Londoners get £565 more investment every year than rest of UK, experts say

The vast gulf in the amount of money pumped into London compared with the rest of the country was laid bare by economic experts today.

Annual per-person investment spending is more than 60% higher in the capital than the rest of the UK, according to the Institute for Fiscal Studies.

The city got £1,456 per-person in investment against a UK average of just £891, the think tank said.

And former industrial heartlands in the North and Midlands are still paying the price for declines more than 40 years ago, analysts confirmed.

A regional breakdown of investment spending showed Yorkshire and the Humber got £694 per-person, a year; the South West £723; the West Midlands £799; the North East £906; the North West £954; and East England £924. Wales received £955.

They all lagged far behind London on £1,456.

The revelations come amid mounting pressure on Boris Johnson to deliver funding pledges for areas previously loyal to Labour , whose voters helped propel him to an 80-seat Commons majority at December’s general election .

The Prime Minister has promised to inject cash into the so-called Red Wall, which was toppled at the ballot box.

Quizzed on inequalities between “North and South, rich and poor” in the Commons today, the Conservative leader said: “This Government is absolutely committed to uniting and levelling up across our country.”

Unveiling the IFS’s pre-Budget report today, think tank director Paul Johnson said: “We know this is a Government that is concerned with geographical inequality.”

The IFS study, funded by the Economic and Social Research Council, comes as rookie Chancellor Rishi Sunak puts the finishing touches to his first Budget, to be unveiled on March 11.

The financial showpiece is expected to pump billions of pounds into infrastructure outside London, including Red Wall areas.

IFS associate director David Phillips said the “Johnson Government has made levelling up its mantra”.

Pointing to productivity gaps between London and some of the regions, he blamed the collapse of heavy industry in the 1970s and 1980s, and changing holidays tastes, for fuelling inequality in industrial heartlands and traditional coastal resorts.

“This big rise in regional inequality that took place then, the impact of deindustrialisation is still with us, it’s not really abated,” he said.

“What people might have thought of as a temporary shock has become a permanent shock that areas are only slightly recovering from.”

He added: “If you look at these former industrial towns in the North and Midlands and the coastal towns, they have grown at broadly the same pace in terms of earnings and incomes as the rest of the country since the early 2000s.

“But they haven’t really made up for the previous lost ground that took place in the ‘70s and ‘80s when the deindustrialisation and the change in holiday habits really dragged down those incomes in the first place.”

The decade-long freeze in real-terms wages since the 2008/9 financial crisis had reinforced the divide, said Mr Phillips.

“Perhaps it’s the case that when everyone’s boats are rising it doesn’t feel quite so bad if your boat is rising a bit less than everyone else’s, than if you’re stuck in the mud.”

IFS research economist Ben Zaranko said: “As well as the total level of investment there is clearly growing interest in where that investment goes, particularly given the Government’s promise to ‘level up’ across the UK and the focus on the possibility of targeting investment at the North of England or at the Midlands.”

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