Time to move the government out of London

“There’s no point trying to live in London,” said the FT’s Christian Oliver at the weekend, after he had spent a miserable afternoon looking for a house to buy in Bromley.

It’s the latest in a series of warnings about the rapid increase in London property prices, which are increasing at rates way higher than anywhere else in the country. This week, a report for the London Assembly called for a suspension of the right to buy council properties, as rising rents in the private market are now beyond the reach of many people.  London seems to be developing an economic microclimate as income and wealth become concentrated in and around the capital.

The recent ONS survey of Regional Gross Disposable Income shows this clearly:

Screen Shot 2013-10-09 at 12.09.32

By and large, per capita income decreases the further away you get from London.

As ever, the people follow the money. The regions with the highest population increase are those closest to the capital.

Screen Shot 2013-10-09 at 12.15.00

More money attracts more people and bids up the price of property. The country is becoming ever more divided between a wealthy South-East and everywhere else. There are pockets of affluence and poverty everywhere but the overall picture is clear.

Why is London so rich? Partly it is because of its financial services industry and its attractiveness to the global rich. Some of it, though, is simply due to being the capital. Most organisations, public, private or voluntary, have their headquarters in London. This means that their most senior executives are paid in London, regardless of where the organisation’s main income is generated. Even if their customers and main production facilities are countrywide, or even worldwide, most of Britain’s most senior people are based in London so that’s where most of its high salaries are paid.

Governments might call for a rebalancing of the economy and make noises about regenerating the regions but as long as the country’s richest people are concentrated in the South-East, not much will change. Attempts to get companies to relocate by offering subsidies and tax breaks have had limited success. In any case, it is rarely the top people who move. The same is true in the public sector. Operational staff are moved out to the regions but the bigwigs stay in London. This is to be expected. Managers like to be close to the centre of power and, as long as that power is in London, that is where you will find them.

To rebalance the country, then, you need to move the centre of power.

London is the UK’s capital in two senses. It is the centre of government but also the business and financial centre. This makes Britain slightly unusual when compared to most major economies, which have their governmental and business capitals in different places. Only France, Russia and Japan also have single capitals. Of these, France and Russia are models of over-centralisation and the Japanese government has been considering a move from Tokyo for some time.

Country Government Capital Financial Capital (where different)
USA Washington New York
China Beijing Shanghai & Hong Kong
Japan Tokyo
Germany Berlin Frankfurt
France Paris
UK London
Brazil Brazilia Sao Paulo
Russia Moscow
Italy Rome Milan
India Delhi Mumbai
Canada Ottawa Toronto

Given that our economy and population are tilting ever more towards the south-east of England, does it really make sense for us to have both our governmental and financial capitals in the same place?

Moving the government to, say, Manchester, Leeds or Birmingham would shift a massive amount of state spending away from London. It would also take a lot of other organisations with it. If the government moved, so would the lobbyists, PR firms, journalists and probably a lot of the charities too, taking their spending power and senior executives with them. This would ease pressure on London’s infrastructure and its property prices.

Parliament will soon be presented with an opportunity to make such a move, for the Palace of Westminster is falling apart. Last year, a report by the Parliamentary Estates Directorate concluded:

If the Palace were not a listed building of the highest heritage value, its owners would probably be advised to demolish and rebuild. 

Most of the building is a Victorian carbuncle and it hasn’t been fit for purpose in years. It would be better to turn it into a hotel or conference centre than try to make its inadequate facilities work for a 21st century legislature. It may well have to close for 5 years anyway so it would make more sense to build something new somewhere else. And somewhere else could be outside London.

Of course, there would be a cost to moving the capital but selling off all the government’s expensive real estate in London would offset some of it. Over time, it would be cheaper to run the government from the Midlands or North, where property and living costs are so much less.

Geographical separation from the City and its financiers would burst the metropolitan bubble. It would encourage ministers and their advisors to associate with a different kind of ‘business community’ and to see things from a non-London perspective.

Most importantly, though, moving the government from London would split our capitals, as so many other countries have done, ensure a more even regional distribution of wealth and ease pressure on London’s transport and property market.

If we are serious about re-balancing the country, we should stop tinkering around and just moving the BBC and a few Department of Health officials up north. We need to take a bold step and move the entire government. If Parliament will have to move out of its building anyway, why not send it up the M1? For good!

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14 Responses to Time to move the government out of London

  1. Pingback: Time to move the government out of London - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Laurie A says:

    One way in which this is already happening is through devolution, with the centres of Welsh and Scottish government moving into Cardiff (or Merthyr) and Edinburgh.

    It would be interesting to see maps of the effect that had had over time on Wales and Scotland – particularly Scotland given the split between Glasgow as industrial capital and Edinburgh as financial and political centre.

  3. Vince Lammas says:

    Moving the capital is an interesting idea and it is certainly possible to imagine the potential political and economic benefits from relocating the political centre but expensive housing in Bromley hardly sufficient reason to do so …. there are cheaper places to live in London and simply constructing more housing in and around the capital to address the supply would be more practical and probably more affordable.

    What’s more, it’s really not that simple. Centres of economic power emerge over time because of economic development and geography while political centres normally reflect preferences for culture and climate of the dominant group in the country.

    The German capital reflects the role of Prussia in German unification while Frankfurt was a major economic centre dating back to the Holy Roman Empire. The decision to revert the capital to Berlin in 1999 says quite a lot about the status of capital cities.

    Milan has been a major centre of trade back to the middle ages and became the capital of Napoleon’s Italian state though Turin, Florence and then Rome were successive capitals of the newly unified Italian state.

    Beijing is the last of four historic capital cities of China while Shanghai is a vital trade seaport on the Yangtze delta. It was possible that Manchester or Liverpool could have become the major economic centres in the UK at a time when financial services were not the dominant economic industry … but they didn’t.

    In terms of deliberate decisions, the choices of new capitals in Australia and Canada and the United States are quite interesting while Japan has been contemplating a move but it may never happen. However, there is a useful list of other capital city relocations http://geography.about.com/od/politicalgeography/a/Capital-City-Relocation.htm

    The list of capital relocations shows how many go back to major political changes in the fortunes of nations, though the example of Brasillia seems to be the best example of a successful relocation for the kinds of economic reasons, and positive impacts, you are suggesting (though the move was enshrined in the country’s first republican constitution and it took from 1891 until 1961 to deliver).

    Of course, if the UK was to follow this example, we would not move the capital to Birmingham or Manchester, instead planning the construction of the new city of “Britannia”, presumably near Dunsop Bridge, the geographical centre of Great Britain http://news.bbc.co.uk/1/hi/uk/2319937.stm

  4. Dave Merritt says:

    What a good idea! A much better idea than HS2.

  5. Oddly enough, in a conversation with Judith Armitt recently (who is currently working on something she describes as “reorganising Whitehall”) we discussed moving Government to Liverpool. It was not an entirely serious conversation, but maybe it should have been.

  6. You suggest the problem is that both the financial and administrative centres are in the same place, but you only consider moving the latter. Why?

    The capital exists in London for geographical reasons, namely the ease of access to the rest of Britain and continental Europe (something understood since Roman times). Most company HQs are not there because of the proximity of government (which is a factor for very few) but because of the proximity of finance and associated services. If you want to make a significant difference then you need to shift the City. This would have a far greater multiplier effect than moving government.

    What we call “the City” is a legal construct more than it is a physical place. The trading routes for money do not follow the natural routes of river valleys or trade winds, but are based on legislative fiat. Tax havens are such because we make them so, not because they are sitting on large, natural deposits of tax havenry. Though the City once had a reason for being in London, i.e. the proximity of mercantile trade via the docks, this “fetter” has long since rusted. Since the Big Bang, the only thing keeping the City in London has been luxury goods.

    The real geographical advantage of the square mile is the timezone, equidistant between Asia and the Americas, which means that anywhere in the UK would suffice just as well. There is an element of convenience in its proximity to mainland Europe, however this would not be significantly worse were it in Birmingham or Leeds, and this is more than offset by the continuing advantages of being anglophone (where Paris and Frankfurt suffer), particularly for US banks.

    Moving Westminster sounds radical, but the truly revolutionary option would be to move the Bank of England to somewhere in the heart of, well, England.

  7. Bernard Martin says:

    This excellent idea was being kicked around in the 80s as ‘Move Parliament to Gateshead.’ Various movers and shakers – including senior journalists in the North East – proposed the idea as a provocation (at least). No-one, however, seemed to feel it was a realistic proposition (not just because it would have meant Thatcher being in the Region) so it fizzled out.
    A related idea for spreading the crumbs from Parliament’s table would be for it to do what monarchs long did: to make a grand progress. Parliament could sit for (say) 3 years in Newcastle/Gateshead, then move to Bradford for the next 3 years, then to Preston, to Wolverhampton, Exeter, etc etc.

  8. oldcobbler says:

    An idea whose time has come. Break up the political-financial-media complex in London.

    And, if Government were moved to, say, Wolverhampton, it might generate enough custom to make HS2 viable….

  9. Juli says:

    Love this idea, Rick. I wonder… What shape shall the debating chamber take: our traditional parallel lines of adversaries or discussion ‘in the round’? 😉

  10. John D says:

    Assuming Scotland opts out of the United Kingdom and Wales and Northern Ireland opt for more devolution, it would make sense to move the administrative and legislative capital to the centre of England: http://www.bing.com/maps/?v=2&cp=52.561928~-1.464854&style=r&lvl=15&sp=Point.52.561928_-1.464854_Centre%20of%20England___.
    There is plenty of unbuilt-upon land in the area, which is very near to the old Roman A5 Road.
    A brand new capital town would be sooooooo interesting. Just look at what they did with Brasilia.

  11. yorksranter says:

    Perhaps if we try hard we could have government as functional as that of Italy or indeed the United States? There’s an inspiring vision for you.

    Anyway, managers try to be near the centre of power for a reason – you often need to get someone powerful to do stuff. Why would it be better for them to be somewhere else? As with the BBC redeployment to Salford, wouldn’t you just be transferring a chunk of the London property market elsewhere?

    I’ve had the same idea in the past, but I wanted to split up the institutions among cities and place the central nucleus, No.10, aboard a ship.

  12. Pingback: Minding the gap or moving the government? | Jules Birch

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