From the Midlands Engine to the 'Northern' Midlands Engine: The March 2016 Budget

“Politically, the problem is that the Midlands Engine is not considered to be part of the disadvantaged north - or is this the politically advantaged north?”


The 2016 Autumn Statement redefined the Midlands (East and West) as the Midlands Engine. This new geographical definition reflects the new sub-national policy agenda that has emerged as one response to localism. Both the Midlands Engine and the Northern Powerhouse are political creations rather than economic realities; neither is a true reflection of the actual functioning economic geography of these areas.

It is arguable that there is more national economic value in supporting the Midlands Engine compared to the Northern Powerhouse, but this is not a politically acceptable argument. There are three reasons to justify supporting the Midlands Engine in the March 2016 budget. First, the Midlands is the only part of the UK that has a trading surplus with China. Second, parts of the Midlands consume more tax revenue than they produce. Third, the Midlands region is underperforming: if it matched the predicted growth rate for the UK over the next 15 years, it could create 300,000 jobs and contribute at additional £34bn to the UK economy.

Politically, the problem is that the Midlands Engine is not considered to be part of the disadvantaged north - or is this the politically advantaged north? There are many reasons why the March 2016 budget should provide the Midlands Engine with the financial resources that match those provided to support the Northern Powerhouse. The primary reason is the contribution that this would bring to exports, job creation, reductions in tax spend, and an increase in tax revenue produced from across the Midlands. Thus, the budget needs to reflect the new definition of the Midlands developed in the Autumn Statement and provide appropriate investment in this part of the UK. This must be considered as an investment with a return measured by a set of output indicators (exports, taxation, etc). The key question is what are the priority areas? The Autumn Statement noted that the government would provide the Northern Powerhouse with £15m to support trade missions and only £5m for the Midlands. This difference would seem to suggest that the North needs more support in trade than the Midlands Engine, but also suggests, to paraphrase George Orwell - ‘all regions of the UK are equal, but some are more equal than others’. Perhaps we need to redefine the Midlands Engine as the Northern Midlands Engine. The Greater Birmingham Chamber of Commerce has called for the Chancellor to establish a Midlands Engine Inward Investment Hub to fund major transport and capital projects that would mirror that provided to the Northern Powerhouse. This is appropriate as economic growth is founded upon skills, connectivity and stable wider framework policy conditions that are designed to encourage and support economic activity and growth.

The new ‘Northern’ Midlands Engine has the potential to make a major contribution to the national economy. It is time to rebalance policy across the UK by ensuring that all regions are provided with the opportunity to contribute to national competitiveness and, at the same time, create better outcomes for the people living across the new Northern Midlands Engine.