In January 2017, the average house price in the North was £140,666 (ONS, 2017), which was about 5.3 times the national average income (ibid). The average house price in the South was £333,000, which was about 12.6 times the national average income (ibid). Furthermore, the average age of first-time buyers in the North was 30, whereas it’s 32 in the South (Halifax, 2017). Clearly, there is an affordability gap; housing prices are more affordable in the North than the South. A cause behind the affordability gap is the overheated market in the South, causing an excess demand in the market and driving up housing prices in the South. “Housing costs should be at such a level that the attainment and satisfaction of other basic needs are not threatened or compromised” (NERSI). Affordability is one of the seven principles to be satisfied in human rights to housing (NERSI). There are also great economic disparities in the country, with economic growth in London forecasted to grow 27% by 2025, almost twice the combined rate of growth in Northern cities (CEBR, 2015). The government must take action to ensure that everyone has access to affordable housing and there is a strong and inclusive economy across the UK. A subsidy is an amount of money paid by a government to the firm to lower cost of production (CGP). To possibly increase the quantity of jobs in the jobs market, the government could intervene by subsidising job creations. In this particular context one could say, there would be a positive externality created by this policy, which creates a benefit to third parties – more jobs for workers. In theory, due to lowered costs of production, the producers that are given subsidies have the incentive to employ more people, shifting the supply curve in the job market in the North outwards, which increases the quantity of jobs available in the market. Because of the abundance of jobs available, unemployed persons in the South may be attracted to work in the North, thus, they would move to the North, which increases the demand for housing in the North, whilst the demand for housing in the South decreases. Theoretically, it could cool down the overheated housing market in the South. A decrease in demand for housing in the South, ceteris paribus, could shift the demand curve inwards, causing the price to drop and the houses in the South to be more affordable, in respect to the average salary. Fostering an inclusive economic growth across the UK could be another objective achieved through subsidizing job creation. There are serious economic imbalances in the country. As previously warned by Nick Clegg, “Emasculating the north and overburdening the south. Trying to prop up a nation of 100,000 square miles on the profits of just a single Square Mile.” The UK economy is too dependent on London’s financial services and idling the economic plans in the North, whilst relying on the South’s tax revenues to pay for the ‘low wage, high welfare’ cities in the North. With the fear of the unfortunate impact of Brexit, if the economy in London cripples, the whole UK economy would suffer severely, without other parts of the country to support the economy. On the contrary, the most successful economies in the world are decentralized-planned economies, which does not mainly rely on a single city, but a multiple of affluent cities, for example, Germany is driven by Berlin, Frankfurt, Munich and the Ruhr. When each city has its own economic strength, this would allow the demand for housing to spread more evenly across the country’s several cities, to ensure more affordable housing prices across the country. Hence, regional inequality would be less prevalent. The UK economy is currently neither sustainable nor inclusive, which may deter itself from being a strong economy in the long run, as a strong economy should be inclusive to be sustainable. The policy could possibly address the situation. Other than ensuring a higher affordability of housing in the South, there would be a further benefit of promoting growth in the North. In theory, the increase in demand for housing could drive the aggregate demand in the North in the long run, as when more and more people inhabit in the North, an increase in consumption of goods and services in the North would follow. The increased number of workers in the North could also create more output of goods and services. This could possibly narrow down the North-South divide and encourage a stronger, more sustainable and inclusive economy across the UK, not only in the South. Hence, this policy could contribute to the economic development of the North.
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