UK's South Supports North With Tax Subsidy, Says Study

by Robin Pilgrim, LawAndTax-News.com, London

01 October 2008

Figures unveiled this week by one of the UK's leading economic consultants have revealed that public services in the North of the country are being heavily subsidised by the higher taxes paid by individuals in the South.

According to the figures, released by Oxford Economics on Monday, GBP40bn worth of tax revenues collected from individuals in the South East and London boost the Treasury's annual expenditures on public transport systems throughout the rest of the country, with particular benefits going to the North.

The figures have also revealed that the amount of government spending on public services for individuals in the South is significantly less than the tax revenues collected - with the average Londoner being penalised by around GBP2,000 every year in taxes they will never benefit from.

At the other end of the spectrum, Northern taxpayers are benefiting substantially from the money generated by Southerners, gaining an average of GBP2,500 every year as government spending on public services outweighs the tax revenues paid.

The study attributes this spending regime to varying socio-economic conditions within the country, explaining:

"There has been a persistent pattern of the southern regions providing fiscal support to the rest of the UK, which is not surprising given the relative strengths of the different regional economies and the broadly redistributive nature of government policies.

"But it is also clear that the scale of regional fiscal redistribution from the South to the rest of the UK has been increasing over recent years."

However, it has been pointed out that the method used by the study to obtain its key figures is only an average indicator of tax revenues generated in particular areas due to the fact that it does not separate the tax revenues of residents and workers in one particular area.

The study also suggests that the South will continue to maintain its status of net contributor to the service sector over the next two years, despite added pressure from the current credit crunch.

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