Memorandum by Sheffield City Council (UWP
KEY FACTORS CONTRIBUTING TO REGIONAL DISPARITIES,
THEIR RELEVANCE TO SHEFFIELD CITY COUNCIL AND THE WIDER REGION
The following key facts are presented to help explain
why the Gross Domestic Product (GDP) of Sheffield, its city region
and Yorkshire and Humberside, are so much lower than London and
the South East.
The GDP of the Sheffield City Region
has been falling in relative terms since 1979 and now stands at
only 73 per cent of the England average, less than £8,000
per head in 1996.
This compares with £12,640 per head (60 per cent higher)
for the whole of the London and South East Standard Statistical
Regionand this gap is projected to grow on past trends.
Yorkshire and Humberside is the second lowest region in England
(87 per cent of England in 1997).
In 1997-98 only 67 per cent of the adults of
working age in the Sheffield City Region were in employment, one
of the lowest rates in England. This amounts to a shortfall of
130,000 jobs compared with more prosperous parts of the country,
such as the South East, where 80 per cent are in work.
Sheffield City Region has been reliant on large
firms working within traditional but declining industries. Consequently
there are only 18 businesses per 1,000 residents. This compares
with nearly double that number in London and the South East (33
businesses per 1,000 residents) and the business formation rate,
two new businesses per 1,000 residents per year, is less than
Average full-time earnings in London are currently
£520 per week compared with £350 per week in Sheffield
City Region. Much of this difference is accounted for by the industrial/occupational
structure of London's workforce with the highest earning industries
and occupations heavily concentrated there, rather than being
more evenly distributed across the regions. The very high earnings
of a small minority working in London has a particularly significant
The most recent household income figures for
1997 confirm that Yorkshire and Humberside had the second lowest
household incomes in England (89.5 per cent of the England average).
At a county level South Yorkshire had the second lowest household
incomes in England and the third lowest in the UK behind Mid-Glamorgan
and Tyne and Wear (83 per cent of England in 1995). London and
three adjoining counties exceeded 120 per cent and nearly all
counties in the South East exceeded 105 per cent. Very few counties
outside the South East were as high as this, so a clear divide
Government's own expenditure in 1996-97 was
particularly concentrated in London, Scotland, Wales and Northern
Ireland. Spending in London was 22 per cent higher per head than
in Yorkshire and Humberside, for example. If the London level
of expenditure applied it would amount to an additional £3,800
million in Yorkshire and Humberside (and approximately £400
million extra in Sheffield).
The additional expenditure in London is especially
significant in the following services:
Health and personal services.
Exam results in London are generally better
than in Sheffield or its city region. For example over 40 per
cent gain five or more GCSEs grades A-C in London compared with
37 per cent in Sheffield in 1997. This may be because London receives
23 per cent more funding per pupil. A secondary school with 1,000
pupils receives the equivalent of £3.65 million in London
compared with £2.96 million in Sheffield.
One aspect of Government spending is the Revenue
Support Grant to Local Government. Sheffield's grant in 1999-2000
in £397 million but it would be £91 million higher (£488
million) if the grant per head that London receives applied.
Council tax for a Band D property across London
averages £731 in 1999-2000 the lowest figure for any English
region. The metropolitan district average is much higher at £878,
including Sheffield at £886. These differences are due to
the higher levels of grant to London.
Council Tax is a regressive form of taxation,
taking a higher proportion from low-income families than high
earners. This is also generally true for all forms of indirect
taxation. Although direct taxation bears more heavily on high
earnings the overall impact is regressive. In 1996-97 households
with the fifth lowest incomes, £7,080 per year, paid 37.4
per cent of this in taxation; those on the highest incomes, £45,870
per year, paid only 35.1 per cent in taxation. With much higher
earnings in London and the South East the overall rate of taxation
will tend to be lower, and after-tax income that much higher.
Over the last two years average house values
have increased from £53,000 to £55,000 in Yorkshire
and Humberside compared with increases in London (from £99,000
to £131,000) and the South East (from £91,000 to £113,000).
These are a particularly key aspect of the growing North-South
divide. In effect there is a growing transfer of wealth from North
to South. There is also a transfer of wealth from savers to borrowers
in those situations where house price inflation is so high. Since
there has not been a revaluation of property values since 1991,
it is also true that Council Tax no longer properly reflects current
The Lottery is helping to fund many public projects
across the country. The total amount allocated to London, nearly
£1,300 million to the end of 1998, is more than double the
amount for any other region. If Yorkshire and Humberside had the
equivalent level of funding it would be receiving over £900
million rather than the £400 million it has received so far.
Perversely the population of London spends less on the lottery
than most other regions so there is a substantial net transfer
of funds from North to South.
Research and development, a crucial aspect of
industrial competitiveness, is particularly concentrated in London
and the South East, both within the public and private sectors.
If Yorkshire and Humberside received the same level of investment
as London and the South East the increase in spending would be
Government research spend would increase
from £55 million to £297 million.
Higher education research spend would
increase from £229 million to £388 million.
Business research spend would increase
from £256 million to £987 million.
In total this amounts to an effective shortfall
in spending in Yorkshire and Humberside of over £1,100 million,
equivalent to £115 million in Sheffield.
Transport investment is particularly
concentrated in London and the South East with projects such as
the Channel Tunnel and its link to London and the Jubilee Line.
Nearly 90 per cent of all scheduled international flights are
concentrated in the South East.
Non manufacturing inward investment is
concentrated more to the South East with five times as many investment
projects as Yorkshire and Humberside.
DTI preferential assistance is mainly
to Scotland, Wales and Northern Ireland, £460 million in
1997-98, compared with £13 million to Yorkshire and Humberside.
SRB is particularly concentrated
in London with London receiving three times the amount of Yorkshire
and Humberside in SRB Round 5 (£320 million compared with
£109 million). Over all rounds London has received £1,135
million, 25 per cent more per head than Yorkshire and Humberside.
Other sources of regeneration fundingcapital
receipts and the action zone programmesshow London in receipt
of £783 million, almost double the amount received per head
in Yorkshire and Humberside.
New Deal for Communities is currently
planned to provide 10 schemes in London at around £50 million
each, compared with four in Yorkshire and Humberside.
Spending on public sector housing
in London runs at more than double the rate of Yorkshire and Humberside
European funding to Yorkshire and
Humberside, in 1997-99 has been no more than might be expected
from the region's population share (£90 million).
Over half of all overseas tourism
spend in Britain is spent in London, £6,450 million in 1997.
The proportion of the adult population
with higher qualifications in London is nearly double that of
Sheffield's City Region.
The above facts illustrate that large sums are
spent by Government in some regions, particularly London, Scotland,
Wales and Northern Ireland, helping to increase their incomes,
wealth and GDP. Beginning to reduce this spending gap would play
a major part in regenerating the economy of the Sheffield City
Region, and begin to close the extremely wide GDP gap with the
1. GDP: ONS News release, November 1998.
2. Employment: Labour Force Survey, Labour
Market Trends, ONS, April 1999.
3. Industry: Regional Trends Table 14.6.
4. Earnings: New Earnings Survey Part A,
Table A21, ONS, October 1999.
5. Household Income: Economic Trends, June
6. Public Expenditure: Public Expenditure
Statistical Analysis, 1999-2000, Table 8.10, HM Treasury, March
7. School Results: Regional Trends Table
8. School Funding and Local Government Grant:
SSAs for 1999-2000, Local Government Treasurers Societies, May
9. Council Taxes: Regional Trends 1999,
Table 14.4, ONS, August 1999.
10. Taxation Policy: Social Trends 1999,
Table 5.20, ONS, January 1999.
11. Housing Costs: Halifax Building Society
12. Lottery: Regional Trends Tables 8.17-18.
13. Research and Development: Regional Trends,
14. Transport: Regional Trends, Table 10.12.
15. Inward Investment: Regional Trends,
16. Preferential Assistance: Regional Trends,
17. Single Regeneration Budgets: New Start,
23 July 1999.
18. European Funding: 1997-99, Regional
Trends, Table 13.10.
19. Tourism Spending: Regional Trends, Table
20. Qualifications: 1991 Census Key Indicators.
21. Various: Shaping the Nation's Prosperity,
Cabinet Office, December 1999.
1 South Yorkshire and the North Midlands, population
1.7 million. Back
The GDP per head of South Yorkshire was 94 per cent of the EU
average in 1979. Back