Too much London-based decision-making may have contributed towards the UK’s vote to leave the EU, according to John McDonnell.
The shadow chancellor said he would support moving some functions of the Bank of England to Birmingham after commissioning a report on the challenges and opportunities facing the country’s financial system.
Carried out by GFC Economics, the report reveals UK output from high-tech industries has fallen on average over the last ten years, with only one other EU member state having a worse performance, with investment in manufacturing, ICT and other sectors lagging £28bn behind investment in real estate companies.
Only London, the south east and eastern regions of the UK have benefited significantly from job growth around new, technology-focused industries, with the gap expected to widen if no action is taken.
Asked if he would also support moving Parliament out of the capital, McDonnell said Labour leader Jeremy Corbyn had already demonstrated his commitment to increased flexibility on the location of government business.
“I think there is an argument to put forward for ensuring that certainly cabinet, and maybe sessions of Parliament, could be held elsewhere,” he said.
“There is a view that decision-making located in Whitehall, Westminster and the City - and that includes the Bank of England results often in a distortion of economic policy direction, not taking into account the real needs of the regions and nations of our country.
“To some extent that may well have contributed towards the Brexit vote as well.
“This gives us an opportunity for looking afresh at institutional frameworks and readdressing some of the imbalances of the past.”
Other recommendations in the report, which will be considered for inclusion in Labour’s next manifesto, include setting up Labour’s proposed National Investment Bank in Birmingham and establishing Bank of England offices in Glasgow, Cardiff and Belfast, with two smaller regional offices in Newcastle and Plymouth, as well as increased investment in research and development.
McDonnell added: “This important report drums home the message that our financial system isn’t delivering enough investment across the whole country, and in the high-technology industries and firms of the future where it is needed most.
“Under the Tories, we’ve seen more and more investment flowing into property speculation whilst high-tech firms have been starved of the money they need, and research spending has lagged far behind.
“Labour is committed to working with our financial institutions to help deliver the financing that the fourth industrial revolution will need, as part of our ambitious plans to help build a high-tech, high-wage economy that works for the many, not the few.”
Report author Graham Turner, chief economist at GFC, said his consultancy was not aligned with any political party, but he had been advising McDonnell for a number of years.
He added: “The pace of automation and technological change is accelerating, threatening established business models and creating an economy characterised by frequent ‘disruptive’ episodes.
“As a central bank sitting at the heart of the UK financial system, the Bank of England needs to be playing an active, leading role, ensuring banks are helping UK companies to innovate. Flow of funds analysis shows that banks are diverting resources away from industries vital to the future of this country.
“The UK’s productivity performance is extremely poor by international standards and we run the risk of being left behind by technological developments, which could and should enrich the whole country.”