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No way to level up

The disposable incomes of North East households rose last year more than in any part of the UK except the North West and Wales, as investment income fell, affecting mainly those in London and the South, while benefits outpaced earnings, supporting people in the North. Though gross disposable household income (GDHI) in the North East caught up slightly with the national average it remains the lowest apart from Northern Ireland.

Figures published last week by the Office for National Statistics (ONS) show that GDHI per head of population in the North East rose by 0.9% in 2020 while the national average was down by 0.2%. Some regions, including London, saw falls of as much as 0.9%. (See table below).

But annual GDHI in the North East is still only £17,416 per head compared with the average for England of £21,962. In London, where GDHI is highest, it is £29,890.

GDHI is defined by the ONS as ‘the amount of money that all of the individuals in the household sector have available for spending or saving after they have paid direct and indirect taxes and received any direct benefits’.

Last year was the second in succession that GDHI in the North East grew by more than the national average. In 2019, before the pandemic, it was up by 2.4% compared with the national average of 2.2%.

But that was the first time the regional growth rate had out-performed the national rate since 2012, in the wake of the global financial crisis, when North East GDHI rose by 4.3% compared with 4% in England and 3.9% for the UK. It still leaves the North East in the same relative position it occupied in 2016 with a GDHI of 81.2% of the UK average and the lowest apart from Northern Ireland.

The slight relative improvement in the North East’s position in 2020 occurred as income from property investments in London fell while social benefits increased. According to the ONS property income fell by 21% and mixed incomes by 4.1%, disproportionately affecting areas of the capital where the levels of property income (from investments and financial assets) and self-employment are high

The local areas with the largest decreases were Westminster (-8.6%), Camden and City of London (-6.0%), Barnet (-2.2%), and Buckinghamshire (-2.1%).

On the other hand, local areas with low GDHI per head gained from increases in social benefits, which grew by 6.3%. Places showing the largest increases in GDHI per head were Manchester (3.4%), Hull (3.0%), Nottingham (2.9%), and Liverpool (2.7%). Some local authority areas in the North East were not far behind – Middlesbrough (2.6%), Darlington (2.5%), and Gateshead and North Tyneside (both 2.1%). All 12 council areas in the region saw a rise except Northumberland, which flatlined, and all but one (Redcar & Cleveland) saw benefits rise faster than pay.

According to the ONS, 95 of 179 local areas saw an increase in GDHI per head between 2019 and 2020 compared with 175 of the 179  between 2018 and 2019. ‘This change from the normal pattern of growth’, says the ONS, ‘ is driven by the impact of the coronavirus (COVID-19) pandemic, which affected local areas in different ways, depending on the composition of household income in each area.’

COMMENT

The North East’s small relative improvement in GDHI last year is welcome, but it is nothing like the type, never mind scale, of levelling up that the region needs. It will have brought slight relief to some people on the lowest incomes, but it is a sorry state of affairs when it is necessary to rely on welfare benefits to support the incomes of struggling households and on the misfortune of other regions to close the gap. What the region needs is, to quote its Strategic Economic Plan (SEP), ‘more jobs and better jobs’.

The SEP has almost run its ten-year course and we will get a considered view from the North East Local Enterprise Partnership (NELEP) next month on how close it has come to meeting its targets. We know the raw figures thanks to the NELEP website. One key target, to completely close the gap in the employment rate between the North East and the rest of England excluding London, is nowhere near being met. In the latest 12-month period, the gap had decreased by 17% when compared with the Apr 2013-Mar 2014 period. Even allowing for Brexit and pandemic disruption, this is disappointing to say the least

Whether the region’s GDHI will continue to catch up, even slowly, with the rest of the country in the light of this failure to raise its employment rate significantly must be in severe doubt. Reliance on benefits to bear so much of the burden makes the region highly vulnerable,  especially following the end of the £20 Universal Credit uplift and at a time when the government is considering whether or not to raise benefits in line with inflation, But even if benefits can and do carry on improving the region’s GDHI position incrementally, this is no way to level up.

 Gross disposable household income by UK and constituent countries and regions, UK, 2020

  GDHI
per
head
(£)
GDHI per head growth on 2019 (%) GDHI per head index (UK = 100) Total GDHI (£m) Total GDHI growth on 2019  (%) Share of UK population (%) Share of UK GDHI (%)
UK 21,440 -0.2 100.0 1,438,237 0.3 100.0 100.0
England 21,962 -0.2 102.4 1,241,970 0.2 84.3 86.4
North
East
17,416 0.9 81.2 46,688 1.3 4.0 3.2
North
West
18,900 0.9 88.2 139,242 1.2 11.0 9.7
Yorkshire
and The
Humber
18,119 0.5 84.5 100,134 0.9 8.2 7.0
East
Midlands
18,844 0.6 87.9 91,689 1.2 7.3 6.4
West
Midlands
18,363 0.2 85.6 109,479 0.7 8.9 7.6
East of
England
22,310 -0.4 104.1 139,863 0.2 9.3 9.7
London 29,890 -0.9 139.4 269,080 -0.4 13.4 18.7
South
East
24,551 -0.9 114.5 226,291 -0.5 13.7 15.7
South
West
21,117 -0.9 98.5 119,503 -0.3 8.4 8.3
Wales 17,592 0.9 82.1 55,760 1.4 4.7 3.9
Scotland 19,706 0.3 91.9 107,713 0.4 8.1 7.5
Northern
Ireland
17,301 -0.5 80.7 32,794 -0.4 2.8 2.3
Source: Office for National Statistics