North of Tyne Mayor wants £500m regional wealth fund

North of Tyne Mayor Jamie Driscoll has proposed a plan for raising hundreds of millions of pounds to level up the North East without, he say, raising taxes. But it would require government agreement, collaboration and, in some respects, legislation.

The proposals in Driscoll’s report Regional Wealth Generation, published today by the Royal Society for Arts, Manufactures and Commerce (RSA), include:

  • a regional wealth fund of £500m to create 14,000 jobs in the North of Tyne Combined Authority (NTCA) area by investing on a commercial basis in small and medium-sized enterprises (SMEs), commercially-viable community interest companies (CICs) and cooperatives based in the North East; it would be created by borrowing at low interest rates and would be intended to be self-sustaining at the minimum;
  • Earnback, a scheme under which the NTCA would retain a proportion of the income tax, national insurance and benefits savings resulting from every job it creates; Driscoll calculates investment of £68m by NTCA over five years, would bring in a tax take of £165m of which he proposes that the combined authority should be able to keep the first year’s payroll taxes and benefit savings and half of the second year’s;
  • Invest to Save, a scheme under which NTCA would be able to benefit from savings on one public service generated by previous spending on another: for example, NHS savings resulting from investment in walking and cycling from the transport budget, or crime reduction resulting from improved education;
  • Targets and stretch targets, the first to measure the current benefits of Invest to Save and the second to set more challenging targets that could be achieved by innovation; in both cases the combined authority would receive the funding benefits only if it achieved the expected results;
  • Land value uplift, under which the owners of property which rises in value as a result of public infrastructure investment in, for example, a station would be liable to hand over most of the increase in value when they sell;

The whole structure would be overseen by a Levelling Up Board to meet twice a year, chaired by the mayor and including a junior minister, an official of at least director level from each domestic government department and the national funding agencies such as Homes England and National Highways.

Driscoll is asking the government to allow the NTCA the necessary powers to introduce his scheme, including to borrow at or close to base rate to establish a regional wealth fund; to take equity stakes in local businesses through mayoral development corporations; and to agree an earnback deal with the NTCA.

The mayor has gained the support of Lord Jim O’Neill, a former Treasury minister who attempted to negotiate the unsuccessful North East Combined Authority devolution deal covering the region’s seven councils in 2015-16. In a foreword to Driscoll’s report he writes that as opposed to many others he does not think the region is a lost cause or incapable of doing things differently..

He describes Driscoll’s proposed wealth fund as ‘an idea that is easy for me to endorse, given the scale of the area’s challenges’ and one which he hopes isn’t dismissed out of hand orignored by Whitehall. ‘This centrepiece idea, along with some of his [Driscoll’s] others, are exactly the kind of things that might be needed to get away from the discomforting status quo of modern times and I hope there is a constructive response’.

And in a telling message to the four councils south of the Tyne which rejected a devolution deal in 2016 and have still not relented – Gateshead, South Tyneside, Sunderland and County Durham – he adds:

‘It is also the case that it [the Driscoll plan] would truly make sense for the whole of the North East, and not just those areas north of the Tyne. And who knows, if this were the kind of idea that the government might consider, the others, south of the Tyne might return to the bold fold, so to speak’.

Transparency statement: Mayor Jamie Driscoll and Peter Morris, publisher of this website, are both Fellows of the RSA.