Opinion: 'A Northern English currency: not just fantasy?'

This February, our City Region’s councillors will once again find themselves in the difficult situation of having to deliver a budget that will reduce services for their citizens. This is not a situation that anyone wants to be in. The blame lies squarely with the choices the present government have made with their policy of austerity. 

One particularly consequence of that austerity is that poverty in Greater Manchester is becoming ever more prevalent, as the latest child poverty statistics indicate. But what is perhaps even worse is that the cuts are having a disproportionate impact on the north of the country. 

The excuse for this ‘punishment’ is that we still receive a subsidy from the South; in other words, we in the North still spend more than we take in tax and we should be bloody grateful as well. This rhetoric not only smacks of contempt for our council services but is ignorant of the facts as well.

As bizarre as it sounds, we may be able to avoid some of the abysmal impacts of this austerity if we introduced our own currency. A northern pound free to devalue in the bad times and appreciate in the good. Maybe we could call it the Manco but, without focusing on the aesthetics, let me try and make the case.  

Despite all the talk of a Northern Powerhouse, the South East is still the magnet for government investment

Greater Manchester and the south east of England are in both a monetary and fiscal union: we share a currency and our government sets national budgets. The rationale for being in both is that in a currency union the less prosperous areas have their goods’ prices inflated by a currency which is stronger because of the more prosperous area, making it more difficult for them to export their goods. They are put at a competitive disadvantage.

 To illustrate my point let’s look at the euro and the dollar. Germany uses the euro to devalue its currency, making its goods more competitive to people outside the Eurozone and the benefit of this is reflected in their government’s substantial trade surplus. Imagine how expensive it would be to buy an Audi if Germany still used the Deutsche Mark.

On the flipside, the Greeks used it to inflate their currency, and in the absence of a fiscal union, they borrowed at the more favourable rates that the euro allowed. As soon as the crash came they were left wide open; no cash from the beneficiary of the euro and no way to devalue their currency.

If they still had the drachma, the currency would have fallen, increasing the competitiveness of their goods, which in turn would have helped attract trade and keep people in work. Instead, poverty sky-rocketed. At one stage there was 50% youth unemployment and, though Greece is finally on the path towards recovery, poverty has taken root in society, with a generation unable to gain skills outside of education.

Granted, we are not like Greece and Manchester’s economy is doing quite well, but our public services still receive subsidies because our economy isn't as strong as, say, London’s, and we are one nation with one responsibility for each other.

In this sense Britain is more like the US, whose 50 states are in both a monetary and fiscal union. The US federal government transfers money from the prosperous states, such as New York and California, to the poorer ones. This is necessary to ensure the stability of the dollar is maintained, so the problems the euro faces are avoided.

Here in the UK, it is conveniently forgotten what the north offers the rest of the country; politicians, as ever, give little thought to facts. After Margaret Thatcher polarised the nation, it was decided that the south was to be the primary beneficiary of both fiscal and monetary stimulus. A devalued pound for London to sell its exotic financial services abroad and a mantra that has led to a belief that local areas should keep every penny.

Despite all the talk of a Northern Powerhouse, the South East is still the magnet for government investment, whether it be through greater spend on infrastructure – witness the gulf that has arisen between the north and south in terms of transport – or the fact that London is the main beneficiary of the country’s spend on education, with too frequently our brightest young minds congregating in the capital.

I have heard some talking of London and the south east escaping the currency union so that they no longer have to pay to ‘subsidise’ the north

So if the south no longer wants to hold up its end of the bargain on the currency union – that, through the national budget, the north receives the dividend it is due for devaluing the currency – I don’t see why we should have to hold up our commitment to the pound.

Maybe it’s time for us to have our own currency, in order to give our firms a fighting chance after Brexit and a job to our unemployed who can’t sell their labour because firms struggle to compete internationally due to an inflated currency.

I have heard some talking of London and the south east escaping the currency union so that they no longer have to pay to ‘subsidise’ the north through regional budgets. Well let us save you the mither and get out now. With our own currency and budget, perhaps we can find a new, more sustainable way of living, freed at last from the dogmatic austerity which appears unaware of the existence of a country beyond London and the Home Counties.