing
*notseasonallyadjusted overestimationofthenumbersofpublicsector
Source:ONS2007a workerswithintheLFSmightbethelarge-scale
outsourcingofsomeserviceswithinthepublic
is,modifiedtoaccountforseasonalfluctuations)wasequalto5.83 sectortoprivatesectorbusinesses(suchas
million,whichis25,000fewerthaninthesameperiodof2005 cleaning,cateringandtransportation).However,whenresponding
(ONS2007a).Thisfigureincludesemploymentincentralandlocal totheLFS,workersinsuchcontracted-outjobsmightstillreferto
governmentagenciesandpubliccorporations. theiractivityaccordingtotheactivityoftheorganisationonwhose
premisestheywork,ratherthantheorganisationwithwhomthey
Despitetheveryhighlevelofattentionpaidtotheimportanceof areemployed.
civilservicejobsforregionalprosperity,onlyabout10percentof
totalpublicservicejobsareinthecivilserviceitself(550,000).Itis ThenumberofpublicsectorjobsacrosstheregionsofEngland
interestingtolookatthedynamicsofcivilservicejobcreation.Over increasedovertheperiod2000–2005.Thelargestincreaseswere
theperiod1997–2002(Table2.5)YorkshireandtheHumbersaw observedintheSouthWest(15.7percent)andtheEastofEngland
largegrowthincivilserviceemployment(21percent),admittedly (14.7percent).YorkshireandtheHumberexperiencedthesmallest
fromalowerbase,whiletherelativegrowthofthecivilservicein growth(only6.2percent),whiletheNorthEast(with12.3per
theNorthEastandNorthWestwasmuchmoremodest(7.7per cent)andtheNorthWest(with11.4percent)hadgrowthabove
centand4percentrespectively).Thesetrendshavesustainedand theEnglishaverage(11percent).
by2005thenumberofpermanentfull-timestaffinYorkshireand Themoredeprivedregionsandnationshaveahighershareof
theHumberhadgrownto38,670,whilegrowthhadbeenmuch publicsectoremployment.Forexample,intheNorthEastpublic
lowerintheNorthWest(59,720).Therehadbeennoneatallinthe sectoremploymentwas23.8percentoftotalemployment,
NorthEast,whichstillhadonly34,460permanentcivilservice comparedwith17.2percentinthebetter-offSouthEastand17.9
employees(CabinetOffice2005a). percentintheEast(2006)(Figure2.7).In2000–2005thehighest
AsforthedynamicsofpublicsectorjobsinUKitisinterestingto growthforpublicsectoremploymentasashareofallemployment
notethatthenumberdecreasedfrom5.983millionin1991to wasintheSouthWest(1.9percentagepoints)andtheEast(1.6
5.168millionin1998,butthenstartedtogrowagain,reaching percentagepoints).Overthesameperiod,Yorkshireandthe
5.850millionin2006(Table2.6). Humbersawonlyamarginalincreaseof0.1percentagepoints,
whilegrowthratesintheNorthEast(1.5percentagepoints)and
Untilrecently,norobustdataexistedonpublicsectoremployment NorthWest(1.4percentagepoints)wereabovetheEnglishaverage
attheregionallevel.In2004ChristopherAllsopp’sReviewof (1.2percentagepoints).
StatisticsforEconomicPolicymaking(Allsopp2004)highlightedthe
importanceofsuchdataandsincethentheONShasstartedto Thepictureisdifferentifwetaketheshareofpublicsector
developamethodologyforproducingregionalestimatesofpublic employmentrelativetothenumberofresidentsineachregion.This
sectoremployment.WhileinScotland,NorthernIrelandandWales showsthecorrelationbetweenthepublicsectorandthecustomer

4.Thesetwodatasourcestakedifferentapproachestodefiningpublicandprivatesectorjobs.Forexample,intheNationalAccountsdefinition,universitystaffandGPsare
classifiedasprivatesectoremployees,whiletheLFSdefinesthemasbeinginthepublicsector.Asaconsequence,originalLFSestimatesofpublicsectoremploymentare
aroundonemillionhigherthanthosefromthefinalPSEnumbers.
17 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

Figure2.7:Publicsectoremploymentasapercentageof Figure2.8:Employmentinmanufacturing,financial
allemployment,perregion servicesandthepublicsector,2005
35 60

30 50
40 Public sector

Per cent
25
P er cent

30
20 Financial
20 services
15
10 Manufacturing
10
0

h st
So h n

t
S o o ern

nd
st s
id n ds
t M dl a r
Ea d W t
5

W t M um s t

Ir e n d

K
N tl a t
es i be

E a a nd

es
u t n do
a n r th a s

U
ut E a
s H e

la
S c We
W
ir e N o h E

o
L
t
or
0

N
er n
nds

st
l ands
st

st

on

t
r

st
nd

land
land

UK

sh
u mb e

We s
h We

h Ea
h Ea

h We

rk
L ond

E n g la
E as t
M i d la

Yo
S c ot
N Ire
t M id

S out
and H
No r t

S out
No r t

Source:ONS2005
E as t
We s
hire

NorthofEnglandhasquiteaparticularemploymentstructure
s
Yo r k

1999 2002 2006

(Figure2.8).Inallthreenorthernregions,employmentin
manufacturingishigherthanthenationalaverage,butnotashigh
Source:LabourForceSurveyinMillard2007 asintheWestandEastMidlands.

baseitisserving.ThetoppositionsstillbelongtoNorthernIreland,
ScotlandandWales,whiletheNorthEastisthetopregionin
England,followedbyLondonandtheSouthEast.Inallofthese
countriesandregions,thepercentageofpublicsectorjobsasa
shareofthetotalresidentpopulationexceeds10percent,whilein
otherEnglishregionsitisbetween8and9percent.
Comparingtheamountofpublicsectorjobswiththoseinkey
sectorssuchasmanufacturingandfinancialservicesshowsthatthe
ThethreenorthernregionslagbehindtheUKaveragefor
employmentinfinancialservices,however(thesectorinwhich
productivityandaveragesalariesareamongthehighest):theNorth
Easthasonly11.4percentemployedinthissector,andtheNorth
WestandYorkshireandtheHumberboth13.4percent,compared
withanationalaverageof15.6percent.Meanwhile,theNorthEast
hasthehighestoverallpublicsectoremploymentasaproportionof
itsworkforce,whiletheNorthWestandYorkshireandtheHumber
areclosetothenationalaverage.
18 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
3.AreviewoftheGovernment’s
publicsectorreform
TheLabourGovernmentssince1997havesupportedan‘enabling
state’approachinwhichpublicsectorspendingisusedtoaddress
marketfailuresandinvigoratespendingbyotherparties.The
ultimateambitionofcurrentpolicyreformsistoevolvetheBritish
welfarestateintowhatwecallan‘Anglo-social’model,
guaranteeingsocialjusticeviahighbutflexibleemploymentand
service-basedlabourmarketscombinedwithastrongpublicsector
(PearceandPaxton2005).Thismodelattemptstocombinethe
dynamismoftheAmericaneconomywithScandinavian-stylesocial
democracy.Itisbelievedthatthiswillleadtolowerlevelsof
inequalityandpovertythanalternativeapproacheswould,without
puttingtheUK’sstrongeconomicperformanceindanger.
TheGovernment’scurrentapproachtotheUKpublicsectorstresses
threekeydriversofchange:
1)Themodernisationagenda
2)Themovetowardsefficiency
3)Decentralisationanddeconcentrationofpublicfunctions.
TheLabourgovernmenthasalong-standingcommitmenttothe
modernisationofpublicservices,confirmedinthe1999WhitePaper
ModernisingGovernment(PrimeMinisterandCabinetOffice1999).
Thisestablishedthecentralobjectiveofpublicservicesasbeing
meetingtheneedsofcustomers,largelythroughtheuseof
informationtechnologyandtheintroductionofan‘e-’government
agenda(althoughtheimplementationofthelatterislaggingbehind
scheduleinmanyareas).
Thedeficienciesinthepublicsectoranditsinabilitytorespondto
moderntechnological,economicandculturalchallengeshave
promptedarangeofindependentreviewscommissionedbythe
Treasury.Twokeyreviewsthathadbigimplicationsforthe‘spatial’
functioningofthepublicsectoranditsregionaldispersalwerethe
GershonEfficiencyReview(2004)andtheLyonsRelocationReview
(2004).Someofthekeyrecommendationsfromthesereviewswere
integratedintotheCabinetOffice’sTransformationalGovernment
Strategy(CabinetOffice2005b).Gradually,thepublicsectoris
gainingmorerelativeflexibilityandbecomingmoremodernby
employingsomeofthetechniquesandapproachesthatare
commoninthebusinessenvironment.Thishasalsobeenfacilitated
bytheGovernment’sstrategyofemployingmorebusinessand
voluntarysectorleadersingovernmentinstitutions.
Streamliningprocurement,outsourcing,andcollaborationinorderto
saveonadministrativefunctionsarethekeyfeaturesdesignedto
changethepublicsectorlandscapeoverthenextfivetotenyears.
Efficiencyisatthecoreofthesereforms,whichaimtoachievea
highlevelofperformancebyemployingfewerresourcestodeliver
maximumqualityservices.
TherationalefortheUK’spolicyofdecentralisationand
‘deconcentration’isinformedbyglobaleconomictrends.Regions
andcitiesarechallengingthepredominanceofnationsinthe
internationalarena,becomingmoreindependent,importantplayers
intheirownright.Ifanationasawholewantstoachievestrong
results,itmustallowitscitiesandregionsmoreauthoritytoexecute
thefunctionsthatwouldallowthemtopositionthemselves
effectivelynotonlyatthenational,butalsoattheinternational
level.Thecentralisedapproachhithertoemployedinthedeliveryof
publicserviceshasnotsofarproducedeffective,efficientor
equitableoutcomesintheUK.Centralgovernmentsthusneedto
delegatemorepowerstosub-nationalgovernments(andithas
alreadystarteddoingthis;see,forexample,theReviewofSub-
NationalEconomicDevelopmentandRegeneration),whichhave
greaterunderstandingofthelocalsituationandcouldthusdevise
moreeffectivestrategiestouselocalfactorsandconditionsforthe
ultimateprosperityandwelfareofthepopulation.
Since1997,theLabourGovernmenthasrecognisedthevast
inequalitiesbetweenUKregions,notablybetweentheNorthEast
andNorthernIrelandandtherestofthecountry(HMTreasuryand
DTI2001).However,theGovernmenthasfailedtodesign
individuallytailoredinstrumentstoaddresstheproblemsof
particularregions.Thus,evensuchpoliciesas‘EnterpriseforAll’
(2000)ortheintroductionofRegionalDevelopmentAgencies
(RDAs)in1999failedtoaddressinequalitiesbecausean‘equal
approach’wasappliedtoallregions,givingeachthesame
opportunitiestobenefitfromeachinitiative.Moreadvancedregions
suchastheSouthEastandLondonwerethusabletotakemuch
betteradvantageoftheseinitiativesthanregionssuchastheNorth
EastorYorkshireandtheHumber.
Recently,theGovernmentidentifiedfivekeyaspectsthatneedto
be(andarebeing)addressedinordertobridgetheproductivitygap
betweenNorthandSouth:skills,investment,innovation,enterprise
andcompetition.Morerecentlystill,theGovernmenthasaimedto
improvetheperformanceoflaggingUKregions,whichisofkey
importanceforachievingnarrowerregionaldisparities(whichremain
thebiggestamongEUcountries[Eurostat2007]).In2005,the
ODPMoutlinedfivekeyfactorsthatshouldbeaddressedinorderto
improvetheregions’economicperformance.Thesewere:
employment,education(andskillsandtraining),businessgrowth,
regionalinvestmentandstructure.Theemphasis,however,wason
employment,withatargetforan80percentemploymentrate
acrossthewholecountry(ODPM2005).
Somecommentatorsarguethatthecurrentpublicspending
approachstillfavoursquantityratherthanquality.Whilethenext
periodoftheComprehensiveSpendingReviewwillseeasmalldrop
inspendingasashareofGDP,thisisbecauseextraresourceshave
driedupafteradecadeofincreasedspendingratherthanbecause
ofachangeofapproach.Bosanquetetal (2007),inareportforthe
thinktankReform,claimthat‘reform’isdiscussedinthelanguage
of‘efficiency’(administrativesavings)ratherthanchoice,
19 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

competitionandprices–whichintheirview,shouldbethereal 2.ItwouldallowUKregionstodesignanddeliverpoliciesthat
driversofchange.Theybelievethatshouldmoremoneybecome bettercorrespondtotheirrealneeds,ratherthanWhitehall
availableinfuture,totalspendingwouldsoonincreaseagain,atthe requirements
costofhighertaxesanddisincentives.
3.Itwouldhelptocreateconditionsforamoredemocraticand
Bosanquetandcolleaguesproposetocutbackpublicexpenditurein locallyaccountablesystemofgovernance.(Morgan2001)
strugglingregionsinordertoencourageprivateinvestmentand
Thereis,however,aneedtofullyandrigorouslyestimatethe
businessstart-ups.Intheiropinion,thiswillalsoaddressthe
economiccostsandbenefitsofadeeperdevolution,bothregionally
problemofadecliningandageingpopulationintheNorth,as
andnationally.Itisarguedthatdevolutioncouldbringnotonlybig
youngerpeoplewillnolongerautomaticallybedrawntoLondon
gains,butalsosignificantburdens.Rodrigues-PoseandGill
andtheGreaterSouthEastforemployment.Thevastinequalitiesin
suggestedthreecoreareasinwhichthedrawbacksofdevolution
economicoutputbetweenLondonandtheSouthEastandother
mighthavethemostsignificantnegativeimpact:efficiencyof
regionsarelargelyexplainedbytheinefficientdistributionofpublic
spending,equityinserviceprovisionandinstitutionalburdensasa
expenditure,wherebyLondonpays18percentoftotalUKpersonal
resultofincreasedbureaucracyandtheneedformoreinteraction
taxation,butreceivesonly14percentofidentifiablepublic
betweenthetiersofgovernment(Rodrigues-PoseandGill2005).
spending.Meanwhile,theSouthEastpays18percentbutreceives
only11percent(Bosanquetetal 2006). Boththeoryandpracticalobservationtestifythatpublicsector
interventionisnecessarytorevivetheeconomyofrelatively
However,thisapproachlooksveryunlikelytobefeasibleinthe
deprivedareasthathavehighlevelsofunemployment.Thepublic
contextoftheAnglo-socialmodelpursuedbytheLabour
sectorcancatalysepositivedevelopmentsinthelabourmarketby
government.Others,likeKevinMorgan,proposesolutionsthatare
combatingunemploymentandincreasingpersonalincomesand
moreinlinewiththismodel.Theyarguethatinordertotackle
publicspending,whichinturnshouldstimulategrowthinthe
regionalinequalitiesthereisaneedtoprogressfrompurely
private(mainlyservice)sector.However,opponentsofthisapproach
administrativedevolutiontodemocraticdevolution.Itisthought
arguethatsuchintrusionsdistortthemarketandunsettlethe
thatthismighthavethreemajorbenefits:
equilibriumthatwouldotherwisebereachedifmarketforceswere
1.Itwouldempowerlocalknowledge,withoutwhichlocalised freetodeterminethesizeandstructureofthelabourmarket.
learninghaslittlepracticaluse Inflowsofpublicsectorjobs,theyargue,mightleadtothecrowding
outoftheregionallabourmarket.
20 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

4.Howshouldpublicsectorchangebe
managedintheNorth?
OverthelasttenyearstheLabourGovernmenthaspromoted regionshasbeenakeystrategytoreducethecongestionofthese
greaterdecentralisationofpowerstotheregionsandlocalities. heavilypopulatedareasandtoenjoysavingsfromthelowercostsof
However,theoverarchingcentralinstitutionalandlegalframework runningabusinessintheMidlandsortheNorthofEngland.
hasremainedinadequatefortheseaspirations.Theoverwhelming
However,previousroundsofjobrelocationanddispersioninthe
focusondeliveringtargetsdesignedandpasseddownbyWhitehall
1970sand1980swerelargelybasedonestimatesofthe
meansthatatthelocallevel,formaltargetsaredelivered
consequencesforregionallabourandcapitalmarkets,alongwith
mechanicallywithoutmuchinitiativeorcreativityoverhowthings
thedesiretocutoperationalcostsinthepublicsector.TheHardman
couldbedonedifferentlytotakethelocalsituationintoaccount.
Reviewin1973cametotheconclusionthatpublicsectorrelocation
ThisuniformityisinparthinderingtheNorth’schancesofradically wouldhaveonlylimitedpositiveimpactsonthereceivingarea
improvingitsperformanceanditspositionrelativetotherestofthe (Hardman1973).However,anex-postevaluationin2003–2004
country.Thecurrentarrangementscanleadonlyto‘linear’changes duringtheLyonsRelocationReviewdiscoveredthatsomelocalities,
andimprovements,wheretheNorthisfollowingallstagesof likeLeedsandNewport,greatlybenefitedfromtheserelocations
economicandsocialdevelopmentinthesamesequenceandover (Experian2003).
thesamedurationasothermoresuccessfulregionsoftheSouth.
TheLyonsrelocationreviewin2004arguedstronglythatregions
ButiftheNorthistooutperformotherpartsofthecountry,itwill
andlocationswillonlybenefitfromtherelocationofpublicsector
needto‘leapfrog’quicklythroughseveralstages:itshould
functionsiftheyare‘regionallyresponsible’andembeddedintothe
condensetheimplementationofnecessaryreformsintoashorter
localmarketsituation(intermsofpay,propertyandskills).The
periodoftimeanddevelopamoreambitiousandspecifically
reviewalsosuggestedthat‘clustering’relocatedofficesinasmall
tailoredagenda,whichwouldthenputitinamorecompetitive
numberofplacesisbetterthandispersingthemacrossthecountry,
position.Merelytryingto‘catchup’willnotclosethe£30billion
sinceitcreatessavingsfromjoined-upback-officefunctionsand
productivitygap,asidentifiedintheNorthernWaystrategy,inthe
createsamorecompetitiveatmosphereforpublicsectoremployees
foreseeablefuture.However,theambitionsshouldnotbeover-
(ratherthantrappingtheminonelocationexecutingthesametype
inflatedandshouldreflecttherealisticpotentialoftheregions(see,
ofjobforalongtime)(Lyons2004).
forexample,OECD2006).
AsaresultoftheLyonsRelocationReview(Lyons2004),the2004
Moreflexibilityshouldbegiventoregionalandlocalgovernments
ComprehensiveSpendingReviewconfirmedtherelocationof
tousedifferentapproachestoachieveacceptablestandardsof
20,000postsfromLondonandtheSouthEastby2010(which
publicservices.Asubstantialdecreaseinthenumberofperformance
accordingtotheReviewwillsave£2billionover15years).Data
indicatorsandPublicServiceAgreement(PSA)targetsinthe
ComprehensiveSpendingReview2007havepaved
thewaytowardsgreaterfreedomforthelocalitiesand
Figure4.1:PostsrelocatedtoGovernmentOfficeAreas,
regionstoidentifytheirownpolicyandmonitoring
December2006
framework.Itis,however,essentialforthestateto
Yorkshire and
maintainaduelevelofsupervisionandcontrolover 2% 5% Humber
1% 0%
regionalandlocalgovernmentsinordertosecurea North West
21%
fairapproachandtoguaranteeminimumsocial 8% Wales
standards.
North East
TheRegionalDevelopmentAgenciesandother 5%
South West
regionaleconomicinstitutionsoftheNorthtendto
haveapositiveoutlookonthepublicsector,which 4% Scotland

theyseeasoneofthedriversforboostingregional East Midlands

productivityandperformance(NWRA2003).They 6%
West Midlands
alsosometimesrelyontherelocationofpublicsector
20%
jobsasanimpulseforthegrowthofjobsinrelated South East
sectors(secondaryeffects).Itisstilldebatable, East of England
6%
however,howmuchthesenewjobsare‘for’the
NorthernIreland
Northern Ireland
regionsandhowmuchtheyare‘in’theregion.
Tobedetermined
To be determine
Relocationtotheregions
Sincethe1970s,therelocationofpublicsectorjobs 22%

fromLondonandtheGreaterSouthEasttoother Source:OfficeofGovernmentCommerce2007
21 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

fromtheOfficeofGovernmentCommerce(OGC)fromDecember
2006demonstratesthataround11,000jobshavesofarbeen
relocated(OGC2007).Twothirdsofthosejobswenttofourregions
(seeFigure4.1).
TheregionsthathavegainedthemostfromthisprocessareWales
(2,487jobs),YorkshireandtheHumber(2,287jobs),andtheNorth
West(2,225jobs).Itisimportanttohighlightthatthelattertwo
regionshavealsogainedthemostrelocatedmanagerialposts(24
percentinYorkshireandtheHumberand20percentintheNorth
West).Meanwhile,theNorthEasthasseenanincreaseofjust654
managerialpostsoverthisperiod.
Sixnortherncitiesandtownsareamongthetoplocalauthoritiesto
benefitfromrelocation:Liverpool,Catterick,Sheffield,Newcastle,
ManchesterandLeeds(OGC2007).Table4.1illustratesthelocation
ofdepartmentofficesinthethreenorthernregionsasofDecember
2006.
Itisinterestingtonotethechangingnatureofthefactorsusedto
explainthenecessityformorepublicservicejobs(includingcivil
servicejobs)beingrelocatedtoregionsoutsideLondonandthe
South.Thegapineconomicandsocialdevelopmentbetweenthese
tworegionsandtherestofthecountryisdramaticandwasstill
growinguntilrecently.Neitherthefiscalrestraintofmuch–though
notall–oftheperiodofConservativeGovernment,northe
financiallymoregenerousmeasuresundertakenbytheLabour
Government,havebeenabletoclosethisgap.Moreover,even
whentherewasrelativelylowinter-regionaldivergence,intra-
regionaldisparitieswerestillgrowing,notonlyintheNorth,but
alsointheSouthofEngland.
SomesuggestthattherelocationofpublicbodiesfromLondonand
theSouthEasttootherregionswillhelptoclosetheproductivity
gapbetweentheNorthandSouthofthecountrybyreducing
unemployment,increasingdemandandimprovingtheuseofinputs
suchashumanresources,financialcapital,infrastructureandnatural
resources,aswellascontributingtowardsimprovingthecapacity
andskillsbaseoflessdevelopedregions(Marshalletal 2005).
Lookingatthecurrentapproachtorelocationandevaluatingits
impactonregionaleconomies,thereareasetofpotentialbenefits
ofrelocationtothenorthernregions,inparticular:
• Newskillsandknowledge,especiallyifnotonlyadministrative
and‘mechanical’jobs(likecallcentreoperators)arerelocated,but
alsoexpertandpolicydepartments
• Aknock-oneffectfor‘consumption’sectors,includingretail,
education,travel,andprivatehealth,duetothehigherdisposable

Table4.1:DepartmentalofficeslocatedinNorthernEngland
NorthEast
EducationandSkills(Darlington)
WorkandPensions(Benton,
Newcastle)
LandRegistry(Durham)
UKPassportOffice(Durham)
ChildSupportAgency(Benton,
Newcastle)
PensionService(Benton,
Newcastle)
CommissionforSocialCare
Inspectorate(Newcastle)
PrescriptionPricingAuthority
(Newcastle)
RevenueandCustoms–National
InsuranceContributionsOffice
(Benton,Newcastle)
Environment,FoodandRuralAffairs
(Longbenton,Alnwick,Newcastle)
TradeandIndustry(Billingham)
Source:OfficeforGovernmentCommerce2007
NorthWest YorkshireandtheHumber
CrownProsecutionService(Liverpool) Health(Leeds)
HMCustomsandExcise EmergencyPlanningCollege(Cabinet
(Liverpool) Office)(Easingwold)
MinistryofDefence EducationandSkills(Sheffield)
EducationandSkills Environment,FoodandRuralAffairs
(Leeds,York)
Environment,FoodandRuralAffairs
(Workington) WorkandPensions(Sheffield,Leeds)
DepartmentofHealth(Manchester) HomeOffice(Sheffield,Leeds)
HealthandSafetyExecutive RevenueandCustoms(Shipley,
(Bootle,Merseyside) Bradford,Leeds)
LandRegistry TradeandIndustry(Leeds,Sheffield)
(Birkenhead,Merseyside)
HMCourtService(Leeds)
HomeOffice(Manchester)
Transport(Leeds)
PrisonService
ConstitutionalAffairs(Leeds)
RevenueandCustoms(Liverpool,
CrownProsecutionService(Leeds)
Manchester)
Culture,MediaandSport(Leeds)
LordChancellor'sDepartment
MinistryofDefence(Leeds)
TradeandIndustry(Manchester)
CommunitiesandLocalGovernment
CommunitiesandLocalGovernment
(Leeds)
(Manchester)
CentralScienceLaboratory-
WorkandPensions(Salford)
Environment,FoodandRuralAffairs
(York)
22 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
incomesofthosemovingtotheregionorbeingemployedbythe
relocateddepartmentoffices
• Improvementstoqualityoflife asitisbelievedthatontheone
hand,peoplemovingfromtheSouthwillenjoyamuchcalmer
lifestyleandabetterwork-lifebalance,andontheotherhand
thattheywillbringdemandsandexpectationsthatwouldpush
localserviceprovidersandmanufacturerstohigherstandards
• Secondaryeffectsofimprovedpublicservicesintheregion(above
alleducationandhealth)
• A‘clustering’effect ofrelocatedofficesforlocalserviceproviders
andotherprivatecompanies.(Somepositiveexamplesalready
exist,forexampletheSheffieldclusteroftheDepartmentofWork
andPensions,HomeOfficeandformerDepartmentforEducation
andSkills.)However,therecommendationsoftheGershon
EffectivenessReview(2004)mightposeproblemsfortheconcept
ofregionalisationthroughoutsourcing,asitproposeshigher
requirementsanduniformstandardsforpotentialprocurement
partnersofgovernmentagencies,andthesearemoreachievable
forbig,diversifiedcompaniesthansmaller,regionally-based
companieswhichhaveonlyjuststartedtoengageinthepublic
sector
• Tacklingthecrowding-outeffect fortheprivatesectorthrough
regionally-adjustablepayratesthatwillnotdistorttheregional
labourmarket.(However,asdiscussedinSection1above,thereis
astrongopinionamongkeyregionalemployersandrecruitments
agenciesintheNorththatthepublicsectordoesnotcause
crowdingoutintheprivatesectorbecausethenatureofthe
positionsisquitedifferentbetweenthetwosectors)
• Synergyeffects forthekeygovernmentpoliciesaimedat
decentralisationandempowermentofregionalandlocal
governments.
AccordingtotheLyonsReview,relocationalsoprovidesaperfect
opportunitytomodernise,sincethegeographicalmoveandthe
‘separation’ofoffices(withrelativelysmalldecision-making/policy
hubsremaininginLondonwhiletherestmoveselsewhere)requires
acompletereviewofoperationalandtechnologicalprocedures.
Relocationallowstheintroductionofnewinformationtechnologies
andashifttowardsmoreflexibleworkpatternstorespondto
changinglifestyles.IfrelocationisactuallytargetedattheNorth,
thiscouldcontributesignificantlytowardsgrowthinthefinancial,IT,
HRsectorsandsoon.Forexample,Leedsalreadyhasthesecond
biggestfinancialservicessector(intermsofnumberofjobs),and
hasextensiveexpertiseintheareaofaccountingandfinancial
management.Advantageofthisfactorcouldbetakenwhen
relocatingrelevantjobsfromLondonandtheSouthEast.
Thedispersionofpublicsectorjobswillalsoprovideacontribution
towardsstatesecurity:evenifLondonandtheSouthEastcame
underseriousthreatfromterrorism,thethreatofdisruptiontothe
workofkeygovernmentagencieswouldbemuchsmallerifoffices
werescatteredacrossthecountry.
Theemergenceofnewregionalquasi-governmentalagenciesin
recentyears(forexampleRDAsandRegionalAssemblies)alsoadds
valuetotherelocation:theycanbringmorelocalknowledgeand
comprehensiveplanningtothiscomplicatedprocess.Quiteoften,
changinganoffice’slocationwillalsopromptwiderchangestoan
organisation’sstructureintermsoftheconductofoperations,
technicalcapabilityandskillspool.TheRDAs,alongwiththe
Whitehalldepartments,wereactivecontributorstotheLyons
Review,‘advertising’theadvantagesoftheirregionsastargetsfor
relocation.Forexample,OneNorthEastcreatedadedicatedwebsite
called‘MovingNorthEast’topromotetheregionasasitefor
relocateddepartmentoffices.
ActiveengagementinthisprocessalsogivesRDAsthe
opportunitiestolinkrelocationinitiativeswiththeirresponsibilities
fordesigningandsteeringtheimplementationoftheRegional
EconomicStrategies(andinthefuture,thesingleIntegrated
RegionalStrategies).Thethreenorthernregions’strategiesrelytoa
substantialextentonthepublicsector(andinparticularonpublic
spendingoneconomicdevelopmentandregeneration)asthedriver
ofsustainableeconomicgrowthandthepotentialcarrierofa
multiplicationeffectforthebusinesssector.Therearethus
opportunitiestoplanrelocationinsuchawaythatitisfully
integratedintotheimplementationofRegionalEconomicStrategies
andtheseprocessesaremutuallyreinforcing.Withtheinstitutional
changesoutlinedintherecentSub-nationalReview(seeJohnsonet
al 2007)itisveryimportantthatregionalagenciesspeakwithone
voicewhenarticulatingtheirviewsonthefutureroleofthepublic
sectoranditsexpansion/developmentinthegivenregion.
Awell-thought-through,consideredapproachtorelocationmight
guaranteehigherbenefitstotheregionthansimplydistributing
departmentsequallyacrossthecountry.Differentdepartments
shouldthereforesynchronisetheirrelocationplansandtrytopursue
a‘reasonableclustering’approach,aimingforconcentrationsina
relativelysmallareainordertoboostlocalserviceandproduct
providersalongsidetheincreaseinemploymentandthe
enhancementofskills.
Skillslevels
Thequalityofpublicsectorjobslocatedintheregionisvery
important.TheNorthofEnglandiswellknownforthecontact
centres(inboththeprivateandpublicsectors)thatwerelocatedin
theregionoverthelast10yearsasanelementofjobcreation
plans.Andthoughthisstrategybroughtasubstantialamountof
low-andmedium-skilledpoststotheregion,ithasprovedtobe
volatile.Thesearehighlymobilefunctions,which–likethe
industrialbranchplantsofthe1960s,’70sand’80s–areeasyto
relocate,andarethereforeoftentopofthelistofoptionswhenitis
timetocutcosts.
AseachofthethreenorthernRegionalEconomicStrategiesstates,
inordertoperformbetterthanotherstheregionsshouldattract
andcreatemorehigh-valuejobs,whichwouldcontributetowards
moredynamiceconomicgrowthandimprovedwelfare(forexample
seeOneNorthEast2006).Untilnow,themajorityofpublicsector
jobshavebeencreatedinlow-andmedium-qualifiedsectorsas
simplesubstitutionsforlostmanufacturingjobs.Theimpactofnew
jobscreatedhasthusnotbeenasdramaticasitwouldbewithhigh-
skilledjobs.
However,theavailabilityofskillsintheNorthisstillamajorissue.
Asexperiencehasshown,eventhebestdesignedandimplemented
relocationplanwilltendtoresultinsubstantialnumbersofjobs
23 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?

beingvacatedintheoriginallocationbythosewhodonotwishto TherecentlypublishedSecondReviewofProgressoftheEfficiency
move,meaningtheonusisonthenewlocationtoprovidea ProgrammebytheNationalAuditOffice(NAO)confirmedthatthe
sufficientamountofskilledlabourtofillthepositions.Doesthe EfficiencyProgrammeisontrack(NAO2007).TheProgrammehas
NorthofEnglandhaveasufficientlyadequateskillsandknowledge madecrucialcontributionstothereformofthepublicsector,
basetofillagreaternumberofhigherskilledvacancies? especiallybyputtingvalueformoneyatthecentreofthereform
process.AccordingtothedataavailableforSeptember2006,
Allthreenorthernregionshavestrongacademicandeducational
governmentdepartmentsachieved£13.3billionoutofatotal£21.5
bases.Anumberofthecountry’stopuniversitiesarelocatedinthe
billiontargetedannualefficiencygains(a62percent‘successrate’).
North,withinternationallyrecognisedcentresofexcellence.A
Theyalsocutthetotalemploymentheadcountby45,550and
substantialnumberofhighly-qualifiedyoungspecialistsgraduate
relocatedafurther9,400poststothe‘frontline’ofpublicservices
fromtheseuniversitiesannuallywhomightremainintheregionif
(ibid).However,thereissomeevidencetosuggestthatthese
therewerejobsavailable.UnfortunatelyfortheNorth,inthe
figuresdonotalwaysadequatelyreflecttherealsituation.Thisis
majorityofcasesgraduatesprefertomovesouthtoadvancetheir
mostlyduetoproblemswithmeasurement,particularlythelackof
careerandtotakeadvantageofsubstantialdifferencesin
adequatedatacollectionsystemsinsomedepartments.Thereare
remuneration.RelocatingpublicsectorjobsfromLondonandthe
manycaseswherethereportedachievementswerenotbasedon
SouthEast–wheregraduatesmightotherwisemovepreciselyto
actualreductionsorcuts,orwheretheimpactofcertaininitiatives
getthesejobs–wouldmakemorevacanciesavailabletoyoung
wasunderestimated.Akeyissueisthustoimprovethequalityand
specialistswhowishedtostayintheregion.
availabilityofdata,whichwouldallowdepartmentstoestablish
Northernuniversitiesarealreadythinkingabouthowtomaximise realistictargetsandthenmeasureprogressagainstthem.
theirresearchandacademicpotential,unitingtheireffortstoattract
However,therearealsoseriousexamplesofinadequately
moretalentedpeopleandmoreinvestment.In2004theycreateda
formulatedefficiencyprogrammeswithinparticulardepartments.
networkofeightbiguniversities,the‘N8’(Durham,Lancaster,
Forexample,theCommonsTreasuryCommitteerecentlycriticised
Leeds,Liverpool,Manchester,Newcastle,SheffieldandYork).The
theefficiencyprogrammefortheOfficeofNationalStatistics
aimwastoraisethestatusofeducationandacademicwork
(ONS),whichaimedtosave£25millionandcut700jobs,witha
(establishingan‘IvyLeague’oftheNorthofEngland),makingthe
further850poststoberelocatedfromLondontoNewport,South
universities’researchandteachingmorerelevanttolocalbusiness,
Wales.TheCommitteewasconcernedthatthemajorityofthe
andlinkingsciencewithpracticeviainnovativeventureprojects
ONS’shighlyqualifiedstaffwasagainsttheproposedmoveto
basedintheuniversities.Thisinitiativeisalsosupportedbythe
Walesandthatthiscouldleadtoalargelossofinstitutional
NorthernWay(seeJohnsonandReed2007),whichgivesbacking
memoryandtomajorproblemsrecruitingnewspecialistsfollowing
toactivitiesinthespheresofhighereducation,scienceand
therelocation.ThiswouldgoagainstthemaingoaloftheONS’s
employmentthatpromotecollaborationacrossthethreenorthern
organisationalreform,whichissupposedlytoimprovepublictrustin
regions.
statestatisticsbyensuringthattheONSisanindependentbody
However,toreallymatchtheneedsofthepublicsector,morelinks thatproduceshighqualitydata.Thecurrentefficiencydrivethus
areneededbetweentheuniversities(especiallyinthesocialsciences seemsmorelikelytounderminethisobjectivethantosupportit.
andhumanities)andpolicymakers.Therearealreadysomeexamples
TheEfficiencyProgrammehasimportantimplicationsnotonlyfor
ofsuchbehaviour,suchasthecreationoftheAcademyfor
centralgovernment,butalsoforregionalandlocalauthorities,since
SustainableCommunitiesinLeeds,andtheestablishmentofthe
allofthemarecommittedtoannualtargetsforefficiencysavingsof
PublicSectorAcademy,aknowledgetransfercentreforthesocial
2.5percent(and3percentforthenextthreeyearsasperCSR07’s
sciencesbasedattheUniversityofSheffieldthatworkswith
newefficiencycommitments).Regionalandlocalauthoritiesare
differentlocalandregionalgovernmentinstitutionsofYorkshireand
alreadystrugglingtoachievethesetargets,however,duetothe
theHumbertobridgethegapbetweenscienceandpractice.
specificsofcontracting(oftenlong-termcontractshavebeen
Efficiencyinthepublicsector agreedanditisthenimpossibletorenegotiatetermsandconditions
TheGershonReviewin2004hadanumberofrecommendationson tomatchthenewrequirements)andtotherelativelysmallscaleof
howtoincreasetheefficiencyofthepublicsectorinsixkeyareas: operations.
procurement;back-officeservices;transactionalservices;policy,
Themostimportantelementsoftheefficiencyagendaforregions
fundingandregulationforthepublicsector;policy,fundingand
andlocalitiesareprocurement,back-officefunctionsand
regulationfortheprivatesector;andproductivity(Gershon2004).
transactionalcosts.Theprocurementreforminprogressenvisages
TheGovernmentacceptedtheserecommendations,andthe makingasubstantialincreaseinsavingsbyimprovingtheskillsof
ChancellorannounceditsEfficiencyProgrammeinApril2005,the procurementspecialistsandcreatingstreamlinedIT-based
keytargetsofwhichare: proceduresonaone-stop-shopbasisforallcentraldepartmentsand
regional/localgovernments.
(1)Toachieve£21.5billioninefficiencysavingsby200708
TheOfficeofGovernmentCommerce(OGC)isleadinginthearea
(2)Toreducetheworkforcewithinthecivilserviceandmilitary
ofmoreeffectivemechanismsandproceduresofprocurement,
administrativeandsupportpostsinthesameperiodoftimeby
primarilythroughtheextensiveuseofICT.Amongrecentchangesis
84,150(13,500ofthesejobswillberelocatedtofront-line
theestablishmentoftheOGC’sExecutiveAgency,
activities).
‘OGCbuying.solutions’.Thisisdesignedtodeliverprofessional
24 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
procurementservicestopublicsectororganisations:byproviding
professionaladviceandtechnicalsupport,enablingorganisationsto
deliveragainsttheircorporatetargetsof‘valueformoney’andmeet
newrequirementsforsustainabilityandtechnicalprogress.
Inordertomeetitsefficiencytargets,theGovernmentisinvesting
heavilyinrestructuringback-officefunctions–combiningthemfor
severalagenciesinregionalcentresclosetotheirlocationsacross
thecountry.Ontheotherhand,efficiencytargetsmeanthata
substantialamountofoperationsneedtobeoutsourcedto
consultantsinordertosaveonadministrativecostsandheadcounts.
However,someoutsourcedprojectshavefailed(forexample,Inland
RevenueandNHSITcontractsthatledtodatacorruptionor
disclosure),orweretooexpensivebecauseconsultantswereableto
bidforinflatedresourcesanddepartmentsdidnothavethe
necessarycheckingprocedurestocutcosts.
TheeffectofthepublicsectorintheNorthof
England
Fromtheaboveanalysisandpolicyreviewitisclearthatthepublic
sectoriscontributingalottotheNorthofEngland–intermsof
bothspendingandemployment.However,thequalityofthis
contributionshouldbequestioned.Currentspendinglevelsmainly
illustratethecostsassociatedwiththeregions’day-to-dayneedsin
termsofrunningbureaucraciesandprovidingbasicservicestothe
population.Spending‘fortheregion’isplayingasignificantrole,
butwhileitsdistributionisalmostentirelycentrally-driventhereis
unlikelytobeavisibleadvancementinthenortherneconomies
relativetotherestoftheUK.Theopportunitiesprovidedbyheavily
centralisedbudgetsaremoreorlessequaltoallEnglishregions,and
thusmoresuccessfulareasintheGreaterSouthEast,wherethereis
higherintellectualpotentialandmoreprivateinvestmentavailable
tomatchexpenditure,arelikelytobenefitmorefromthese
opportunitiesthanwilltheNorthofEngland.
TheNorth’srelativelyhighper-capitapublicexpenditurecaninpart
beexplainedbyneed:historically,thethreenorthernregionshave
beencharacterisedbylong-termdeprivationandstructural
unemployment,whichwerereflectedinlowpersonalincomesand
highlevelsofeconomicinactivityamongthelocalpopulation.The
policydirectionchosenbytheLabourGovernmentpromotes
equalityandsocialjustice,althoughonlytoacertainextent.For
examplethePublicServiceAgreementonregionaldisparities,as
discussedinJohnsonetal 2007,onlycommitstheGovernmentto
reducingthegapingrowthratesofGrossValueAdded(GVA)
betweenthedifferentregions–nottoreducingtheabsolute
disparitiesinGVAbetweentheregions.Evengiventhislimited
objective,substantialamountsofmoneyarerequiredtobridgethe
gapincapacitiesandchancesbetweenregions.Ontheotherhand,
thecostsofpublicservicedeliveryinsparselypopulatedregionsare
higherthaninthedenselypopulatedregionsoftheSouthand
Midlands.Ruralareas,whichconstituteaconsiderableproportionof
theterritoryoftheNorthEast,YorkshireandtheHumber,andthe
NorthWest,alsorequirehigherpercapitacostsforbasicpublic
functions.
Whiletheshareofpublicsectoremploymenthasbeengrowingover
thelasttenyears(particularlyintheNorthEast),therelative
productivityoftheregionaleconomy(measuredbyGVAperhead)
hasbeengoingdown.Theshareofpublicspendingintheseregions
hasremainedmoreorlesssteadyoverthisperiodoftimewith
publiccapitalexpenditurebeingrelativelylow(exceptintheNorth
West),thussignallingthatgovernmentinvestmentinpublicsector
reformisgoingelsewhere.Thepublicsectorhasnotplayeda
‘developmental’roleintheregionsforthemostpart.Ithas
difficultiesincatalysingasignificantmultipliereffectfortheprivate
sectoranditdoesnotappeartohavegreatlyboostedtheprivate
initiativeofthelocalpopulation.Fewadministrativeefficienciesand
innovationshavebeenspurredintheregionbythecommissioning
oroutsourcingofpublicservicesandworks.
LikeSouthernItaly,theNorthofEnglandissufferingfromadeficit
oftheinitiativeandregionalleadershipneededtodrivetheregion
towardssteadyeconomicgrowthandprosperity.Thiswasidentified
inthecontextoftheNorthEastbytheOECD’sterritorialreviewof
theregion(OECD2006)butthelessonsgomuchwider.Thehabit
ofgettingmoneyfromthecentretosatisfytheneedsofdeclining
regionshasplayedanegativerole,nurturingaclientilisticapproach
amongregionalandlocalgovernmentleaders.Theseleadershave
failed,jointlywithregionalandlocalstakeholders,toformulatea
visionfortheregion.Ifsuchavisionwereidentified,itcouldbe
implemented,atleastpartially,usingajointpoolofmoneyfromthe
nationalbudget,EUstructuralfunds(somepartsoftheNorthof
Englandstillqualifyforthissupport),regional/localbudgetsand
privateinvestment.
Moreover,Whitehall’scentralisedplanning,implementationand
controlmechanismshavekeptitintheroleof‘backseatdriver’,
evenwhenformallygrantingtheregionstheopportunitytoexplore
theirlocalpotentialandrelativeadvantages.Veryoften,local
knowledgeisignoredoroverruledbytheexpertviewfromLondon,
forexampleindecisionsaboutmajorinfrastructure,transport
projectsortheallocationofEuropeanstructuralfunds.Nonetheless,
therehavebeencasesinwhichsomeEnglishregions(forexample,
theWestMidlands)havemanagedtopresentanddefendtheir
positionclearlyinnegotiationswithcentralgovernment,andthe
northernregionsshouldlearnlessonsfromsuchexamples.
Thereisnoclearevidencethatthepublicsectorhasbeencrowding
outprivatesectorjobs.Thisispartlybecausethetwosectorshave
quitedifferentjobprofiles,andpartlybecauseofthedifferencesin
remunerationpackagesbetweenthetwo.Thepublicsectorismore
attractiveforemployeesinperiodsofeconomicrecessionand
stagnationthaninboomperiods(atleastinthemid-andhigh-
skilledsegmentsofthelabourmarket).Otherwise,forhigh-skilled
positionsthesalaryandotherbenefitsofferedbytheprivatesector
aremoreattractivethanwhatisonofferatthesamelevelinthe
publicsector(thoughpublicsectoremploymenttendstobemore
stable).
Demographictrendssuggesttherewillbeagrowingneedforsome
typesofservicesandadecreasingneedforothers.Anageing
populationwillputmorestrainonhealthcareandsocialservices.
Moreover,theoldersectionofthepopulationislessableorless
inclinedtousenewtechnologies(suchascomputers,theInternet,
mobilephones,andlandtelephonelines),andthusitmaybeharder
tocutcostsforthemthroughtheintroductionofnewinformation
andcommunicationtechnologies.Ontheotherhand,new
technologiesmaybringsignificantbenefitstotheeducationsector,
asyoungpeopleadapttousingthemmuchmorequickly.
25 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
TherelocationofpublicsectorjobsoutsideLondonandtheSouth
EastofferssignificantpotentialgainstotheNorth,thoughforthese
gainstobesustainable,thesejobsshouldbeinhighvalue-added
sectors.Tomatchthistrend,theregion’shighereducation
institutionsshouldcollaboratemoreactivelywithpublicsector
institutions,inordertoofferjobstoyoung,highly-qualified
graduatesthatwillkeepthemlivingintheregion.Relocationalso
hasthepotentialtohaveapositiveimpactonthegrowthof
regionally-basedserviceproviders(bothforthepublicsectorand
privateconsumption)andonincomes.Thisneedstobebalanced,
however,againstthefactthataninflowofhighlypaidspecialists
couldleadtoagrowthinpropertyandcommodityprices,which
couldhavenegativeconsequencesforlow-incomeresidents.
Thepublicsectorefficiencyagendaprovidessomeopportunitiesfor
cuttingcostsandrationalisingthewaypublicorganisationsare
operating.However,theefficiencydriveisprovingtobeamajor
problematthelocallevel,wheretherelativelysmallscaleof
operationsandcontractingissuesmakeitdifficulttoreachthe2.5
percentefficiencytarget(orthe3percenttargetforthenext
period,2008–11).Northern-basedcompanieswithnoprevious
experienceinpublicprocurementmighthavelittlechanceof
accessingthislucrativesector,asstandardsarebecomingmuch
tighterandmoreformalised,requiringagreatdealoftechnical
expertisewhichcouldonlybegainedfrompracticalexperience.
(AccordingtotheconsultingcompanyKable,outsourcinginthe
publicsectorreached£49.4billionin2005–06andhasthepotential
togrowto£64.3billionin2008–09[Kable2006].)Henceevenif
governmentofficesarerelocatedtotheNorth,thismightnothelpif
procurementisstilllargelyrunfromthecentreandreliesheavilyon
ICTinstruments.
26 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
5.Conclusionsandrecommendations
Theanalysisundertakeninthispaperconfirmstheideathatthe
publicandprivatesectorsarenotmutuallyexclusiveentities.Both
theoryandpracticalobservationtestifythatpublicinterventionis
necessarytorevivetheeconomyofrelativelydeprivedareasthat
havehighlevelsofunemployment.Thepublicsectorcancatalyse
positivedevelopmentsinthelabourmarketbycombating
unemploymentandincreasingpersonalincomesandspending,
whichinturnshouldstimulategrowthintheprivatesector.
Thenewroleofthepublicsector
Thecorepurposeofthepublicsectoristodeliverpublicgoodsthat
arenotsuitableforprovisionbytheprivatesector(suchasdefence,
justiceandaspectsoffundamentalscientificresearch),aswellasa
substantialproportionofeducationandhealthservices.Atthesame
timethepublicsectorhasavitalroletoplayincreatinganenabling
environmentfortheprivatesectorandextendingthecollaboration
andinvolvementofthevoluntarysectorintheprovisionofpublic
services.Thisroleneedstobeperformednotonlythrough
conventionaleconomicinstrumentssuchasinterestrates,fiscal
stability,financialsupportandlabourmarketregulations,butalso
bycreatingthenecessarytoolstoimprovethelinksbetween
business,innovativescienceandhighereducationinstitutions,and
byprovidinganadequatetransportandcommunications
infrastructure,andagoodregulatoryenvironment.
Attheregionallevel,thepublicsector’senablingfunctionsshould
takeprecedenceoveritsinterventionist,regulatoryelements.The
sectorneedstobecomearealfactorofdevelopmentfortheregions
andforbusinesses,enablingthemtounlocktheirpotentialandto
increasetheirinvestments.
Costsandbenefits
DemographictrendsintheUKnecessitateareviewofcurrentpublic
spendingallocationsandpriorities.TheONS(2007b)reportsthat
apartfromnegativenaturalpopulationgrowth–whichcouldbe
compensatedforbyhigherlevelsofimmigration–Britishsociety
hasmore‘dispersed’families,withasubstantialincreaseinthe
numberofpeoplelivingalone(fromthreemillionin1971toseven
millionin2005).Ifthistrendcontinues,itwillhaveserious
implicationsforcommunityandtransportinfrastructure,landuse
planningandhousingpolicy.Thehealthandsocialserviceswill
experiencerevolutionarychangesresultingfromincreasedlife
expectancyandthegreaterproportionofolderpeopleinthe
population,whohavespecialisedneedsandrequirements.An
adjustmentineducationandemploymentpolicieswillalsobe
requiredtosecuremorelabourintheover-50sagegroup,whichis
currentlyunder-representedintheactivelabourforce.Weanalyse
thisthemeindetailinJohnsonetal2007.
Thelowerthepopulationdensity,thehigherthecostsofproviding
services.TheNorthofEnglandhasalowpopulationdensityoverall
andthereforethetotalcostofprovidingservicesishigh.Theneed
forpublicinvestmentisalsogreater,sincetheprivatesectorhas
continuallyfailedtorestructureproductionfacilitiesandchangethe
specialisationoftheregionaleconomyinordertosatisfythe
growingdemandforparticularproductsandservices.Allofthis
raisesthethresholdforthetotalamountofpublicspending
required.
Whileanalysingthe(extensive)roleofthepublicsectorintheNorth
ofEnglanditisimportanttolooknotonlyatthetotalamountof
publicfunding,butalsoatits‘quality’:itsabilitytostimulatenew
economicactivityandinvestmentintheprivatesector,whichwill
ideallythenenableagradualreductionofstateinterventionand
financialinjections.Thesuccessfulexamplesofcountriessuchas
SwedenorFinlandprovethatincreasedpublicinvestmentin
education,R&D,scienceandtechnologyandcrucialbusinessand
communityinfrastructurecankeepstatesandregionsatthetopof
the21stcenturyglobaleconomy.
CurrenthighlevelsofspendinginnorthernEnglandmainlyillustrate
thehighcostsassociatedwiththeday-to-dayneedsofitsthree
regions.Publiccapitalexpenditurehasbeenrelativelylowthere
(exceptintheNorthWest),thussignallingthatgovernment
investmentinpublicsectorreformisspreadunequallyandis
inadequatetorespondtothechallengesofthemostdeprived
regions.Theyhavelessmoneytospendonmodernisationandthus
havelesschancetoimprovetheiroutcomestohigher-than-average
rates(whichareneededinordertocatchupwiththenational
average).Thepublicsectorhasnotcatalysedamultipliereffectfor
theprivatesectorandhasnotboostedtheprivateinitiativeofthe
localpopulation.TheGovernment’sspatialallocationofinvestments
shouldchangeinordertoallowmorecapitaltounlockthepotential
ofthenorthernregions.
Thecorepublicspending(thatcontributesdirectlytotheregions)
willalsohavetochangetoreflectchangingneedsinspendingin
differentsectors.Whilethedistributionofspendingiswhollydriven
fromthecentre,thereisunlikelytobeadramaticadvancementin
thenortherneconomiesrelativetotherestoftheUK.Currently,the
opportunitiesprovidedaremoreorlessequaltothoseinallEnglish
regions,andthusmoresuccessfulareasintheGreaterSouthEast
arelikelytoremainbetteroff.ThereisaneedforGovernmentto
developamodernneeds-basedapproachtodistributingfunds
acrosstheEnglishregions.
Relocationofjobsandskills
Whiletheshareofpublicsectoremploymenthasbeengrowingover
thelasttenyearsandtheshareofpublicspendinghasremained
relativelystable,therelativeproductivityofthenorthernregional
economies(measuredbyGVAperhead)hasbeengoingdown.One
ofthekeydriversbehindthisphenomenonisthatthepublicsector
jobsinthethreeregionsarestilllargelyconcentratedinthelower
segmentoflabourmarket,thushinderingthegrowthofregional
output.
Ourresearchrevealedthepositiveresultsfromtherelocationof
managerialpoststotheNorthWestandYorkshireandtheHumber
from2004–06.Wearguethatthistrendshouldbesustainedand
distributedacrossallnorthernregions.Toreallycontributeto
regionaldecentralisationandclosetheproductivitygapbetweenthe
27 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
NorthandtheSouth,thepublicsectorshouldorganiseand
streamlinetherelocationprocessinawaythatstrengthensthe
expertiseandscientificcapacityoftheselessadvantagedregions.
Thiscouldbedonebymovingmorepolicyandresearchpoststothe
North.RelocatingpublicsectorjobsfromLondonandtheSouth
Eastwouldalsomakevacanciesavailabletoyoungspecialists
graduatingfromtheregion’suniversitieswhowishedtostayinthe
area,andwhomightotherwisemovesouthpreciselytogetthese
jobs.
Thecentrally-drivenprocessofrelocationshouldbeplannedinsuch
awaythatitisfullyintegratedintotheimplementationofRegional
EconomicStrategies(soontobecomesingleIntegratedRegional
Strategies)andthattheseprocessesaremutuallyreinforcing.All
threenorthernRegionalEconomicStrategiesoftenrelyonthe
publicsector(andpublicspendingoneconomicdevelopmentand
regenerationinparticular)asoneofthekeydriversofsustainable
economicgrowthandasapotentialcatalystofamultipliereffectfor
thelabourmarketandbusinesses.
Efficiencyandspatialeffectsinthepublicsector
Atthemoment,theGovernmentinitsmodernisationofthepublic
sectoroverwhelminglyfocusesondeliveringitsefficiencyagenda.
Despitetheimportanceofthismissionitisoftendoneinquitea
mechanical,non-inventiveway.Thecurrentefficiencytargetshave
causedproblemsatthelocalandregionallevelsduetotherigidity
ofthetargetsandthelimitsoftheregions’bargainingpower.The
uniformityispartlyresponsibleforhinderingtheNorth’schancesof
radicallyimprovingitsperformanceanditspositionrelativetothe
restofthecountry.
Ourresearchconcludesthatcurrentarrangementscanonlyleadto
‘linear’changesandimprovements,followingthepatternofgradual
andsuccessivestagesandphases,whichrequireacertainamountof
timeandresources.Webelievethatthesameefficiencyresults
couldbebetterachievedbyaddingothermeans,forexample
creatingasystemofincentivestoboostcollaborativeinitiatives,or
settingupconditionalityprinciplesforprovidingfinancialresources
(ontopoftheminimumrequired)tospurinnovationandcreate
bettervalueformoneyinthepublicsector.FortheNorthto
performbetterthanotherpartsofthecountry,itwillneedtobe
morecreativeandto‘leapfrog’quicklythroughseveralstages.It
needstoabsorbpositiveandnegativeexperiencesfromotherparts
ofthecountry,tohaveclearobjectivesforthefutureandtouseall
thistodevelopitsownuniquepathforprogress,rootedinthelocal
situationandtakingfullaccountoflocalfactors.
Also,greateremphasisonspatialefficiencyofpublicservicesis
needed,whichstemsfromenhancingthepositiveclustereffects
fromrelocatedofficesandusinglocallyavailablefactorsand
resourcesmoresuccessfully.
Procurement
WerecommendthattheGovernmentcontinuestoimprovethe
efficiencyofpublicprocurementprocedures(viatheOfficeof
GovernmentCommerce),introducinghigherstandardsandICT-
basedsolutions.However,thisshouldbedoneinawaythat
increasesthechancesforregionalandlocalcompaniestoparticipate
intheprocess.Theyshouldreceivesupport,adviceandtrainingon
howtocomplywiththesenewstandards,howtousenewtoolsin
publicprocurement(whichareofteninternet-based),andhowto
becomemorecompetitive.Thisnewtechnologyshouldenablethem
toprovidegoodsandservicesnotonlylocally,butalsotopublic
agentslocatedinotherregionsoftheUK.
Thequalityofdata
Therigouranddepthofourandothers’researchsuffersduetothe
deficienciesinpublicsectoremploymentstatistics.Werecommend
thattheGovernmentmakefundingavailableforthegatheringand
productionofadministrativedatafortheEnglishregions(asisdone
inScotland,WalesandNorthernIreland)insteadofrelyingonONS
regionalestimatesbasedonLabourForceSurveydata.These
estimatesareinconsistentwiththeNationalAccountsclassification.
TheLFSdefinitionofpublicsectoremploymentshouldbeusedasa
basis,sinceitismoreaccuratethantheNationalAccountsdefinition
(classifyingGPsanduniversitystaffaspublic,ratherthanprivate,
sectoremployees).
Decentralisationandleadership
TheNorthofEnglandshowssomeofthesymptomsofclientelism–
adeficitofinitiativeandjoint-upregionalleadershipthatcould
drivetheregiontowardssteadyeconomicgrowthandprosperity.To
reversethissituationthereisaneedinadditionalcapacity.
Whitehall’scentralisedplanning,implementationandcontrol
mechanismshavekeptitintheroleof‘backseatdriver’,evenwhen
formallygrantingtheregionstheopportunitytoexploretheirlocal
potentialandrelativeadvantages.Nowitistimetoprovidesupport
totheregionalandlocalauthoritiestostrengthentheircapacityin
orderthattheycanperformtheseandotherfunctionsontheirown.
Thismeansthatdevelopmentalpublicspendingintheregionswill
requireadifferent,lesscentralistic,approach,informedbytheidea
thatregionsandsub-regionsarerelativelyautonomousunits
seekinggreaterproductivityandintra-regionalterritorialequality.
Regionalandlocalleadersshouldunitetheireffortsandresourcesto
improvetheprocessesofstrategicplanningandimplementationin
theever-extendingareasoftheirresponsibility.Leadership,
strengthenedcapacityandinitiativeattheregionallevelshouldbe
encouragedandsupported,reducingthepowerofcentral
governmenttodictateinareasthatmightbenefitmorefrom
regionalandlocalknowledgeandterritorially-adaptablepolicies.It
is,however,essentialforthestatetomaintainacertainlevelof
supervisionandcontroloverregionalandlocalgovernmentinorder
tosecureafairapproachandtoguaranteeminimumsocial
standards,whichwouldbeimposedbylawortargets.
28 ipprnorth|ThePublicSectorintheNorth:Driverorintruder?
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Appendix1.Identifiablecurrentexpenditureonservices,byfunction,countryandregion,2006-07
£million
GPS EUT IS DI D POS EED ST EP AFF T EP HCA H RCR ET SP UP Total
NorthEast 295 - 10 - 5 1,300 415 61 219 209 280 265 197 4,184 291 2,932 8,611 - 19,272
NorthWest 683 - 26 - 9 3,366 623 151 437 418 985 961 538 10,997 598 7,676 21,582 - 49,051
Yorkshire&Humber 422 - 20 - 6 2,034 569 131 321 437 557 449 302 7,729 468 5,551 14,811 - 33,805
EastMidlands 364 - 16 - 6 1,525 381 105 154 391 548 351 167 5,895 357 4,451 11,357 - 26,069
WestMidlands 499 - 20 - 9 2,113 363 97 397 415 724 456 212 7,799 437 5,943 15,469 - 34,954
Eastern 497 - 21 - 11 1,792 169 255 187 411 514 502 111 7,262 410 5,449 14,063 - 31,653
London 926 - 29 - 13 5,253 478 298 409 217 2,371 809 894 12,080 953 9,603 22,422 - 56,754
SouthEast 721 - 31 - 21 2,932 279 252 193 496 1,028 1,131 293 10,714 659 8,058 20,169 - 46,976
SouthWest 482 - 19 - 10 1,876 212 91 159 894 600 743 188 7,066 405 4,899 13,919 - 31,563
England 4,889 - 192 - 91 22,190 3,489 1,440 2,476 3,888 7,607 5,668 2,901 73,725 4,577 54,563 142,402 - 330,097
Scotland 783 - 19 - 8 1,955 567 252 614 672 1,267 1,174 361 8,644 816 6,186 16,021 - 39,339
Wales 614 - 11 - 4 1,359 574 55 112 371 475 397 134 4,659 499 3,431 9,549 - 22,246
NorthernIreland 382 - 7 - 1 1,243 220 52 163 446 250 194 518 2,691 308 2,156 6,097 - 14,729
UKcurrent 6,668 - 229 - 104 26,746 4,850 1,799 3,365 5,377 9,598 7,433 3,914 89,719 6,201 66,337 174,070 - 406,411
identifable expend.
OutsidetheUK 5 4,378 5,289 - 48 0 40 145 9 - 37 34 0 605 160 5 2,308 - 13,062
Totalcurrent 6,673 4,378 5,519 - 152 26,746 4,890 1,943 3,375 5,377 9,635 7,467 3,915 90,323 6,361 66,342 176,378 - 419,473
identifiableexpend.
Non-identifiable 4,975 -7,090 1,131 27,166 30,836 1,494 118 327 - 67 137 249 - 167 2,742 - 1 2,081 64,402
spending
Totalcurrent
expend.onservices 11,648 -2,712 6,650 27,166 30,988 28,240 5,008 2,271 3,375 5,444 9,772 7,716 3,915 90,491 9,103 66,342 176,379 2,081 483,875
Source:HMT,PESA2007,Table9.10a

KEYGPS=GeneralpublicservicesEUT=EUtransactionsIS=InternationalservicesDI=DebtinterestD=DefencePOS=PublicorderandsafetyEED=Enterpriseandeconomicdevelopment
ST=ScienceandtechnologyEP=EnvironmentalpoliciesAFF=Agriculture,fisheriesandforestryT=TransportEP=EnvironmentprotectionHCA=Housingandcommunityamenities
H=HealthRCR=Recreation,cultureandreligionET=EducationandtrainingSP=SocialprotectionUP=Unallocatedprovision
Appendix2.Identifiablecapitalexpenditureonservices,byfunction,countryandregion,2006-07
£million
GPS EUT IS DI D POS 7 8 9 10 11 12 13 14 15 16 17 18 Total
NorthEast 40 - 1 - 1 63 96 16 1 2 293 47 287 282 143 281 55 - 1,609
NorthWest 118 - 3 - 1 190 590 29 2 11 915 289 837 714 201 547 87 - 4,533
Yorkshire&Humber 52 - 2 - 1 154 105 33 1 12 539 117 633 414 208 526 83 - 2,882
EastMidlands 110 - 1 - 1 98 47 22 1 7 460 51 283 378 139 423 50 - 2,073
WestMidlands 125 - 1 - 1 152 169 25 1 9 688 74 458 489 236 522 62 - 3,010
Eastern 126 - 1 - 1 111 87 45 1 4 800 73 295 353 165 454 40 - 2,554
London 199 - 1 - 2 439 31 92 2 39 2,292 61 1,798 660 434 910 80 - 7,040
SouthEast 187 - 1 - 2 179 209 60 1 15 1,266 208 635 925 229 762 69 - 4,746
SouthWest 70 - 0 - 1 104 77 21 1 53 613 185 245 498 218 441 48 - 2,575
England 1,027 - 9 - 11 1,490 1,413 344 12 153 7,864 1,105 5,470 4,713 1,972 4,866 574 - 31,022
Scotland 78 - 0 - 0 209 111 75 49 90 1,232 264 1,188 491 266 550 107 - 4,711
Wales 123 - 0 - 0 118 221 16 1 13 445 67 350 220 158 219 36 - 1,987
NorthernIreland 41 - 0 - 0 95 72 18 0 44 142 77 413 189 116 276 53 - 1,534
UKcapitalidentifiable 1,268 - 10 - 11 1,912 1,816 452 62 301 9,683 1,513 7,421 5,613 2,513 5,911 769 - 39,254
expenditure
OutsidetheUK 1 - 31 - 5 - 72 36 - - 1 8 - 0 44 - - - 197
Totalcapital 1,269 - 41 - 16 1,912 1,888 489 62 301 9,683 1,521 7,421 5,613 2,557 5,911 769 - 39,451
identifiableexpenditure
Non-identifiable 374 - 159 - 1,218 156 48 81 - - 9 24 - 80 84 - - 3,696 5,931
spending
Totalcapital 1,643 - 200 - 1,234 2,068 1,936 570 62 301 9,693 1,545 7,421 5,693 2,641 5,911 769 3,696 45,382
expenditureon
services
Source:HMT,PESA2007,Table9.10b

KEYGPS=GeneralpublicservicesEUT=EUtransactionsIS=InternationalservicesDI=DebtinterestD=DefencePOS=PublicorderandsafetyEED=Enterpriseandeconomicdevelopment
ST=ScienceandtechnologyEP=EnvironmentalpoliciesAFF=Agriculture,fisheriesandforestryT=TransportEP=EnvironmentprotectionHCA=Housingandcommunityamenities
H=HealthRCR=Recreation,cultureandreligionET=EducationandtrainingSP=SocialprotectionUP=Unallocatedprovision