North East Devolution and Levelling Up

The mounting costs of no deal

QUESTION: what two factors do the following four projects have in common?

  • The Leamside rail line;
  • Tyne Bridge refurbishment;
  • Baltic Quays redevelopment; and  
  • European Athletics Championships 2026?


  1. All are promoted or supported exclusively or jointly by Gateshead Council;
  2. All have been turned down for government funding in the past week.

This is not a coincidence. It was Gateshead that led the four south of Tyne councils – the others being South Tyneside, Sunderland and County Durham – into their rejection of a devolution deal offered by the government in 2015/16.

The south of Tyne four (all Labour at the time) did not want an elected mayor like Andy Burnham in Greater Manchester and Ben Houchen in Tees Valley. They were worried that he or she might not be one of their own. As a civil servant involved in the devolution negotiations at the time put it to this author: ‘I think there was…a little bit of protectionism among council leaders that having a mayor would force them not to have their own priorities first in their cosy little cabal’.

The council leaders were also disdainful of the £30m-a-year for 30 years investment grant that was being offered, even though it was as much as given to Manchester and Liverpool and exceeded only by the West Midlands (£36.5m) and subsequently West Yorkshire (£38m).

What is more they knew that the £30m a year could be used to finance an accelerated capital investment programme of between £1bn and £1.4bn in the first 15 years, rising to between £1.6bn and £1.8bn over the whole 30 years, to support business growth and generate income for reinvestment.

Or at least, they should have known, for it was spelled out for them in an official report to the North East Combined Authority (NECA) leadership board on 24 March 2016.

But six months later, when the time came to make their final decision at the leadership board on 6 September, instead of discussing how best to spend up to £1.8bn for the benefit of the North East, they spent the meeting going over old complaints about ‘fair funding’ as they had been doing since the deal was offered the previous October. They could not see past the cuts to their individual council budgets (which were real enough) to the potential benefits of devolution to the North East as a whole.   

They even recognised the drawbacks of not going ahead with the deal, including lost chances and risks to transport projects – drawbacks which are now becoming reality, and costing the North East much more than £30m a year.

Yet still the south of Tyne four, led by Gateshead, voted against, causing Newcastle, North Tyneside and Northumberland to break away from NECA, form their own North of Tyne Combined Authority (NTCA), do their own devolution deal worth £20m a year and elect their own mayor in 2019.  

Councillors still do not seem to understand why the government is reluctant to hand over large sums to combined authorities without a mayor who can be held accountable for the powers and funding to be devolved from Whitehall. Former Chancellor George Osborne first spelled it out in his Northern Powerhouse speech in Manchester in 2014: ‘There are big advantages in having an elected mayor to represent your city. To fight your corner in the world. To have someone democratically accountable to the whole city who can deal with issues like transport or economic development or fighting crime’.

A year later, back in Manchester, he expanded on the theme: ‘Here’s the deal. We will hand power from the centre to cities to give you greater control over your local transport, housing, skills and healthcare. And we’ll give the levers you need to grow your local economy and make sure local people keep the rewards. But it’s right people have a single point of accountability: someone they elect, who takes the decisions and carries the can. So with these new powers for cities must come new city-wide elected mayors who work with local councils. I will not impose this model on anyone. But nor will I settle for less’.

Today, six years later, amid all the twists and turns of politics, after two more general elections, two changes of Prime Minister and seemingly countless changes of Chancellor, on this point the government is still not settling for less.

And so it is that this week we saw the four projects listed above rejected in a region that refused to take Osborne’s offer. Not that ministers have explicitly said that it is the refusal that has led directly to the rejections. But in view of the favours that have gone to devolved Tees Valley, documented on this website, does anyone doubt it?

First, on October 28, came news in the Northern Echo and elsewhere that the government had rejected a demand by six North East Labour MPs and one Conservative to re-open the Leamside Line, linking Tursdale in County Durham to the Tyne and Wear Metro at Pelaw, in Gateshead, on the grounds that the £600m cost was prohibitive. Reopening of the line forms part of the North East Transport Plan drawn up by the Joint Transport Committee (JTC) chaired by the leader of Gateshead Council, Councillor Martin Gannon – the man who led opposition to the devolution deal in 2016.

Then on November 1, the Local Democracy Reporting Service reported in Chronicle Live that the government had rejected a bid to the Levelling Up Fund for £18.5m to restore the Tyne Bridge. The bid was submitted by Newcastle City Council but the bridge is jointly owned by Gateshead. Talks are reported to be continuing with the Department for Transport about alternative sources of funding.

On November 4 came news reported in The Journal that the government has rejected a £20m bid from Gateshead Council towards the £260m cost of a new arena, conference centre, hotel, bars and restaurants on Gateshead Quayside. Councillor Gannon said the project was still viable but the completion date is understood to have been delayed from 2023 to 2024.

The final blow of the week came also on November 4 when ChronicleLive reported that Councillor Gannon had broken the news to NECA that the government had rejected a bid for £25m to bring the 2026 European Athletics Championships to Gateshead and Newcastle. Without government backing, he said, the bid was ‘dead in the water’.

These four cases, coming on top of other Budget disappointments for the North East this year, including the failure to win a free port in March, and its forfeiture of its £500m share of funding for intra-city transport because it has no comprehensive devolution deal, show how much the region, in contrast to neighbouring Tees Valley is continuing to pay the price of its 2016 decision.

And there is almost certainly more disappointment to come. The JTC is seeking £804m for its bus service improvement plan. Today, two weeks after this website warned readers not to count on the money yet, Councillor Graeme Miller, leader of Sunderland City Council and chair of the North East Combined Authority, told the Northern Echo that the chances of the plan being funded were ‘infinitesimally small’.

Then there’s the umbrella North East Transport Plan, referred to above, for which Councillor Gannon’s JTC wants £6.8bn by 3035.

And the North East Local Enterprise Partnership (NELEP), covering all seven councils north and south of the river, is still waiting after more than a year for the £2.8bn it wants for its Covid recovery and renewal deal.

There is plenty of scope for disappointment in all these ambitious plans, and they don’t just cover the south of Tyne four. They are holding back their NTCA colleagues as well. Councillors on both sides of the river should prepare themselves and their constituents for more of the same – unless they can sink their differences with each other and the government and do a devolution deal like they should have done five years ago.