Natural order no more

"The UK economy is already effectively bankrupt. Its long-term trade balance in goods has been in deficit for years and last year it deteriorated by a further 8%. Capital investment is at an all-time low and the only thing holding the UK economy together is the City of London – which is being criticised and undermined by government, press, media and the population at large." So said the secretary-general of the Federation of European Employers (FedEE), Robin Chater. Now to be fair, he went on to offer ideas to boost UK manufacturing by means of corporation tax changes – something the Budget just delivered. The fact that the finance industry is such a significant part of our economy means that we do indeed have to value it, but deputy prime minister Nick Clegg has postulated an alternative view of, specifically, London's Square Mile's power in the economy. "An orthodoxy has emerged which assumes that the profoundly centralised nature of our economy, where one city – containing just 13% of the country's population – is responsible for over a fifth of its total output, is somehow the natural order of things: fixed, inevitable, irreversible – when in fact it is none of those things." Devolved spending, rather than Whitehall-directed spending, is the answer, he offers, with cities given the freedom and funds to support this – empowerment. "Empowering them – crucially – to attract outside investment; raise their own money; spend it in the ways they need. So the coalition is giving it to them. You may not have noticed; it's a kind of quiet, British revolution. But by 2015, as a result of our reforms, every part of Britain will feel more empowered than in 2010." Labour recycled the tax receipts from the Square Mile and gave them to the regions, he says: "And in doing so, they took the easy route: expanding the public sector in the north, paid for by the private sector in the south. Emasculating the north and overburdening the south. Trying to prop up a nation of 100,000 square miles on the profits of just a single Square Mile." The coalition's move sails under the heading of the City Deal (http://is.gd/2QTawj). Now, the finance sector and the City will continue to be wealth generators, but with more varied private sector growth outside the capital, its voice will have a welcome counterbalance. Good luck to the City Deal, then. First published in Machinery, April 2013