Nick CleggThe UK economy is losing out on £41 billion a year because of a London-centric business model that has allowed other great cities to "wither", Nick Clegg will warn.

Successive Tory and Labour governments choked off northern cities' potential in favour of the financial services industry, he will tell City figures at the Mansion House.

Investing


Urging the City of London to help close the output gap, the Deputy Prime Minister will claim the dominance of the capital and the South East is a "historical anomaly" out of step with competitor nations with multiple powerhouses.

He will say putting it right would require further efforts to restore local control - including investment-raising powers and the freedom to spend the extra cash according to local priorities. "It is in everyone's interests - not least London's itself - if that potential is now tapped. There can - and must - be more than one jewel in our crown," he will say.

"The challenge for us is to rebuild our economy so that it runs on all cylinders. If all of our big cities closed their output gap - in other words met their potential - we would see an additional £41 billion on GDP every year."

Mr Clegg will add: "When you look at the UK's economy, never forget that its highly-centralised design is as much the result of political choices as anything else.

"From the big bang right until what was a monumental crash, the Labour and Conservative governments of the day were so bewitched by London's financial services that they squandered other industries and allowed other communities to wither.

"The previous government, in particular, recycled and redistributed City of London tax receipts to other parts of the country through the long arm of Whitehall. 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."

He will hail a heyday of major cities when 95p of every pound spent by authorities was raised locally. "If communities benefit more directly from growth in their area, they have a real reason to drive it," Mr Clegg will add.

It is the first of a new annual series of speeches by the Deputy Prime Minister at the Mansion House, which the Cabinet Office said had been set up to reflect the realities of coalition government.