The State of Britain

The SW’s per head fiscal deficit drops to three figures, the Great South West Powerhouse mooted and Flybe rescued

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, the SW had a deficit of £5.5bn, a smaller shortfall than the £6.6bn recorded in 2018. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the SW’s deficit was £979, lower than the £1,188 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in the SW was £69.4bn or £12,405 per head, an increase on the 2018 figure of £68.1bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

The SW collected £63.9bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes, an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in the SW increased by 12,000 to 82,000 between September and November 2019; the decrease of 0.5% took the overall rate to 2.8%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

Despite a fall of 1.1% the South West continued to (just) have the highest employment rate at 79.8% which compared with the UK employment rate at 76.3%.

SW average property prices fell by 0.3% during November 2019, the drop to £259,758, decreased annual growth to 1.1%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Three Local Enterprise Partnerships (LEPs) and businesses in the south west are lobbying the government to recognise the ‘Great South West Powerhouse.’ The aim of the powerhouse is to create 190,000 jobs and generate £45bn of economic benefit.

Cornwall and Isles of Scilly, Dorset, and Heart of the South West LEPs and other stakeholders commissioned a report focusing on the growth potential of the area stretching from Dorset, Somerset and Devon through to Cornwall and the Isles of Scilly. Key industries to be targeted include ‘green’ economies, such as agriculture, and ‘blue’ economies, such as marine research.

The Great South West is effectively a ‘powerhouse’ brand to promote the three LEP areas. Other regional initiatives like the Midlands Engine and Northern Powerhouse can call on dedicated ministers Robert Jenrick and Jake Berry to push their brands. The LEP’s SW initiate requests formal recognition and an identified minister to link into Government, plus £2m over three years to help formulate a more detailed plan.

The Great South West powerhouse differs from the Western Gateway, a strategic partnership promoting economic growth across south Wales and the west of England which was launched last November.

Further north, South Gloucestershire Council is set to join North Somerset council and abandon the joint regional plan for housing and growth in the west of England, after planning inspectors were critical of the initiative which is known as the Joint Spatial Plan.

Four unitary authorities, South Gloucestershire, North Somerset, Bristol City and Bath & North East Somerset (B&NES) councils, were working together to draw up the plans which included 105,000 new homes. Strategic planning needs are now likely to be fostered by the West of England Combined Authority (Weca).

On transport, Exeter based Flybe is planning to discontinue its Newquay-Heathrow service in March, replacing it with flights from Newquay to London’s Gatwick airport. The route will still qualify for public subsidy known as public service obligations. The swap will not be welcome by businesses in the South West, which value the range of international destinations Heathrow provides and the inward investment opportunities it offers.

Earlier in the month ministers intervened in the airline sector confirming that Flybe will receive state support because of its regional connectivity role. The rescue deal details are unclear, but appear to offer deferral on the firm’s Air Passenger Duty (APD) and a short-term loan. Connect Airways – the consortium that includes Virgin Atlantic, Cyrus Capital and Stobart Group – which owns Flybe, will also inject another £30m into the business.

Unlike other collapsed businesses such as Carillion and Thomas Cook, the regional connectivity issue gives the government scope to intervene. Also provisions exist in EU state aid law that allow governments to intervene if a strategically important firm can be restructured within a certain time frame. A government review of the whole APD structure may make Flybe’s business model more viable.