Financial Times UK - 03.03.2020

2 ★ FINANCIAL TIMES Tuesday 3 March 2020

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NAT I O N A L

R O B E RT W R I G H T A N D S E BA ST I A N PAY N E

Home secretary Priti Patel is to face an
internal government inquiry into
claims about her alleged bullying of civil
servants following the resignation of the
top official in her department.
Cabinet Office minister Michael Gove
told the House of Commons yesterday
that Boris Johnson had asked cabinet
secretary Mark Sedwill to “establish the
facts” about Ms Patel’s behaviour.
Philip Rutnam resigned as Home

Office permanent secretary on Satur- day, saying he planned to sue the government for constructive dismissal as he accused Ms Patel of being involved in a “vicious” media briefing campaign against him and of bullying officials. New allegations against Ms Patel emerged yesterday evening. The BBC reported that a civil servant in Ms Patel’s private office, when she served as employment minister, took an overdose of prescription medicine after claiming she was bullied. The Cabinet Office said it would not comment on personnel cases. Labour leader Jeremy Corbyn earlier told Mr Gove the internal inquiry was “not enough”, adding the government

should call in an external lawyer to investigate Sir Philip’s claims and whether they amounted to a breach of the ministerial code of conduct by Ms Patel. The prime minister has defended the home secretary, a pro-Brexit ally in his cabinet with a critical role in delivering flagship Conservative policies including a new immigration system and the recruitment of 20,000 extra police officers. Mr Johnson said yesterday Ms Patel was doing an “outstanding job” on a “tough beat”. He told the BBC: “She’s putting forward the new points-based immigration system — that’s a big, big job of work.”

Sir Philip said in his resignation state- ment that, as Home Office permanent secretary, he had received allegations that Ms Patel’s conduct “has included shouting and swearing, belittling

people, making unreasonable and repeated demands, behaviour that cre- ated fear”. Mr Gove said Ms Patel “absolutely” rejected the allegations against her, but

opposition MPs raised further claims about her conduct. Mr Corbyn cited media reports that Ms Patel had last month asked officials to continue with the deportation to the Caribbean of 25 Jamaicans convicted of offences in the UK even though the courts said they should not be removed. Mr Gove insisted the government was committed to adhering to the law in such cases. “You betcha,” he replied when Labour MP Cat Smith asked whether it was the government’s position that ministers should obey the law. Former Labour minister Hilary Benn asked whether No 10 had received complaints from officials about Ms Patel’s

behaviour when she was international development secretary between 2016 and 2017 and employment minister from 2015 to 2016. “It is the case that the inquiry that’s proceeding will look at all complaints that may have been made,” said Mr Gove. Some Conservative MPs suggested the allegations against Ms Patel were typical of those made when women reached powerful positions. Other Tory MPs said the claims reflected civil servants’ resistance to the government policies that Ms Patel was pursuing. Mr Gove defended ministers’ right to be tough with officials. Robert Shrimsleypage 11

Home Office

Inquiry to probe Patel bullying allegations

Cabinet secretary has

been asked to ‘establish

the facts’ about minister

S E BA ST I A N PAY N E

The government is exploring using its international aid budget to purchase a multimillion-pound hospital ship that could be used for humanitarian relief and assisting military operations.

Anne-Marie Trevelyan, minister for international development, has ordered officials to examine ways of broadening use of her department’s budget, which represents 0.7 per cent of national income, to better chime with the aims of Boris Johnson’s government. One option officials are investigating is buying a hospital ship to improve the UK’s humanitarian relief capabilities, while also having the potential to assist the Royal Navy in military operations, according to one senior insider. The UK is one of only a few countries to meet the OECD target of spending 0. per cent of gross domestic product on aid, but Conservative MPs have called on the government to widen the use of the budget to cover other priorities, such as the BBC World Service and

peacekeeping. Mr Johnson backed these calls last year, stating: “We could make sure that 0.7 per cent is spent more in line with Britain’s political, commercial and diplomatic interests.” The Department for International Development is considering the possi- bility of procuring a ship similar to the US’s Mercy-class of vessels, which were converted from oil tankers in the 1980s. Each ship has 1,000 patient beds with a basic crew of 70. They provide assist- ance to American military personnel and respond to natural disasters. One of the Royal Navy’s current ships, the RFA Argus, is equipped with 100 beds, but does not meet the Geneva Convention’s definition of a hospital ship. It is due to be taken out of service in 2024 with no plans for a replacement. Penny Mordaunt, one of Ms Trev- elyan’s predecessors, investigated a similar plan. DfID said: “We are committed to ensuring UK aid reaches the world’s poorest people, achieves value for money for the taxpayer and works in our national interest.”

Humanitarian relief

Navy set to share hospital

ship funded by overseas aid

J O S E P H I N E C U M B O

“Stronger” employers will be required to clear any pension deficits within six years under a shake-up of the funding regime for thousands of company retirement schemes unveiled by the industry regulator.

Currently, employers sponsoring “defined benefit” pension schemes, which promise to pay an inflation- linked retirement income for as long as the member or surviving spouse lives, do not have a prescribed timeframe to clear any shortfall in the scheme. The industry median for implement- ing a recovery plan after an employer and its pension trustees identify a shortfall is seven years. But the Pensions Regulator proposed yesterday that schemes backed by stronger employers should have deficit recovery plans of no longer than six years, with the weakest employers having up to 12 years to clear their shortfalls. The consultation did not define a stronger employer. But the regulator

generally regards an employer as strong if it is a market leader, has good growth prospects, is part of a wider group or has cash to support the pension scheme. Businesses may be required to divert cash from dividend payments if they want less scrutiny from the regulator, under the proposals. The plans came in a consultation document which aims to address a lack of clarity in the current system over funding for DB schemes. “This lack of clarity allowed a minor- ity of trustees and employers to misuse the flexibilities in the system and made our job of proving non-compliance and taking enforcement action more time consuming,” the regulator said. Stephen Soper ofPwCsaid for members of DB schemes supported by stronger employers the code should improve security of their benefits. “But schemes with weak employers may find this could accelerate their journey into the Pension Protection Fund,” he said. The consultation comes as the major- ity of the UK’s 5,422 private sector DB schemes are closed to new members.

Defined benefit

Big employers will be given six

years to clear pension deficits

C H R I S G I L E S— ECONOMICS EDITOR

Boris Johnson’s election pledge to “level
up” the UK’s underperforming regions,
so that “everyone can get a fair share of
future prosperity”, is about to come
under intense scrutiny.
The Budget on March 11 will be the
government’s first opportunity to back
its rhetoric with cash, and start helping
“left-behind” areas far beyond London
and the affluent south-east.
The prime minister is under pressure
to deliver: he knows the Conservative
party only seized seats traditionally
held by Labour in northern England, the
Midlands and Wales after promising to
improve their areas.

What does levelling up aim to solve?
On many simple measures such as gross
domestic product of each resident, the
UK has one of the most regionally une-
qual economies of any in the advanced
world, according to OECD figures.
London is far ahead of all other
regions, notably Wales, the north-east
and Northern Ireland.
At a more local level, Britain easily has
the worst inequality among OECD coun-
tries, and this reflects how differences
within regions are greater than those
between them.
For the Conservatives and Labour, a
consensus has built up that these stark
differences must be tackled.
Bob Kerslake, a former civil service
head who has advised Labour, said
regional inequality “blights the pros-
pects of future generations” because the
“economic potential of large parts of the
UK is not being realised”.
Andy Haldane, chief economist at the
Bank of England, issued a “call to arms”
to government in February to address
“the interlocking issues of productivity,
skills and place” that meant some
regions were “steaming ahead” while
others have been “left behind”.
But this problem is not new. London’s
GDP per worker was 30 per cent higher
than the national average in 1900; the
gap closed in the middle of the 20th cen-
tury and widened again after 1980.

Why are the inequalities so large?
The Industrial Strategy Council, which
advises the government and is chaired
by Mr Haldane, in February listed sev-
eral key reasons for left-behind areas.
It said that some places had lost their
fundamental reason for existing: such as
former coalfields and some coastal
towns where the main industries — fish-

ing, mining or tourism — had been wound up or severely curtailed. By contrast, bigger cities could benefit from clusters of economic activity which became self-sustaining and attracted new businesses to locate nearby. These trends were reinforced by people moving from left-behind areas to work in these cities. Increasingly, the age profile of places is polarising: cities are becoming younger, while most coastal towns are growing older. Having a much higher proportion of old people generally reduces the dynamism of areas. There is no doubt well-educated and skilled people tend to move to the south-east, exacerbating regional differences. Henry Overman, professor of economic geography at the London School of Economics, said “a better-educated labour force is the most important driver of local economic performance”. David Phillips, associate director at the Institute for Fiscal Studies, a think- tank, said the main difference between places was whether they had high-paid

jobs. “Poor regions are poor not because they have large numbers of poor people but because they have smaller numbers of high-income people,” he added.

Are regional inequalities that bad? As so often in economics, the way the inequalities are measured matters. One reason why London looks so affluent is because it is treated as a single region in official statistics. Other regions are very different, comprising cities, towns and rural areas. Britain’s high regional economic inequality figures are “enormously influ- enced” by these administrative boundaries, according to Tony Travers, professor of government at the London School of Economics. When Camden and the City of London are treated as one local area and then compared with Tokyo in OECD statistics, he said the figures were meaning- less. “You might as well” compare the house in central London owned by the wealthy Hinduja brothers with “a croft in Scotland”, he added.

When the OECD discards administrative boundaries and looks at individual cities and the commuter areas con- nected to them, the UK’s economic inequalities no longer look larger than those in many other countries. Another issue is the risk of relying too much on one measurement. Many areas which perform well on GDP per head actually have low house- hold incomes, so the figures on regional inequalities do not reflect the living standards of those that reside there. For example, Belfast and Nottingham have dynamic economies, but also high levels of poverty, reflecting how strong GDP per head figures result from com- muters going into the cities for work. Conversely, there are areas with weak local economies but rich households: Dorset is affluent by dint of its status as a desirable place to retire to, for instance.

Is London so much better off? Britain has dynamic places with high- skilled, well-paid workers, predomi- nantly in the south-east, but this does

On the level Budget will test pledge to even out regional inequality

A dynamic economy does not buy happiness GVA per head vs mean score for whether residents feel their life is worthwhile South Derbyshire

Camden

Westminster

Hammersmith & Fulham

Kensington & Chelsea

Tower Hamlets Islington

Southwark

Merton

Sutton

West Devon

Belfast

Mid & East Antrim

Belfast

GVA per head (, log scale)

Mean wellbeing score for ‘life is worthwhile’ category

London

Northern Ireland Other regions

Even in London’s most dynamic areas. people are less likely than average to say life is worthwhile

Older parts of England are ageing faster than the country as a whole, while younger areas grow even younger

eg. in of people in East Sussex were aged or over, which is points above the national average of

Gap between regional and national share of the population that is aged and above (-)

Brighton Cornwall

Devon

East Sussex

London Tyne & Wear

West Midlands

Brighton Cornwall

Devon

London Tyne & Wear East Sussex

West Midlands

National average

UKDE FR RO PL TR HU BG BE SK NL IE IT US CH EL LV CZ HR KR JP EE LT SI NO AT DK PT ES SE FI MT NZ

By one measure, the UK has the most regionally unequal economy in the developed world Regional and national GDP per capita (thousands of USD*, log scale)

*Adjusted for the cost of living in each country Sources: OECD; ONS

MOST UNEQUAL MOST EQUAL

Camden and the City of London

Co Down

San Francisco Bay Area Tokyo Stockholm

Wellington

Södermanland Northland

Warsaw Brussels

McAllen,Edinburg, Pharr, TX

New York, New Jersey

National average

CL US MX PL SK KO UK IT FR HU DE ES BE CZ CA NL SI EL SE DK CH LT AU FI PT NO AT

Using city boundaries, the UK looks much more geographically equal Metropolitan GDP per capita (thousands of USD*, log scale) MOST UNEQUAL MOST EQUAL

Milton Keynes London

Wirral

San Francisco

Hidalgo, TX

Calgary Stockholm ACT

Oslo Salzburg

Graz Gold Coast

not mean that living in the region is easy. High costs of living — notably housing — mean that median incomes after tax in London are no higher than the national average. Wellbeing indicators show London as the most anxious and unhappy area of the UK, with residents least likely to say life is worthwhile. All other areas, including Northern Ireland, score much higher. Tera Allas, director of research and economics at McKinsey UK, said at a local authority level there was “very lit- tle correlation” between economic suc- cess and life satisfaction. Britons appear to face an invidious choice: live in the dynamic south-east and grapple with high housing costs that drag down living standards, or move somewhere more affordable that offers worse career prospects. It all highlights how Mr Johnson’s mis- sion to level up the country will be far from easy to accomplish. This is the first part in an occasional series on the government’s levelling-up agenda

Measure for measure

Johnson knows the

Tories only seized seats

historically held by

Labour after

promising to improve

those areas

Politics podcast Brexit mandates, civil service wars, the Budget and Labour leadership ft.com/podcast

Priti Patel: praised by Prime Minister Boris Johnson for doing an ‘outstanding job’ on a ‘tough beat’

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$ per ££ per €$ per €CURRENCIES1.070Mar 311.2510.8551.0741.249prev0. ¥ per $¥ per £SFr per €€ indexCOMMODITIES111.430 111.295139.338 139.03588.767 89.0461.0711.069$ index€ per $£ index¥ per €£ per $€ per £SFr per £119.180 119.476104.536 104.63677.226 76.705Mar 310.8000.9351.1691.252prev0.9321.1641.2440. Oil Brent $Gold $Oil WTI $Mar 3150.461244.8553.351248.80prev53.1350.350.220.41%chg-0.

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