The Tory architect of George Osborne’s “northern powerhouse” strategy and leaders of Britain’s largest northern cities are demanding that the government acts to reverse a major brain drain to the south of England, as new figures show that 310,000 graduates have left the north in the past decade.
Infrastructure investment is expected to be at the heart of the chancellor’s autumn statement on Wednesday, with billions of pounds of extra spending to be committed on transport links.
But Theresa May’s government is being urged by the political leaders of Leeds, Manchester, Newcastle and Liverpool – who describe themselves as a “council of the north” – to urgently prioritise the east-west rail links between the major northern cities to boost the future of the region. Lord (Jim) O’Neill, the former chairman of Goldman Sachs Asset Management – who was a Tory Treasury minister and pioneered the northern powerhouse – has lent his support, adding of future rail investment: “East-west is way more important than north-south.”
About 31,000 highly qualified British resident workers have left the north each year in the past decade with only 23,500 a year moving in the opposite direction. The net deficit suggests an average of 7,500 highly qualified workers leaving annually, or 75,500 over a decade. The hole in the workforce has until now been filled by an inflow of 15,500 skilled foreign workers a year, but the Brexit vote has raised questions over whether such migration will be encouraged in the future.
O’Neill, who resigned in September from May’s new government, and from the Conservative whip in the Lords, said: “We need more initiatives. In one or another form they are coming. Maybe not with the same gusto as when it was me and George, but I think the underlying commitment to the northern powerhouse is still there.
“In terms of reversing the brain drain, that ultimately, in another decade, will probably be the test of how successful it is, in my view. One of the things I got interested in, and would have encouraged more official analysis in if I had stayed, was what do you do to get domestic inward migration of graduates? The only place outside of London that attracts graduates is Bristol.”
Doubt has been expressed about May’s commitment to the north, with reports suggesting she was shifting the government’s focus to other rural and industrial areas, in particular the Midlands.
In a letter sent to the chancellor, Philip Hammond, council leaders in Manchester, Leeds, Newcastle and Sheffield, along with the Labour candidates for mayor of Greater Manchester and mayor of the Liverpool city region, Andy Burnham and Steve Rotheram, write that spending on transport priorities will be a key test of the government’s commitment.
They say: “We believe that northern powerhouse rail should now be prioritised and expedited. We are reaching the point where our motorways across the north are at saturation point. Journey times are increasing and capacity on our trains is at the limit. Unless we urgently develop a credible plan to get the north moving, we could suffer a loss of confidence from inward investors. As the UK prepares to start the process of leaving the EU, the need to deliver a convincing plan for skills and transport in the north is now urgent.”
The migration figures were compiled by Homes for the North, a new campaign group made up of 19 housing associations which provide homes to a million people. The group has published a report calling on the chancellor to raise the stamp duty threshold to £350,000 and to lower business rates in an attempt to attract and retain highly qualified workers.
The report suggests the more likely prospect of homeownership in the north compared with the south is potentially the biggest incentive for graduates to stay in the region. Mark Henderson, the organisation’s chief executive, said: “Stemming the flow of graduates and attracting more highly qualified British resident and foreign workers will be critical to economic growth across the north of England.
The shadow chancellor, John McDonnell, on the guardian.com, says: “The government’s commitment to the northern powerhouse has always been a media exercise just like the now forgotten Big Society. They are only paying lip service to people in the north of England, but they can’t just reannounce old projects.
“The fact that only one in five projects in the infrastructure pipeline is in construction after six years just shows that they are better at press releasing projects than delivering on them.”
A Treasury source said that Hammond would highlight the government’s intention to bring down the deficit while investing in infrastructure and innovation to boost long-term economic growth during his first autumn statement.
The chancellor is expected to take a different approach to Osborne, by announcing top-level spending decisions rather than announcing full details of individual projects.
The source said the chancellor believed the Treasury should be focused on its core job of “economic policy, managing the public finances, and not doing spending departments’ jobs for them”.
There will be £1.3bn of new investment in Britain’s roads, targeted at small projects which will relieve congestion and deliver much needed upgrades on existing networks.
City analysts expect Hammond to admit that the Brexit vote has forced the government to tear up its forecasts for the public finances over the next four years.
He will say that rising inflation, lower than expected investment and limited wages growth will hit the exchequer with an extra bill of around £100bn by 2020.
GDP growth is due to fall to about 1.2% next year as inflation heads towards 3% and wages remain stuck at a growth rate of between 2% and 2.5%.
Meanwhile the former Liberal Democrat health minister Norman Lamb is calling on Hammond to include £4bn of extra funding for the NHS and care.
