# The North-South Divide in Infrastructure Spending: £6,000 Per Person in London vs £400 in the North East

> Analysis of government infrastructure spending reveals London receives £6,356 per person while the North East gets £413. HS2 cancellation, Northern Powerhouse Rail downgrade, and persistent underfunding show 'levelling up' was rhetoric without resources.

*Section: Politics — By Sarah Mitchell — Published January 18, 2025 — 10 min read*

Canonical URL: https://dailyjunction.org/politics/north-south-divide-infrastructure-spending-gap
Tags: North-South divide, infrastructure, levelling up, regional inequality, transport, investment

## Key takeaways

- London receives £6,356 per capita in transport infrastructure spending vs £413 in North East (IPPR North data, 2024)
- HS2 cancellation saved £36bn but Northern Powerhouse Rail received only £2bn of promised reinvestment
- North has 29% of England's population but receives 19% of infrastructure spending
- Productivity gap between London and North has widened from 23% in 2010 to 31% in 2024
- Treasury Green Book appraisal methods systematically favour projects in already-prosperous areas

The North-South divide in England is not an accident of geography or an inevitable result of economic forces. It is a policy choice, sustained decade after decade by an infrastructure spending gap so large that it amounts to a structural transfer of resources and opportunity from the North to London and the South East. The numbers are stark, the consequences are measurable, and the failure to address it is a national scandal.

According to IPPR North's analysis of government infrastructure spending in 2024, London receives £6,356 per person in transport infrastructure investment. The North East receives £413. The North West gets £620. Yorkshire and the Humber receives £511. This is not a one-off anomaly—it is a persistent pattern that has held for decades and shows no sign of changing.

"Levelling up" was supposed to fix this. It did not. The rhetoric was bold, the promises were specific, and the delivery was almost non-existent. HS2's northern leg was cancelled, Northern Powerhouse Rail was downgraded to a fraction of what was promised, and the Infrastructure Investment Fund that was supposed to redirect resources to left-behind areas has been quietly shelved.

The result is predictable: the productivity gap between London and the North has widened, not narrowed. In 2010, London's productivity per worker was 23% higher than the North. By 2024, it was 31% higher. The North is not catching up. It is falling further behind. And infrastructure spending is a major reason why.

## The scale of the disparity

The IPPR North figures are based on analysis of committed government transport infrastructure spending over the next decade. They include major projects like Crossrail 2 (now paused but still in planning), London Underground upgrades, road schemes, and rail improvements.

London's £6,356 per capita is not an outlier in the South—the South East receives £1,800 per capita, the South West £1,200. The North, by contrast, averages around £500-600 per capita across its three regions (North East, North West, Yorkshire and the Humber).

This is not because London does not need investment—it does. The transport network is overcrowded, the population is growing, and infrastructure is ageing. But the disparity is so large that it cannot be justified on need alone. It reflects a system that prioritises the already-successful over the left-behind.

The gap is even starker when you look at major transformational projects. Crossrail (the Elizabeth Line) cost £19 billion for 100km of new and upgraded railway serving London and the South East. Northern Powerhouse Rail, which was supposed to connect Liverpool, Manchester, Leeds, Sheffield, and Newcastle with high-speed rail, was budgeted at £39 billion for a much larger network. It was downgraded to a £2 billion package of upgrades to existing lines.

The message is clear: London gets transformational infrastructure. The North gets upgrades and patches.

## The Treasury Green Book problem

Why does this happen? Part of the answer is the Treasury Green Book—the methodology used to appraise infrastructure projects. It is designed to ensure value for money, but in practice, it systematically favours projects in already-prosperous areas.

The Green Book values time savings based on wages. A project that saves 10 minutes for a London commuter earning £50,000 is valued more highly than the same time saving for a Manchester commuter earning £30,000. This makes economic sense in a narrow cost-benefit framework, but it means that projects in high-wage areas always score better than projects in low-wage areas.

It also values agglomeration benefits—the productivity gains from bringing more people and businesses into close proximity. Again, this favours London, which already has high density and high productivity. A new transport link in London connects more high-value jobs and businesses than the same link in the North, so it scores higher.

The result is a self-reinforcing cycle. London gets more investment because it is already successful. That investment makes it more successful, which justifies more investment. The North gets less investment because it is less productive. That lack of investment keeps it less productive, which justifies continued underinvestment.

This is economically rational in a narrow sense, but it is strategically insane. It locks in regional inequality and ensures that the North can never catch up. A methodology designed to maximise national economic output ends up concentrating growth in one corner of the country and leaving everywhere else behind.

## The HS2 betrayal

HS2 was supposed to be different. It was sold as a project for the whole country, not just London. The original plan was a Y-shaped network: London to Birmingham (Phase 1), then splitting to Manchester (Phase 2a) and Leeds (Phase 2b).

Phase 1 is being built, though over budget and behind schedule. Phase 2a to Manchester was cancelled in October 2023. Phase 2b to Leeds was cancelled earlier. The official reason was cost—the project had ballooned from an estimated £37 billion in 2013 to over £100 billion.

The government promised that the £36 billion saved by cancelling the northern legs would be reinvested in northern transport through a programme called "Network North." The reality has been very different.

Much of the "new" funding announced under Network North was either already committed, rebadged existing projects, or inflation adjustments to existing budgets. The Midlands Rail Hub, for example, was counted as new investment despite being in development for years. Road maintenance budgets were inflated and presented as new spending.

Northern Powerhouse Rail, the flagship project that was supposed to replace HS2, was downgraded from a new high-speed line to a package of upgrades to existing routes. The £39 billion vision became a £2 billion reality. The journey time from Manchester to Leeds, which NPR was supposed to cut to 30 minutes, will remain around 50 minutes with the downgraded plan.

Transport for the North, the body representing northern local authorities, described the outcome as a "betrayal" and said it would not deliver the connectivity the North needs to compete. They were right.

## The productivity consequences

Infrastructure is not just about convenience—it is about productivity. Good transport infrastructure expands labour markets, allows businesses to access more customers and suppliers, enables specialisation, and attracts investment. Poor infrastructure does the opposite.

The North's productivity gap is not primarily about skills or innovation—northern cities have good universities, skilled workforces, and growing tech and creative sectors. The gap is about connectivity and agglomeration.

A business in Manchester can access a labour market of around 2.5 million people within a reasonable commute. A business in London can access over 8 million. That difference matters enormously for recruitment, specialisation, and productivity.

Similarly, a business in Leeds that wants to collaborate with partners in Manchester or Sheffield faces a slow, unreliable train journey on Victorian infrastructure. A business in London can reach partners across the South East quickly and reliably. That difference shows up in productivity data.

Research by the National Infrastructure Commission found that improving connectivity between northern cities could add £97 billion to the northern economy over 30 years and create 850,000 jobs. But this requires investment on a scale that has never been delivered.

## The political economy of neglect

Why does this persist? Because the political incentives are all wrong. London and the South East have more parliamentary seats, more media influence, and more economic weight. Northern MPs can complain, but they are outnumbered.

The Treasury, which controls infrastructure spending, is institutionally biased towards projects that maximise measured economic return. That means London. The Green Book methodology is not a conspiracy—it is a technocratic tool that reflects a particular set of priorities. But those priorities entrench inequality.

There is also a lack of institutional capacity in the North. London has the Mayor of London, Transport for London, and a unified voice. The North has multiple metro mayors, local authorities that often compete rather than cooperate, and no single body with the power to plan and deliver regional infrastructure.

Transport for the North was supposed to fill this gap, but it has limited powers and no funding of its own. It can make plans, but it cannot build. That power remains with central government, which has repeatedly overruled or downgraded TfN's proposals.

## What the North actually needs

The North does not need piecemeal upgrades or rebadged existing projects. It needs transformational infrastructure on the scale that London has received.

**Northern Powerhouse Rail in full.** A genuine high-speed rail network connecting Liverpool, Manchester, Leeds, Sheffield, Newcastle, and Hull. Journey times of 30 minutes between major cities, not 50-60 minutes. This would create a single economic region of 15 million people that could compete with London.

**Electrification and capacity upgrades.** Much of the North's rail network is still diesel-powered, slow, and overcrowded. Full electrification, digital signalling, and capacity improvements are essential.

**Intra-city transport.** Northern cities need London-scale investment in metros, trams, and bus networks. Manchester's Metrolink is good but limited. Leeds, the largest city in Western Europe without a metro, desperately needs one. Newcastle, Sheffield, and Liverpool need expansion of existing systems.

**Road investment.** The trans-Pennine routes (M62, A66, A69) are congested and unreliable. Upgrades are needed, though rail should be the priority for inter-city connectivity.

**Digital infrastructure.** Full fibre broadband and 5G coverage across the North, not just in city centres. Connectivity is not just physical.

The cost would be high—probably £50-100 billion over 20 years. But this is comparable to what London has received and will continue to receive. And the economic return, in terms of productivity growth, job creation, and reduced regional inequality, would be enormous.

## The levelling up failure

"Levelling up" was the Conservative government's flagship policy from 2019 to 2024. It promised to address regional inequality, invest in left-behind areas, and rebalance the economy. It failed almost completely.

The Levelling Up Fund allocated £4.8 billion over three years to local projects. This sounds significant until you realise it is less than the annual cost of running Crossrail. It was spread across hundreds of small projects—new roundabouts, refurbished town centres, sports facilities—rather than transformational infrastructure.

The allocation process was widely criticised as politically motivated, with marginal Conservative seats receiving disproportionate funding. Analysis by the UK in a Changing Europe found that deprivation was a weaker predictor of funding than political marginality.

The Infrastructure Investment Fund, announced with great fanfare, was quietly shelved. The UK Shared Prosperity Fund, which replaced EU structural funds, provided less money and was time-limited. The Freeports programme created tax incentives but no new infrastructure.

The overall picture is clear: levelling up was a slogan, not a strategy. It delivered small-scale projects and tax breaks, not the transformational investment the North needs.

## The case for change

The current approach is not just unfair—it is economically inefficient. Concentrating growth in London and the South East has created overcrowding, unaffordable housing, and infrastructure strain in the South, while leaving talent and potential underutilised in the North.

A more balanced economy would be more productive overall. Research by the OECD and others shows that excessive concentration of economic activity in a single city or region reduces national productivity growth. The UK is an extreme outlier in this regard—no other major economy is as London-centric.

Rebalancing would also reduce political alienation. The Brexit vote and the collapse of the "Red Wall" in 2019 were driven partly by a sense that London and the South East were prospering while the North was left behind. Infrastructure investment is not a silver bullet for political discontent, but it is a tangible signal that the government cares about all regions, not just the capital.

## The bottom line

The North-South infrastructure divide is a policy choice. It is the result of a Treasury methodology that favours already-successful areas, a political system that prioritises London, and a failure of ambition and investment that has persisted for decades.

The consequences are measurable: a widening productivity gap, underutilised economic potential, and deepening regional inequality. "Levelling up" promised to fix this and delivered almost nothing. HS2 was supposed to connect the country and ended up stopping at Birmingham.

The North does not need sympathy or small-scale projects. It needs transformational infrastructure investment on the scale that London has received for decades. Until that happens, the North-South divide will continue to widen, and the UK will continue to be one of the most regionally unequal countries in the developed world. The question is whether any government will have the courage and the resources to actually do something about it.

## Frequently asked questions

### Why does London receive so much more infrastructure spending than the North?

Several factors: London's higher population density makes projects appear better value in cost-benefit analysis; the Treasury Green Book methodology values time savings based on wages, so projects in high-wage areas score higher; political pressure from London MPs and media; and a self-reinforcing cycle where past investment makes new investment appear more justified. The system is designed to favour areas that are already successful, not to address regional imbalance.

### What happened to the money saved from HS2 cancellation?

The government claimed cancelling HS2's northern leg would save £36 billion to be reinvested in northern transport. In reality, most 'reinvestment' was either already-planned projects rebadged, inflation adjustments, or vague long-term commitments. Northern Powerhouse Rail was downgraded from a new high-speed line to upgrades of existing routes. The North received a fraction of what was promised, and much of it is not new money.

### Can the North close the productivity gap without major infrastructure investment?

Unlikely. Productivity is closely linked to connectivity, agglomeration effects, and access to markets and talent. Poor transport infrastructure limits the size of effective labour markets, makes supply chains less efficient, and reduces business investment. Skills and innovation matter too, but without the physical infrastructure to connect people and businesses, the North will continue to lag. Every successful economic region in the world has invested heavily in connectivity.

## Sources

- [IPPR North — Regional infrastructure spending analysis](https://www.ippr.org/research/publications/)
- [Transport for the North — Northern Powerhouse Rail and investment data](https://transportforthenorth.com/)
- [National Infrastructure Commission — Regional infrastructure assessments](https://nic.org.uk/)

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