Go south' strategy attacked

Government strategies forcing higher growth and hundreds of thousands of new houses on an already prosperous south-east of England are challenged today by a thinktank which is close to Tony Blair.

Questioning the region's ability to handle further expansion, it warns that the south should instead concentrate on coping with current pressures, including congestion, pollution, disparities within the region and the lack of affordable housing.

In a report certain to raise more doubts about John Prescott's plan for four big growth areas in the south and east of England, the Institute for Public Policy Research bluntly says that the case for ever-faster economic expansion is wrong.

It seeks to demolish the argument of government agencies pushing for further growth to match continental counterparts, using figures showing that the south already compares well with mainland Europe's most prosperous regions.

The region is already on a par with all the "well-known centres of commerce outside London and Paris": Milan, Turin, Amsterdam, Frankfurt, Munich, and Stuttgart, for instance.

The report labels two other arguments as myths: that the south has an overheating labour market, characterised by skills shortages, and that its future lies in the "knowledge economy".

It argues that problems caused by skills shortages and gaps do not appear to be a bigger problem in the south than elsewhere, while the region's ability to draw graduates from the rest of the UK and overseas might give it an advantage.

Pushing for a "knowledge economy" is labelled an ill-defined concept and a throwback to an industrial policy of "picking winners" which had little success in the second half of the 20th century.

Research commissioned by public agencies in the south defines such an economy to include only a "handful of high-technology manufacturing and service activities". That definition excludes business and financial services - "the obvious area of comparative advantage for the greater south-east".

Prepared for an IPPR-led commission on sustainable development in the south-east, whose membership includes some of the major players in the region, the report will be seized on by critics of the expansion plans.

Those opponents range from amenity groups such as the Campaign to Protect Rural England to northern MPs and some councils in the south fearful of the impact growth will have on the countryside.

In one critical section, the report notes: "Further increasing the rate of economic growth in the south-east does not seem a high priority relative to dealing with disparities in prosperity within the region and coping with the problems that current levels of relative economic success pose - particularly in terms of traffic congestion, the lack of affordable housing, the use of natural resources and the quality of the environment."

But it cautions that such a critique should not be confused with arguing for no growth, or lower growth. It says it is merely suggesting that the current rate of growth is acceptable as an economic objective, although it "will pose challenges for achieving environmental objectives in the region".

The report comes amid signs of a policy re-appraisal by Gordon Brown and Mr Prescott, who are charged with pushing through the southern growth areas, principally the 40-mile Thames Gateway corridor running from east London to Essex and Kent.

In a speech in Newcastle upon Tyne last week the chancellor, accompanied by the deputy prime minister, said that a key theme in Labour's next manifesto would be how to make all regions more productive, prosperous and wealthy.

But he warned that balanced economic growth becomes impossible "if we have unemployment and emigration and the under-use of resources in one part of the country, and congestion and overcrowding and huge inflationary pressures in the other".

Jobless rates in the north-east, where unemployment is rising, contrary to the national trend, were twice those of the south-east, he noted, while business start-ups were only half the national average.

Both Mr Brown and Mr Prescott are pushing a new initiative, known as the Northern Way, which is based on improving the economies of big cities such as Manchester, Leeds and Sheffield as well as surrounding growth areas to challenge the south.

But the Brown-Prescott initiative sits uneasily alongside a public service agreement (PSA) between the government and its nine regional development agencies, updated this year. It is aimed at making improvements in the economic performance of all regions while reducing the prosperity gap between the strongest and the weakest - which is currently widening, according to the IPPR.

Of the PSA target, the report notes: "It means there is an objective for the south-east's rate of growth ... to be increased with all the other English regions."