In the Limelight 

October 4, 2016

Alison Cowie reflects on the dramatic events that took place last month surrounding North East devolution and asks whether the local authorities are gambling with the future of the region

Last month, many in the North East were left stunned when its devolution deal collapsed in dramatic fashion.

Back in October 2015, when deals were announced for the North East and the Tees Valley, they were heralded as the opportunity for these regions to wrestle back power from Whitehall and take control of their destinies.

In a speech at the time, the then-Chancellor George Osborne described the devolution deals as an “historic agreement which will give the area significant new powers and investment”.

The deals promised a radical devolution of funding powers and responsibilities for the North East and Tees Valley.

They guaranteed £30 million a year for the North East and £15 million a year for Tees Valley, for the next 30 years.

A mayor would also be elected in each region who would oversee the new devolved powers, which included transport, funding, strategic planning, housing, business support and skills and training.

The initial North East deal was signed by all of its seven local authorities and was largely welcomed by the councils and business community.

In a joint statement, the North of England Chamber of Commerce (The Chamber), Confederation of British Industry (CBI), Federation of Small Businesses (FSB) and the manufacturing organisation, EEF, said: “It’s great to get two deals over the line in this region that cover many areas where we believe more local control can improve conditions to deliver economic growth and jobs.”

But the first indication that all was not well came in March 2016, when Gateshead Council announced it would not support the proposed deal.

Positive momentum for a deal, however, continued and Gateshead’s lone voice looking increasing forlorn. Indeed, it was reported that the council – albeit reluctantly – was set to agree to the deal in discussions chaired by the North East Combined Authority (NECA) last month.

But then came the dramatic announcement by the NECA on September 6 that the seven local authorities had been unable to reach an agreement on the terms of the devolution deal – with Sunderland, Durham and South Tyneside councils now echoing Gateshead’s position that they could not support the proposed plans.

This was followed two days later by the announcement by the Government’s communities’ secretary, Sajid Javid, that the North East devolution deal was now “off the table”.

NECA chairman Paul Watson responded by saying: “It is very disappointing that the Government has chosen to end current discussions over North East devolution in this way.”

The business community echoed Cllr Watson’s disappointment.

James Ramsbotham, chief executive of The Chamber, said: “It is baffling and hugely disappointing that after a year of negotiations it had not been possible to strike a deal with the Government. We are determined to play whatever part we can to secure meaningful devolution for the North East as soon as possible.”

CBI North East chair Alison Thain said: “Businesses of all sizes and sectors in the North East are disappointed that at the eleventh hour, a devolution deal to bring powers to the region hasn’t been possible. We need to work together to assess and understand the implications of the decision, and what happens next is of critical importance.”

Jeremy Middleton – a North East businessman who announced his independent candidacy for North East mayor back in February, and was so confident that the devolution deal would go through parliament that he had hired campaign staff and travelled around in a branded ‘Jeremy 4 Mayor’ vehicle – was suddenly left without a campaign to fight.

“I was hugely surprised and very disappointed that [the four local authorities] reneged on the deal that was signed last year.

“I have therefore suspended my mayoral campaign and instead, I have launched the North East Devolution Commission to help explore new ideas and policies that a future North East Devolution deal could deliver.”

So why exactly did the four councils feel they couldn’t support the devolution deal?

Brexit and the potential loss of European funding, which the North East was a considerable benefactor of, was clearly a factor with the local authorities feeling they did not receive sufficient reassurances from the Government over how this European funding would be replaced.

Martin Gannon, leader of Gateshead Council, says: “Our assessment of the deal was that it wasn’t fair in terms of funding and this goes back to when the deal was first signed.

“We believe that the region would lose out on around £1 billion a year in Government funding, to be replaced with £30 million. And this would have to run the mayor’s office, the election and all of the new powers.

“From the outset, we wanted to negotiate with Government and to seek further assurances but Gateshead Council didn’t get very far on its own.

“Obviously, post the EU referendum, the position of other authorities shifted as they didn’t feel they were getting the assurances from Government either.

“Currently, European funding to the North East totals £450 million but the Government was only prepared to guarantee around 17 per cent of this funding until 2020.”

Arguably, it would have been difficult for the Government to commit to funding after a General Election year but the uncertainty it created clearly changed the minds of those councils based south of the Tyne.

In addition, Martin Gannon also cites concern over the impact of a mayor.

“A mayor would make a huge change in governance to the region,” he says. “One person representing 2.5 million people may make it difficult for some people to get their voices heard.”

Jeremy Middleton, unsurprisingly, takes a different view.

“We need leadership, otherwise we are disunited and unable to fight our corner in terms of skills, jobs and our economy,” he says.

Andrew Lewis, managing director of the Tees Valley Combined Authority, worked on the North East devolution deal in a former role at Newcastle Council. He admits that he is disappointed by what has happened in the North East but is concentrating on the Tees Valley devolution deal, which continued unabated.

“We are further down the track than the North East to delivering on the statutory arrangements and we genuinely believe we can be a flagship for successful devolution,” he says. “By making decisions locally, we hope to achieve a better outcome for the people in the Tees Valley and reflect the opportunities that are present in our local economy.

“We are currently in negotiations with Government in making sure we get a really strong programme of investment to deliver economic growth and bring jobs to the region. We are also working on a constitution whereby the mayor and the combined authority can work with scrutiny and proper oversight and transparency over the decisions they make.”

Tees Valley joins other areas in the North such Manchester, Liverpool and Sheffield in continuing with their devolution plans. This has created concern that the North East could be left behind.

“If we do nothing, places such as Tees Valley and Manchester and Liverpool will get the prizes,” says Jeremy Middleton. “They will get the opportunities to move forward and we will miss out on marketing our region and having our voice heard.”

Martin Gannon, however, insists that Gateshead Council is still committed to devolution.

“We’re passionate about devolution and we believe that through local decision making we can make things better in the region. But we want a fairer financial settlement from the Government.

“I can’t see any advantage for us taking on extra responsibility from central government with reduced budgets. It won’t benefit us.”

The people of the North East will now have to wait and see if it can achieve devolution in some form. At present, the local authorities’ failure to agree has created a stand-off between themselves and the Government. Further negotiation is clearly needed and, considering that devolution is a key policy for the current Government, it may seem churlish if it doesn’t put North East devolution back on the table at some point.

The result of this could be a better deal for the North East. Or it could leave it out in the cold as the Government favours those regions that embrace devolution.

With such high stakes, all wait with bated-breath to see the outcome.