UK needs a ‘big state’ to close wealth gap, says MP

ABIRMINGHAM MP is calling for radical changes to the UK economy after a major report highlighted a huge wealth gap between the Midlands and the North on one hand, and London and the South East on the other.

British governments had believed in “rolling back the state” for the past 40 years, said Labour’s Liam Byrne, MP for Hodge Hill and Labour’s Shadow minister for digital issues.

But it was clear that the country now needed a “big state” to succeed, he claimed. Mr Byrne said: “Countries like China are spending huge amounts of money on industrial policies. If we want to compete with them in the 21st century then we need to do the same.”

It follows the publication of a major report by the Commission on Economic Justice, set up by think tank IPPR. The report’s authors include The Archbishop of Canterbury, Justin Welby, and MPs are set to debate the findings in the House of Commons.

The report warned that the UK is “divided by geography” and incomes in the West Midlands, North West, North East, West Wales and the South West are almost a third less than in London.

It called for the creation of four “regional economic executives” in the North, Midlands, South West and South East, which would take respon- sibility for economic and industrial strategy and report to local mayors and councillors instead of the Westminster government. Other proposals included: An immediate increase of around £1 an hour in the minimum wage to the Real Living Wage, and requiring all those on zero-hours contracts to be paid 20 per cent above the higher rate;

An industrial strategy supporting a “new industrialisation” to boost exports and close the trade deficit, backed by a new National Investment Bank and by raising public investment by £15 billion a year to 3.5 per cent of GDP;

A rise in corporation tax from 19 per cent to 24 per cent.

Taxing work and wealth on the same basis, with a new, single income tax schedule for all types of income. This would end the current discrepancy where people who earn money from the return on investment pay a lower tax rate than people who earn a salary.

The Commission said too many workers were paid less than the “voluntary living wage”. Its report said: “In the East Midlands, West Midlands and Yorkshire and Humber, 27 per cent of employees are paid below the voluntary living wage, compared to 19 per cent in the South East and 20 per cent in London and Scotland.”

Average weekly earnings in the West Midlands are £515, while in London they are £693.