The great wen UFO

As we commence the festival of London-centric self-congratulation that runs from the marathon to the Olympics, the question of whether the capital is too big for its boots, or just too big for Britain, has once more raised its head. In the Spectator recently, Neil O'Brien (of the Tory think tank Policy Exchange) reiterated the myth that London took leave of the rest of the UK as a result of the coming of Thatcher and the mid-80s Big Bang.

It was a shabby, defeated city, brilliantly captured in The Long Good Friday, in which the rat-like gangster Harold Shand picks over the ruined wilderness of London’s abandoned docklands. We all know about what happened next. Mrs T and the Big Bang. Yuppies then hipsters. Russian oligarchs and Polish builders alike have moved to London.

This ignores the fact that the "Bigger Bang" of the Eurobond markets began in the 1960s, as the City's traditional Sterling area went into decline, that gentrification began then too (a point made in Dominic Sandbrook's current TV series on the 1970s), and that the "wilderness of London's abandoned docklands" was in reality a relatively short hiatus between the closure of the docks due to the containerisation revolution in the 70s and the formation of the LDDC in 1981. The very notion of the "hipster" is a London in-joke, the international super-rich have based themselves here since 1789, and there's been a big Polish community since WW2. It's also worth pointing out that Bob Hoskins does not look like a rat. A well-fed penguin, maybe.

London, and specifically the City, has always been out of tune with the rest of the UK. This didn't start in 1979 or 1986. O'Brien wishes to make the point that London is categorically different to the rest of the UK, so extreme contrasts and abrupt divisions are used to illustrate this: "Economically, culturally and socially, London has now left Britain behind, blasting off from the rest of the nation like some vast UFO. Its inhabitants need to remember those who have been left behind." That last sentence sounds half-hearted, while the preceding one is brimming with glee. The departing UFO metaphor is also a bit awry, as to most of Britain "that there London" is more like a huge alien spaceship that has come to hover over the island, like something out of Independence Day or District 9 (it's well known that Cockerneys will happily perform degrading sex acts in return for dog food).

John Harris offers a more romantic soft left perspective in the Guardian today, picking up on Andrew Lansley's announcement that the NHS will introduce regional pay and noting that exceptions will be made for (presumably) metropolitan high-flyers who will be sent beyond the M25 like latterday district commissioners (pith helmets optional). Harris welcomes the relative success of the SNP and UKIP as a sign of non-metropolitan frustration with the Great Wen, though his solution is a vague call for more top-down (i.e. directed from London) action: "the national state should shift anything and everything it can well beyond the capital". This even extends to welcoming Andrew Adonis's suggestion that the House of Lords should be shifted to Manchester.

This latter call is part of the fashion for eye-catching gestures towards regionalism that don't actually amount to much, such as moving some of the more tractable bits of the BBC to Salford, and insisting that what the larger English cities need are directly-elected mayors: a Boris in your backyard. This comes from the same people (Heseltine and Adonis appear to have formed a double-act recently) who abolished the powerful metropolitan counties (including the GLC) in 1986 and were surprised when the electorate rejected feeble regional assemblies in the North East referendum in 2004.

What O'Brien, Harris and Adonis fail to address is the economic basis for the dominance of London and the powerlessness of the regions. Local government was strong in Victorian Britain not because of the talents of Joe Chamberlain, but because Birmingham, Manchester, Newcastle and other cities were economically strong. The gradual conversion of the regions into bantustans, dependent on central government largesse and increasingly denied the right to fully manage their own affairs, is a consequence of economic weakness.

Equally, the dominance of London (and its South East hinterland) is a consequence of the capital's ability both to grab the lion's share of the UK's economic growth and exploit its international role as a tax haven gateway, service centre and luxury resort. Dubai with rain. There are also grounds to believe that the financial crisis of 2008, and the failure to reform the banking sector thereafter, are symptomatic of the evolution of London as a City state, pursuing goals independent of the rest of the UK. It was emblematic that David Cameron should choose to invoke the UK veto (or non-veto) at last year's Brussels summit to safeguard the interests of the City of London, while standing aside in respect of the Bombardier plant closure in Derby.

London is over-mighty and its gravitational pull is enervating to the rest of the country. The Labour party, unlike the Tories, has an obvious interest in rectifying this, however the Blair coup meant that it institutionally accepted that this was not possible within the neoliberal paradigm. Activist industrial policy is dead and we must not jeopardise the tax and trickle-down benefits that London brings.

There is solution to this. Traditional city states based their influence on being at the nexus of multiple trading routes.

London is now running an entrepôt trade in money at the intersection of the international time zones, just as Italian city states like Genoa or Venice had run an entrepôt trade in goods at the intersection of the trade routes from the East and the Mediterranean to the North and West of Europe. [pg 7].

If the political class will not reform the City's status as a tax haven gateway, then it should at least legislate to move the City to somewhere in the North so the benefit is distributed. What we call "the City" is a legal construct more than it is a physical place. The trading routes for money do not follow the natural routes of river valleys or trade winds, but are based on legislative fiat. Tax havens are such because we make them so, not because they are sitting on large, natural deposits of tax havenry.

The real geographical advantage of the square mile is the timezone, equidistant between Asia and the Americas, which means that anywhere in the UK would suffice just as well. There is an element of convenience in its proximity to mainland Europe, however this would not be significantly worse were it in Birmingham or Leeds, and this is more than offset by the advantages of being anglophone, particularly for US banks. It might be argued that such a shift would cause some foreign banks to prefer relocation to Frankfurt, but that ignores the fact that they are in London now precisely because it offers a more benign regulatory environment and thus more profit opportunities than Frankfurt, which would be preserved in Birmingham or Leeds.

Moving the House of Lords sounds radical, even cheeky, but the truly revolutionary option would be to move the Bank of England to somewhere in the heart of, well, England. It's time for the UFO to take off.