North East Devolution and Levelling Up

Devolution and levelling up: where we are now

Welcome back from a summer of national turbulence and regional torpor. Since the last post on this website on July 29 – with one exception (see below) – nothing has changed. But everything has changed.

The challenge now facing the North East’s leaders as a new political season begins is to keep the levelling-up and devolution agenda alive as a regional priority while recognising that the cost-of-living crisis is bound to dominate as a national priority. But are they up to it? Are they even willing to do what is necessary?

NORTH EAST: SAME OLD

The North East economy remains firmly in its usual place at or near the bottom of the league tables that matter. Its employment rate of 71.4% remains the lowest in the UK; its economic inactivity rate of 24.9% the highest apart from Northern Ireland’s; and its unemployment rate the highest at 5.1%.

When these labour market statistics appeared on August 16 Helen Golightly, chief executive of the North East Local Enterprise Partnership (NELEP), referred to the situation in the jobs market as ‘relatively static.’

The North East political front might also be said to have been static during August, if not dormant.

Well, everyone needs a break; this website has been taking a break.

One news item, though, did light a spark of interest, and typically for the North East it involved secret meetings behind closed doors in the region’s town halls. Thanks to County Durham’s Labour opposition leader and the Northern Echo we learned – or rather had confirmed what we have long suspected – that discussions about a new devolution deal are taking place which could see County Durham either joining an expanded North East devolution deal with its present Tyne & Wear South partners or joining Tees Valley rather than pursuing the go-it-alone county deal offered by the government.

Opaqueness on the issue of devolution is so long-term and habitual that there has not been a post on the topic on the North East Combined Authority’s (NECA’s) website since 2018. That was after the four councils south of the river – Gateshead, South Tyneside, Sunderland and County Durham – voted in 2016 to reject a government devolution deal worth £30m a year as well as offering local powers over employment and skills, transport, housing, planning, business support and investment.

North of the Tyne, however, August has not been a completely dead month. There, the three councils which voted in favour of the 2016 deal – Newcastle, North Tyneside and Northumberland – formed their own North of Tyne Combined Authority (NTCA) and signed their own devolution agreement, have made some announcements in the past month.

On August 18 NTCA announced that it had submitted its Local Investment Plan for spending £51.2m from the UK Shared Prosperity Fund to the government. The money will be invested in community and place; local businesses; and people and skills.

There were a number of smaller initiatives too – such as a £2.25m scheme to train a ‘green army’ of tradespeople to help tackle the climate crisis, announcement of a plan for 63 affordable homes in Bellingham, Northumberland, and a £90,000 crowdfunding project to support community campaigns.

The region went through another of its innumerable mini-crises over bus services, with councillors warning of cuts without more funding, the government stepping in with a last-minute reprieve – £130m to see us through till March on this occasion – and the chair of the North East Joint Transport Committee, Councillor Martin Gannon, complaining that it was just a sticking plaster, as the Local Democracy Reporting Service reported in ChronicleLive on August 23. So services will keep running for another six months, till the next crisis. This short-termism, staggering from near-disaster to narrowly-averted catastrophe, is no way to run public transport or treat passengers.

The fact that there is no official information about devolution-related activity north or south of the Tyne does not mean, of course, that there hasn’t been any. Presumably local leaders really have been talking to each other and/or the government about an expanded devolution deal – a deal offered in the Levelling Up White Paper published in February. Councillor Marshall (the Durham opposition leader) says they have, and there is no reason to doubt it.

But the public only knows what leaks out. The discussions probably take place in the secretive LA7 group of council leaders, which as this site has complained on numerous occasions meets in private and does not even publish agendas, reports or minutes.

Meanwhile, as North East politicians continue their private squabbles, more and more parts of England are doing devolution deals and leaving the region behind. August 1 saw publication of a deal for York and North Yorkshire with £18m a year for 30 years and bringing a directly elected mayor and new powers over transport, housing and skills. On August 30 there followed a similar deal worth £38m a year for Derby, Nottingham and their respective counties.

Assuming these deals are implemented in 2024 the four councils south of the Tyne will be left as an isolated patch of political obtuseness and economically diminished opportunities in a devolved landscape stretching from the Scottish border to the Midlands – unless their leaders act urgently to save the region from the consequences of their own past failure.

UK: ALL CHANGE

When Helen Golightly issued her comment about the static labour market she also said that employers and employees were waiting to see how the economic situation changes and how public policy develops in response.’

That might be taken as a coded reference to the way that at national level everything has changed.

On 17 August we learned that inflation, the Consumer Price Index, which in July 2021 had been only marginally above its target at 2.1%, had more than quadrupled to 10.1% as the cost of energy, food and fuel rocketed. Now there is talk of 18% inflation by January  and the NHS has warned of a humanitarian crisis.

Worse was to come. On August 26 Ofgem, the energy regulator, announced that the energy price cap limiting household bills will rise in October by 80%, reaching £3,549 for the typical home.

On Monday we will learn who has been chosen by fewer than 200,000 paid-up members of the Conservative Party, largely in the south of England, to be the new prime minister and deal with this crisis on behalf of 67 million people in all parts of the UK.

Soon after that – but perhaps not until the Tory Party conference on October 2-5 – we should know what the new prime minister’s approach to devolution and levelling up is going to be. The signs are not promising. One of Liz Truss’s proposals during her campaign was for regional pay bargaining in the public sector, which would inevitably leave North East staff worse off, while Rishi Sunak sought support from Conservative Party members in Tunbridge Wells by revealing that he had tried to redirect levelling-up funds to places like theirs from lagging areas like the North East.

By then we should also know the identity of the new Levelling Up Secretary following the sacking of Michael Gove. Will Greg Clark, the present stopgap, be confirmed or a new incumbent be installed? That’s assuming the Department for Levelling Up still exists.

Will Tory favourite Ben Houchen, Mayor of Tees Valley, be given a seat in the Lords and a ministerial post, as speculated in Northern Agenda, following a report in The Sun, on August 22. Perhaps not if Truss is PM, for Houchen backed Sunak.

THE LEVELLING UP AMBIGUITY

The developments over summer, and particularly rapidly rising awareness of the cost-of-living crisis, have focused fresh attention on a critical ambiguity at the heart of economic development and assistance to lagging regions, whether called levelling up or anything else – an ambiguity that has been allowed to go unresolved for decades: who is it for?

Sixty years ago we knew the answer: it was for the North East, or at least the north of England, though borders were always fluid. The Hailsham Plan (1963) was definitely a plan for the region, and the same was true of Dan Smith’s plan, Challenge of the Changing North, in 1967 and the North Regional Strategy Team’s plan a decade later. The Thatcher government’s urban development corporations were place-based as well.

When the Labour government introduced regional development agencies (RDAs) they too were thought of as a way of concentrating assistance on economically lagging regions like the North East, and this was true up to a point. But all nine regions of England got its RDA – even London, which defeated the purpose of enabling lagging regions to catch up – and even some places that lacked a regional identity and perhaps did not want an RDA, such as the East Midlands, got one.

Labour’s only way of targeting assistance at the neediest regions was therefore to allocate more funding to some RDAs than others, which did happen. But the principle of something for everyone had been established, and this principle continued when the coalition government came to power in 2010, though again with different boundaries: nine RDAs were replaced by 38 local enterprise partnerships (LEPs). Once more every part of England got one, and still has it.

The ambiguity continued in the Conservative Party Manifesto 2019: ‘[T]here are parts of the country that feel left behind,’ it said. ‘Talent and genius are uniformly distributed throughout the country. Opportunity is not. Now is the time to close that gap.’ The reference to left-behind places naturally encouraged people in regions like the North East to think: ‘That means us’.

But it could just as easily be interpreted as meaning deprived areas wherever they might be – and they certainly exist in every region – and elsewhere the manifesto talked of ‘using our post-Brexit freedoms to build prosperity and strengthen and level up every part of the country.’

That reference to ‘every part of the country’ enabled the government to use the Levelling Up Fund, for example, for civic improvements and similar projects in places like Brighton, the Isle of Wight, Somerset and the London Borough of Ealing, far removed geographically and economically from lagging regions like the North East.

That was a contentious approach, but at least arguable on the ground that there are pockets of deprivation everywhere. But the cost-of-living crisis is undoubtedly a national crisis, not a regional one. It strengthens the hand of those resisting special levelling-up treatment, as they see it, for lagging or left-behind regions like the North East at the expense of more prosperous – and Tory-voting – constituencies.

‘Level us up’ is now the plea of disadvantaged groups of every sort and in every part of the country. No doubt they need it, but it negates levelling up as a regional policy.

So there is no doubt that the cost-of-living crisis puts extra pressure on the levelling-up agenda. Regions like the North East cannot carry on demanding extra funding – usually unsuccessfully anyway – as if nothing had happened. The government is bound to give priority to a tackling a food, fuel and energy crisis facing people in all parts of the UK. The challenge is, while recognising the over-riding national priority of the cost-of-living crisis in current circumstances, to keep the levelling-up policy alive as a regional priority for the longer-term. So what should the response of North East politicians be?

FACING THE COST OF LIVING CHALLENGE

First, they should continue to press for a fair share of any capital expenditure that is still available for investment in infrastructure. There probably won’t be much in the foreseeable future, as national politicians are already talking of borrowing not just for investment but to help households meet energy bills.

Secondly, they should join their colleagues in local government everywhere to press for the completion this calendar year of the fair funding review of how resources are shared between councils, as promised by Michael Gove in July, not long before he was sacked, in an interview with the Local Government Chronicle. It’s councils that provide many of the services that people facing difficulties rely on, and councils have been hard hit by austerity in the past decade. Fair funding will not in itself reverse austerity, but it should restore faith in the system; lack of fair funding was one of the reasons a majority of NECA councillors rejected devolution in 2016.

Thirdly, North East councillors should press ahead with an expanded devolution deal for the region with urgency, taking the public with them. Continuing to fail to do a deal would be to extend the catastrophic strategic political error they made when they rejected devolution in 2016. The fact that the benefits of devolution may be far from what they have been hoping for  is no reason for not taking whatever is available, as they should have done six years ago.

Consider the consequences of that decision. Has it been better for the North East since then not to have had the £30m a year that the government was offering? Is the £600m from the City Regional Sustainable Transport Settlement that the region could be spending – but isn’t – not a significant loss? Does the inability to introduce bus franchising – giving councillors the power to control routes and fares – not place North East passengers at a serious disadvantage compared with London, Manchester and other devolved areas? Would it not help boost the economic development of the undevolved south-of-Tyne area if it had a mayor with the power to establish a development corporation like that at Teesworks on the site of the former Redcar steelworks.

All of these and more are reasons why councillors in Gateshead, South Tyneside and Sunderland should show enthusiasm, energy and determination in pursuing a deal for the region now (and why Durham County Council should make up its mind as quickly as possible which route to devolution it is going to follow). With the holidays over, it is time for councillors to act, and to engage the public in the devolution endeavour instead of acting secretively in behind-closed-doors meetings in their LA7 group.