Osborne and Old Mother Hubbard's Dog

The Tale of George Osborne and Old Mother Hubbard's Dog

With nothing in the economic cupboard, the Chancellor would do well to follow the later and less well-known verses of the nursery rhyme. Here's Ed Cox of IPPR North with a reminder of them

 

Down to the bare bones. But there's a way to fill the cupboard up again. Photograph: Paul Taylor/Getty

Expectations are unsurprisingly low in the north of England ahead of the forthcoming budget. Just like Old Mother Hubbard, the Chancellor is facing into an empty cupboard as he seeks to throw the nation a proverbial bone. Not only does he have no money, there is precious little change in the macro-economic situation and politically he sits like a rabbit caught between the left and right headlights of Cable's Plan A+++ or Fox's Austerity Max.

Last November's Autumn Statement announcements on benefits cuts and the overall spending envelope limit his room for manoeuvre too. New IPPR North analysis, to be published later in the Spring, will show that the impact of this Spending Review will be to reduce expenditure on benefits by £66 per person in the north by 2017/18.

Mark Carney: from the Bank of Canada to Threadneedle Street. Photograph: Geoff Robins/Reuters
In such circumstances, one expects that Osborne might try to shift some of the blame. Some have speculated that with the arrival of a new governor, he will give the Bank of England a broader remit for growth and employment as well as managing inflation. Whilst this would be tantamount to an admission of failure on his own part, in fact it points to something deeper: the limits of macro-economic policy. To pursue the Old Mother Hubbard analogy, there is a limit to how far you can re-organise an empty cupboard. Perhaps it's time to give a bit more attention to the dog.

For those unfamiliar with the subsequent verses of the nursery rhyme, Old Mother Hubbard embarks after her bone disappointment on a series of excursions to local shops in order to satisfy the perceived needs of her dog. Each time she returns, she finds the dog involved in some kind of enterprising activity. For example:

She went to the fruiterer's
To buy him some fruit;
When she came back
He was playing a flute.
She went to the cobbler's
To buy him some shoes;
When she came back
He was reading the news.
She went to the sempstress
To buy him some linen;
When she came back
The dog was spinning.

There are risks in extending an analogy too far, but there may be some wisdom in the rhyme: rather than look to see what he can do from a monetary or fiscal perspective, perhaps the Chancellor should be encouraging a more enterprising and confident dog. For fruit, shoes and linen, substitute skills, infrastructure and financial autonomy.

City Deals to date have tinkered with the idea that skills funding and decision-making should be devolved to city regions. Now is the time to go much further. In a recent report on the skills system, IPPR North has argued that we should devolve a large proportion of skills and welfare-to-work commissioning to local networks of businesses, local skills providers and local authorities working across Local Enterprise Partnership areas. In this way, skills development can be much better tailored to local growth priorities.

In previous budgets the Chancellor has made much of new infrastructure investment in the North and for this we should be grateful. But the latest National Infrastructure Plan still shows that as a nation we plan to invest over £2500 per capita in London and the South East compared to around £150 per person in the North. This can change, either through a reprioritisation of projects, or through the freedom to create new municipal bonds and local authority backed pension vehicles.

Good at turning over stones: Michael Heseltine. Photograph: Graeme Robertson for the Guardian

One thing we can be sure of in the budget is a response to the Heseltine report No Stone Unturned and the proposal for a 'Single Pot' of unringfenced departmental funds. Whilst this has broad support, the devil will be in the detail. If Local Enterprise Partnerships are left to compete with one another in a national beauty contest then much time and energy will be wasted, not least in weaker areas where support for economic growth may be needed most. Let us hope Treasury comes up with a more progressive allocation of these funds.

But the Chancellor could go further in promoting local financial autonomy and steal Ed Miliband's thunder if he were to announce an enhanced State Investment Bank with a regional allocation of funds or – better still – state-backed regional banks along the lines of the German Sparkasse.

Backed into a corner, it is measures such as these that are most likely to unleash the dog. And who knows, when it accounts for 25 per cent of the national economy – twice the size of Scotland – it may just be that the north of England might come to the Old Mother Hubbard's rescue. Consider how the rhyme finishes:

This wonderful dog
Was Dame Hubbard's delight,
He could read, he could dance,
He could sing, he could write;
She gave him rich dainties
Whenever he fed,
And erected this monument
When he was dead.

Ed Cox is Director of IPPR North. He Tweets here.

Guardian