Reading note: Head North
Head North | Andy Burnham an Steve Rotheram
Hearts in the right places
Burnham and Rotheram’s Head North details the personal motivation for better representation in the North of England. It’s a compelling story, particularly in a time where the Labour party is desperately searching for an economic narrative and scrambling to maintain a healthy dose of economic talent.
Head North explains why the Hillsborough disaster is symptomatic of Westminster1 as a whole. The disconnect between London (and more broadly the South-East of England) is engineered out of centuries of mistrust between the have and have-nots.
The book is written in an unusual format. A chronological memoir where each co-author takes turns to explain the key events of their lives (many of which are the same) from their own point of view. It’s a little clunky - yet if the moral of the story is one of greater unity, it’s certainly on brand.
It’s the third political memoir / manifesto on the future of Westminster I’ve read this year. Yet it brings a welcome, homely, fresh angle to the woes facing the UK compared to both Great Britain? and Failed State.
What is to be done?
Burnham and Rotheram recap the recent history of funding for Manchester and Liverpool (spoilers: it’s going down). Thatcher unsurprisingly gets a good mention for stripping capital planning powers out of councils in the early 1980s. These powers were never recovered.
The lack of funding flowing north has a much deeper history than Burnham and Rotheram explain. England doesn’t rely on a union or federation of independent states (like Australia, Canada, or even the US) that advocate stringently for their regions, and have broad remit over government services. Running the country out of Westminster is a feature, not a bug.
Isn’t this the exact role of elected MPs you say? Burnham and Rotheram argue that pragmatically speaking, not anymore. Well certainly not in a two-party system where Whips and seniority control the way the overwhelming majority of MPs vote (especially in the Labour party).
Half of Burnham and Rotheram’s proposed solution is warranted. Capital budgets determined at a local level are more likely to prioritise the ground needs of residents and businesses. There is less information loss between problem and solution, and the temptation for pulling political strings is lower if decisions makers are also a member of the local community.
Yet some realism here is warranted too. Mega-projects (inter-city rail, major new highways, port upgrades) are never going to be locally funded. Not only does council not have the capital, they don’t have the procurement or management talent to run the design/tender/build.
The answer, as with most things, lies somewhere in the middle.
Shall we scrap the Green Book?
The other half of Burnham and Rotheram’s solution — scrapping Green Book processes2 for evaluating state significant investments - is intriguing but not entirely convincing.
Burnham talks of his own experience in HM Treasury when he was a MP:
But I asked the civil servants: why could not a single project in the North of England be identified? That was when the scales fell from my eyes.
‘No project in the North passed the Green Book, Minister,’ said the senior official.
‘How is that possible when the railways of the North are falling apart?’ I countered.
‘Because the Green Book appraises projects on what they will generate for the UK economy within a twenty-five-year period and most projects in the North don’t return enough to meet the threshold.’
If anything had brought me into Parliament, it was a mission to close the North–South divide. As I patiently listened to this explanation, sitting in the splendour of the chief secretary’s office, with its magnificent view onto Horseguards and St James’s Park, I finally realised why it was mission impossible. The North–South divide was no accident. It was the product of permanent UK policy and would continue getting wider for as long as the Green Book remained in place.
While the Treasury was never my natural habitat, I regard my brief time there as critical in my political journey. By seeing how things worked from the inside, I finally understood why England has always felt like two countries. Only the EU funded infrastructure on the basis of social deprivation. The UK government’s economic test was a recipe to give more to the places that already had most and widen regional divides. This is what people call ‘Treasury orthodoxy’. It is a doctrine based on cold numbers which takes a negative view of our own country. In essence it says: those old industrial communities can’t become anything again so why invest in them? Let’s just invest in the places that will provide a quicker economic and financial return. Up until this point, I had assumed that the bias against the North was cultural and emotional – a product of the fact that people from the South tended to dominate positions of power across society and made decisions to favour it. Whilst it is partly that, I genuinely hadn’t realised that it is supplemented by a bias that is hard-wired into the processes which govern the country. Under this system, the North could cry out for investment for years and would never get it and we have seen that play out ever since.
It’s incredible that this angle has come from a man who once was himself ‘in the room’. Burnham was once upon a time was chief secretary3 to the Treasury.
Burnham goes on:
The time has come to tear up the Green Book and the Barnett Formula4 and replace them with a modern funding formula which works for the English regions and the home nations.
Big call.
A move away from ‘Treasury orthodoxy’, including scrapping the Green Book entirely, is a strategic political message. It creates a common enemy to rally against for those who feel like they are missing out. The trouble with is is what comes next?
What is this magical alternative formula? In Head North, the authors fall silent.
Let’s play out the downside scenario. Spending of state funds aren’t to be evaluated through cost-benefit analysis as the Green Book recommends, but rather ‘social’ considerations are given bigger priority.
That seems convenient, however it’s likely the Westminster establishment is going to win at that game every day of the week. Westminster politicians can and will rely on the argument that (expensive) projects in London benefit far more people that ‘low utilisation’ projects in the North.
While use of the Green Book has resulted in the North being deprived of infrastructure, it also helps stops politicians from funnelling cash to pet projects in London based purely on qualitative arguments.
What would actually work
Credit where credit is due - it is true that HM Treasury needs serious reform.
The latest Green Book update has gone to some lengths to give better guidance on projects with ‘long-tailed’ benefits, and the discount rate treatment now has some flexibility depending on the benefit class. It is no longer the utilitarian machine Burnham's quote describes, though institutional muscle memory at Treasury and DfT is slow to catch up.
Yet there’s a broader point here to consider on so-called ‘Treasury orthodoxy’. If each time the Green Book cost-benefit analysis points to investing in London as the most rational economic decision, we’re going to see an agglomeration of talent and industry in the capital.
Is that the outcome we want? Is that the country we’re willing to live in? Governments build infrastructure to deliver services and promote productivity. But good infrastructure also creates a productivity feedback loop. Governments must commit to long term infrastructure plans that set the direction - and importantly the location - for private sector investment.
While we’re on Treasury Orthodoxy, the current fiscal rules (which are also discussed extensively in both Great Britain? and Failed State) are absolutely bonkers.
Treating opex and capex as substitutable when balancing the budget books causes politicians to cancel long term infrastructure projects in order to meet the Treasury rules.
The people that lose out on this the most live in the lowest density areas - namely the North. The current Labour government has all but committed to stick with them (as to not enrage the fiscally conservative in the party), much to the dismay of most modern economic thinkers.
The saddest part of all this is it’s blatantly obvious that councils are excellent at service delivery (especially for the very young and very old) compared to their Westminster cousins.
More funding flowing out of Westminster to the north for social housing or localised transport would give England’s former industrial powerhouses (Manchester, Liverpool, Birmingham) a real chance of reigniting their engines.
Britain has all the ingredients for economic prosperity: talent, trade, institutions, and capital. What is missing is a narrative and practice to build - especially in the North.
Referring to both houses of Parliament, Whitehall, and the associated political class
Evaluating investment opportunities through business cases and cost-benefit analysis
Second-highest-ranking minister in HM Treasury after the Chancellor of the Exchequer
The Barnett Formula allocates funding between devolved administrations of Scotland, Wales and Northern Ireland. There’s been solid evidence for over a decade that under the current split, regional England (including the North) is missing out.