Ruth Porter: Innovation and flexibility - not nostalgia and mourning - will revive the regions

Ruth Porter is Communications Director at the Institute of Economic Affairs

Growing up in the north of England shaped me in many ways, small and large - but perhaps the most significant was the fierce appreciation it gave me for the dirt and mess of large cities.

The sense of history, of chaos and disorder, in some ways is what brought me to live and work here in London. Whether I loved London as a conservative or whether loving London and Britain’s other great cities made me a conservative, I’m not sure. Around each corner is something unexpected, roads rarely run straight and grand design is nowhere to be seen, replaced instead by layer upon layer of adaptation.

Each day that passes London looks different. It is moulded by the people who live in it and what they do. Talk to fruit farmers of the route to market in Covent Garden a few decades ago - hauling produce from the country into thick pollution - and you will wonder at the difference even relatively short timeframes can make.

But not everywhere has fared so well. Being from Yorkshire I can share something of the pain when people lament the decline of cutlery manufacture in Sheffield, or the dormancy of other areas where intense industrial activity previously thrived. The images of communities with their hearts ripped out - replaced by terminal unemployment and public sector dependency, set amidst depressing council estates - are terrible.

Mourning only takes us so far though. The threads of city life tell us that when we unpick them, nothing stays the same. Life is constantly changing. The great liberal and socialist myth is that we can tear things up and start again, but the conservative truth is that we can only build on what has gone before.

The heady days of labour-intensive heavy industry brought us much that was good, but they also brought physical danger, certain limits on opportunity and an unhealthy degree of uniformity. Technology and progress have been kind in many ways. Our living standards are vastly improved and for most people the range of options life provides has increased. This is of little comfort though to people directly affected by the closure of a manufacturing plant. But "Buy British" is not the answer.

The reality is that the cheaper production of goods, from cutlery to clothing, in other countries is a positive thing for us in the UK. It means we can all afford a better standard of living than we could before. The people it is hard on are those living in the regions that struggle to adapt. Various strategies have been tried to help the regions from direct infrastructure investment to regional development agencies; none have met with much success.  Pouring government subsidies into renewal and trying to predict which new technologies will be commercially successful has proved beyond the wits of our finest bureaucrats –  unsurprisingly "picking winners" turns out not to be the forte of those in Whitehall.

The reality is that the private sector in the regions has a disadvantage. National pay bargaining pushes up public sector salaries in areas where living costs are relatively low, while the national minimum wage artificially raises labour costs. How can businesses in struggling areas compete in these circumstances? Reducing the minimum wage by itself is not an answer as then benefit levels set the floor for wage levels. Welfare reform must sit alongside labour market deregulation.

A recent report from the Centre for Cities shows the gap between cities in unemployment rates increasing, the likely impact of public sector job losses and the increasing cost of housing in northern cities. Yet these challenges are still not being properly tackled.  Much has been written now on regionalising the minimum wage and ending national pay bargaining, yet the government has still to act, further entrenching the system with the latest round of pension negotiations. 

Those in the regions stand to gain a lot from deregulation. We have all heard anecdotes such as that of a hairdresser who tries to expand her business but can’t because doing so means having to install a disabled ramp, at a cost that would consume the additional profit. These stories are repeated over and over. It is small businesses that are hit hardest by requirements for flexible working hours, maternity and paternity provisions and box ticking health and safety checks. As a recent Institute of Economic Affairs publication outlined we should cut a new deal with small businesses, allowing them "to employ staff as self-employed individuals.” This would effectively exempt small businesses from much of the regulation that stops them expanding.  

We have to look forward, and be willing to be flexible. What are the unions doing to prepare their workers for the inevitable transition into new roles, and quite possibly industries, as technology develops? Nostalgia for a bygone era is understandable, as is grieving for what we have lost with the inevitable advent of new technologies and sectors. This cannot come to define us, though. We need to move on from "Buy British" to "Be British" – innovate, create and work hard. This is how the regions will thrive, but they need a level playing field to be able to do so.