Newspaper article The Journal (Newcastle, England)

In My View

Newspaper article The Journal (Newcastle, England)

In My View

Article excerpt

Byline: By John Adams

On Monday John Prescott will visit Gateshead to launch the latest document from the Northern Way initiative (well that's what I've heard ( I think my invite got lost in the post).

Last September, the three northern RDAs and John Prescott announced that they had jointly created a pounds 100m growth fund designed to help drive forward the economic renaissance of the north.

The Business Plan which will be launched on Monday will detail how that pounds 100m is to be spent. One of the issues which is occasionally discussed in this context is whether public expenditure squeezes out growth in the private sector. In the pages of this newspaper a few weeks ago an economic development consultancy said that the North-East's dependence on public expenditure was like a drug, and a leading figure from the region called for the public sector "to be trimmed back" to "encourage enterprise and innovation".

The argument for reducing the size of the state and the associated burden of funding was the mantra of the "New Right" during the 1980s and 1990s. Conservative thinking argued that the high levels of taxation necessary to finance spending created disincentives to work and high burdens on business.

Often the implicit assumption was that public expenditure disappeared into a black hole from which nothing of any value ever emerged.

There never was much value in these crude debates, but it is worth revisiting the argument, in the light of the Northern Way strategy and One NorthEast's economic strategy.

It is true that a relatively high proportion of the North-East's economic output does come from Government spending. Total public expenditure in the three northern regions is nearly pounds 100bn ( approximately 1,000 times bigger than the Northern Way growth fund.

But the actual levels of public spending per head in the North-East are lower than in more economically successful parts of the UK.

For some years London and Scotland have had both higher levels of public spending and higher economic growth rates than the North-East. On the other hand, Wales has had higher levels of public expenditure than the North-East but a roughly comparable rate of economic growth. …

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