We're Scotland’s economic powerhouse. Why doesn’t it feel like it?

For most people inside and outside of the city boundaries, the name ‘Glasgow’ isn’t exactly synonymous with wealth. This hasn’t always been the case; periods of immense prosperity have left the city with an arguably unrivalled architectural and cultural legacy — albeit with the accompanying baggage of its historic role in the slave trade and British Empire.

But after subtle and gradual economic stagnation post-1945, followed by the cataclysmic deindustrialisation of the 1970s and 1980s, the local economy suffered immensely. Glasgow acquired a reputation that landed somewhere between a great city down on its luck and a post-industrial wasteland.

Even during the city’s most challenging economic era, this perception was always painting with a very broad brush. But where does Glasgow stand today? How prosperous is the city? And who — or perhaps just as importantly, where — benefits from that prosperity? 

The engine of Scotland’s economy

At first glance, economic data seems to be telling a very different story about the wealth of Glasgow. The map below shows the real distribution of Scotland’s economy in terms of value generated (technically this is called Gross Value Added, a local equivalent to GDP). And Glasgow dwarfs other economic clusters, including Aberdeen and Edinburgh, in the scale and intensity of economic activity.

What this makes clear is that Glasgow is the heart of Scotland’s economy; the city boasts the densest concentration of jobs and economic production in the entire nation. In particular, the city centre district bounded by the Clyde, the M8 and the Necropolis alone generates £11.4bn in GVA — or 7% of the entire Scottish economy — an outsized importance which has only grown in recent decades, up from 5% in the late 1990s.

Why is this the case? Part of this is the overall and decade-long shift across the UK to a service based economy — think lawyers, media and finance professionals etc. — which puts a premium on access to workers. (Older, industrial economic structures tended to require both space and access to raw materials for production, favouring suburban and town-based locations). Like other major cities, Glasgow has a large pool of people, which makes it a compelling place to set up shop for a services firm. 

But it’s possible that Glasgow is in the process of making this transition more successfully than many other UK cities. The average value of work carried out in Glasgow (or ‘productivity’ — an extremely unhelpful label for a concept that has nothing to do with how hard someone does or doesn’t work) has risen much more quickly here than in most comparable English cities, as the chart below shows. 

Reading into these numbers too much is risky, but some commentators have speculated that this could be down to devolution; the argument goes that the Scottish Government has had a more free hand to act and invest in cities than English mayors, who struggle to make the case for regional investment to civil servants in Westminster.

So far so good, at least from the perspective of a Glaswegian. But are Glasgow residents feeling the benefit?

The income divides within Glasgow

This is where things get tricky. Despite Glasgow’s clear importance as the centre of the Scottish economy, much of the city is substantially worse off than the Scottish average in terms of actual income. The map below shows household incomes across the city relative to Scotland as a whole; the swathes of red reveal that many of Scotland’s lowest income neighbourhoods are both at the heart of – but disconnected from — the growth of Scotland’s most significant economic engine.

In particular, the West End stands out from the rest of the city. Built as an inner urban enclave for the city’s prosperous merchant classes, the West End remains the single wealthiest district of the city, although incomes in wards in the south of the city, like Pollokshields and Langside, are catching up fast.

Some of these income inequalities within the city are pretty stark. Income per resident (note: this isn’t analogous to wages as it includes non-workers) in Kelvindale and Partick East stands at £24,964; a few streets away, in the Canal ward (encompassing Parkhouse, Lambhill and Possilpark) average incomes are 40% lower.

But the inequalities within the narrow boundaries of the city are only a part of the picture. The City of Glasgow generates around 12% of the total value of Scotland’s economy. But it retains much less than that in household incomes (around 10%), and many Glasgow neighbourhoods are much less well off than the national average despite the centrality of the city to Scotland’s economy.

So where is all the money going?

Much of the wealth of Glasgow actually accumulates just outside of the narrow borders of the city, in the commuter suburbs, as the map below shows. Places like Bearsden or Giffnock, with good connectivity (in particular via rail) to jobs in the city centre, have substantially higher incomes than adjacent districts inside the city. Much of the value created — seen in that vast spike of economic activity — is trickling out beyond the boundaries of the city.

This poses something of a question of fairness: the prosperity of these outlying suburbs are overwhelmingly reliant on economic strength of the city itself. Yet the cost of maintaining those assets and the public services that underpin them fall on the substantially poorer residents of the inner city, many of which are not feeling the benefit. Glasgow’s council tax rates are the second highest in Scotland. 

It was (an admittedly much more extreme) version of the dynamic that trapped American cities, where boundaries are much more capricious than in the UK, in a vicious cycle in the 1970s and 1980s. As wealthier (and overwhelmingly white) residents fled the inner cities, the local tax base contracted, taxes rose to compensate, and more of those that could leave, did.

This all poses a dilemma for solving income inequality. The extremely visible prosperity of the West End feels stark in a city with such high levels of deprivation. But it’s not obvious that a counterfactual world with no West End — where the wealthiest exclusively live outside the boundaries of the city and only commute in for high paid service jobs — would be a better outcome for most Glasgow residents, who would have to pay higher taxes for the same public services.

That said, it's clear that much more of the wealth of Glasgow could be captured and re-invested in its people than it is currently. Better public services, building more affordable housing and investing in public transport aren’t going to close the city’s income divides alone, but they have the potential to substantially improve lives; and they will require a lot of money to deliver. How could we get there?

Housing wealth

Taxing and then redistributing income is often difficult, especially at the local level, where a quick hop over an administrative boundary puts you out of reach. The task of raising serious revenue from local income taxes often falters for this reason, as cities and local governments compete against each other to attract flighty and mobile high-income professionals.

Property wealth, however, is inherently immobile. Much of Glasgow’s prosperity is tied up in housing, where prices tend to track access to the best jobs (alongside access to green space, good schools, and other amenities). And the wealth tied up in these houses and flats is highly unevenly distributed across the city, and closely linked to patterns of income. As the map below shows, better designed property wealth taxes could go some way to reducing Glasgow’s spatial divides.

As things stand, the only lever to do so is council tax. Council tax is broken and highly regressive — tax bands in Scotland are based on valuations from 1991 — but the Scottish Government already has the power for genuinely radical reform, and to make it a much fairer, progressive system. But this would have to be tied to better partnership and revenue sharing. That would allow for a fairer distribution between the places that generate much of the wealth of Scotland — like Glasgow — and those that benefit the most from that prosperity, like Bearsden, Giffnock, and the other more prosperous outlying suburbs of Glasgow.

So will this happen any time soon? Any real shifts in wealth taxes would be hugely controversial and create a small number of extremely well-connected losers-out, so I wouldn’t hold your breath. But despite some popular conceptions of the city, Glasgow’s wealth is very definitely real and significant. You just need to know where to look for it.