North-East Devolution

Debate between Lord Beamish and Nicholas Brown

Thursday 26th November 2015 Westminster Hall

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

I beg to move,

That this House has considered the north-east devolution deal.

It is a pleasure to serve under your chairmanship, Mr Percy. I welcome the opportunity to debate these matters. We do not often get a chance to debate English regional development, so I express my thanks to the Backbench Business Committee for facilitating today’s discussion.

The north-east devolution deal is the latest initiative as part of the Government’s proposed devolution agenda, which is the mechanism by which they hope to drive local economic development. As I said, we do not often get a chance to debate these matters in the House, so I want not only to focus on the deal itself, but to consider it in the context of the Government’s wider regional economic development strategy, such as it is.

The recent signing of the devolution deal for the north-east of England makes now the right time to look at the record of the coalition Government and, more recently, the Conservative-majority Government on economic development in the north-east of England, as well as to consider the likely impact of the terms of the deal.

It is claimed that the north-east devolution deal will give the north-east more control over areas such as transport, skills and business support. The deal imposes on the region a directly elected Mayor, who will be chiefly responsible for transport arrangements. The Mayor will be a member of the North East Combined Authority, with each of the local authority representatives holding a specific cabinet post. The combined authority will have responsibility for a North East Combined Authority investment fund, a seat on an employment and skills board designed to review and redesign post-16 education and skills policy, and responsibilities relating to business support, connectivity and rural growth. A review body is also to be set up with Government to consider the possibility of devolution of health services at a future date. There are outstanding issues—that is probably the best way to put it, Mr Percy—in relation to police governance and the three fire authorities.

Devolution must have a purpose. It should be seen as a means to an end. My concern is that, under this Government, devolution has come to be seen as an end in itself. We must ask ourselves why we are devolving certain powers and how devolving such powers helps to meet our core objectives—in the north-east’s case, economic development. We talk a lot about the principle of devolution, which I am not philosophically opposed to, but we must also bear it in mind that decisions should be made at the most appropriate level. My concern about the Conservative Government’s approach to devolution is that where they devolve responsibility for a problem, there is no devolution of the capacity and necessary resources to tackle it. They essentially want to take Government out of the equation. Despite all the local initiatives and structures put in place, central Government remain the most powerful and influential agent in driving forward economic development and change. Government can be a force for good and should not take a back seat on regional issues.

The north-east has a range of needs. However, our overwhelming priority is, and has been for many years, the need to broaden, deepen and strengthen the private sector employment base in the region. Our unemployment rate is 8.6% and has so far increased throughout 2015; the national average is 5.3%. We have a historical structural gap in jobs. The region is calculated to need an extra 60,000 jobs to bring it in line with the rest of the country; that is a key objective for economic development strategies in the region. Consequently, our employment rate is below the national average. Our gross value added levels per head are just 74% of the English average, and addressing productivity is another key challenge for the region. Skills, employability and training is the third key challenge for the north-east. We have a higher inactive proportion of the working-age population than the rest of the country, and we need to build the skill levels of our young people if local youngsters are to fill the high-quality jobs that we want for the region.

Finally, the region suffers from an imbalance in infrastructure spend. Planned infrastructure spending per head is £3,386 in London; the figure per head for the north-east is £539. Even a modest redistribution would help to make big improvements to the north-east’s transport infrastructure and connectivity.

None of the issues that I have set out is new. They have been mentioned in every economic development initiative for the last decade, from the regional development agency, the North East local enterprise partnership’s economic review, the strategic economic plan for the region, the city deals agreed with local authorities in the region and in this latest devolution agreement. However, we are not making much progress towards achieving the objectives.

Real progress was achieved under the last Labour Government. From 1998 to 2008, employment in the region increased by 67,000—a 10% increase. By its own measure, the North East local enterprise partnership has stated that the jobs gap, historically estimated at 60,000 in the north-east, has reduced during the five and a half years of Conservative-led government to 58,900. The gap is simply not closing, and it does not give me great confidence that the local enterprise partnership has struggled for more than a year to appoint a chief executive. If it cannot fill one job, how can it be expected to oversee the creation of 60,000?

Regional productivity saw a 10% increase, compared with the England average, in the course of the last Labour Government. It has remained broadly static since 2010 and below the levels seen in the mid-2000s.

On skills and apprenticeships, a recent report for the North East Combined Authority branded the region’s target of doubling the number of apprenticeships “unachievable”. It reported a 33% decline in apprenticeship starts for 16 to 19-year-olds and a 42% drop in apprenticeships for those aged 19-plus. Those are declines of nearly 3,000 and 4,000 apprenticeships respectively in the north-east alone. The report also points to a growing skills gap in engineering and advanced manufacturing, while there is a lack of apprenticeship and training opportunities in the IT and digital sector, business and creative and cultural industries.

On infrastructure investment, the north-east receives just 16% of the funding per head that London gets. On transport funding, for every £520 spent per head in London, just £1 is spent in the north-east. We do not get our fair share, yet the Chancellor of the Exchequer cites infrastructure and transport as a core plank of the northern powerhouse plan. The north-east does not stand to benefit from the High Speed 2 scheme and could well face a reduced service if slower services are routed up the east coast main line.

The north-east has some of the most profitable bus routes in the country, and the old integrated transport board—that was the joint board set up after the abolition of Tyne and Wear County Council—quite reasonably was trying to improve services for customers. The proposed quality contract scheme, subsequently taken up by the North East Combined Authority, has been thwarted by a Government agency, citing concerns about the impact on profits for the large bus companies.

The Chancellor cites integrated, smart-ticketed transport networks as part of the way forward for northern regions, yet his own Government agencies are preventing that from happening. The north-east is only trying to implement what already exists in London. Why do we face opposition from the Government?

On economic development, the Government’s rhetoric simply does not match the reality on the ground in the north-east. Progress has been slow, minimal or non-existent. The momentum built up during the years of the Labour Government was lost in the misguided abolition of the regional development agencies and the resultant scramble of schemes and initiatives.

There is a strong case for having an intervention policy to deal with the problems faced by the region, led by Government and overseen by a Minister. For the avoidance of doubt, let me say that I think the present Minister would be a perfectly acceptable person to oversee such arrangements. The region needs serious, comprehensive, Government-led economic development, not a series of tinkering interventions dressed up as local government reform and badged as the new localism—without any say, incidentally, from the people of the north-east.

It is my contention that the coalition Government were wrong to abolish RDAs. If they wanted to reduce the agencies’ budget or scope, they could have done so while leaving the agencies’ core function of regional economic development in place. Since then, we have seen a plethora of initiatives designed to replace the RDAs and give the impression of a flurry of Government activity. Local enterprise partnerships were the coalition Government’s intended replacement for RDAs. LEPs were supposed to be the bodies that would drive forward economic development. They are, however, ill-defined and ill-equipped to tackle the problems we face in the north-east.

The Government’s city deal initiative was promoted aside from the LEPs and their enterprise zones. The regional growth fund was held centrally and its use decided in Whitehall. Lucky bidders were awarded allocations, and even luckier ones actually received the money. We have not heard much about the regional growth fund since May this year.

Alongside the regional growth fund—the responsibility of the Department for Business, Innovation and Skills—we had the creation of local growth deals, which seemed to be the competitor funds from the Department for Communities and Local Government, and which were announced with great fanfare in June 2014. A year later, however, mention of them seems to have ceased. The last press statement on the Government’s website about local growth deals was in January.

Now, the Government’s repackaged initiative is devolution deals, which build on the forced creation around the country of combined authorities—another wonky plank in the Government’s haphazard regional economic development platform. The Government’s regional economic development policy is unfocused, incoherent and unclear about what it is designed to achieve. I am not sure that it can be properly defined as a policy programme; rather, it is a series of confused, overlapping and disjointed attempts to portray the image of a Government spreading money around the country.

The Government have focused relentlessly on constantly changing and churning structures and the process by which that happens, to the extent that a concrete outcome is a distant afterthought. It is a tragedy for the north-east that we have wasted five and a half years so far arguing about structures and territorial delineations between the various bodies when the Government should have been driving forward a comprehensive economic development strategy.

I fear that the north-east deal is just the latest initiative in the Government’s disjointed regional economic development programme. There are concerns about the proposed governance structures, chiefly the imposition of a Mayor on the region. Whatever they say in public, the Government clearly made that a precondition for the granting of further powers. In much the same way as with the principle of devolution, little consideration has been given to whether a directly elected Mayor, or indeed a combined authority, is the most suitable way to tackle the stated problems that the north-east faces.

The region rejected the regional assembly proposition in 2004, and Newcastle rejected the idea of an elected Mayor for the city in 2012, but both structures have been imposed on us by Government. It would not be unreasonable to let the people of the north-east have a say about all that in a referendum. I note that Durham County Council is drawing up plans to let its residents do so, and I welcome that. I hope that other residents in the north-east will have a similar opportunity to vote on these proposals before they are enacted.

The Government’s intention in imposing a directly elected Mayor is to have a single figurehead who can drive forward the region’s priorities. However, the nature of the governance structures means that that simply will not be the case. The Mayor is essentially just an additional member of the combined authority, with decisions requiring a majority vote from the north-east council leaders, as well as being subject to a two-thirds veto. This looks very much like just another opportunity for gridlock and division.

I have concerns about the accountability and scrutiny arrangements for the Government’s devolution plans. Our RDA had a mixture of private sector, political opposition and governing party membership, and we—the then Labour Government—made sure that that was the case. The scrutiny and accountability arrangements under this Government are much weaker.

There are questions about LEP appointments. Do they really conform to Nolan principles? How will the Mayor and combined authority members be held accountable to the north-east as a whole? What role is there for opposition parties to hold such figures to account?

[Mr Kevan Jones (North Durham) (Lab)]

Does my right hon. Friend share the concerns of Mick Henry, the leader of Gateshead Council, about the fact that the chair of the North East LEP has been appointed to the board of a company run by a senior Conservative in the region? There does not seem be any transparency of the sort that would be expected for normal appointments.

[Mr Brown]

The concerns that my hon. Friend raises are widely shared throughout public life in the north-east of England, and I share the concerns that the leader of Gateshead Council has expressed. The potential overlap between public service and private interest seems to me to be too great. I cannot see how that can truly be said to be in conformity with the Nolan principles that I referred to earlier. Indeed, I have my doubts about whether any of the original appointments to the LEP board were truly in conformity with Nolan principles, and I know of no evidence that a Nolan-style procedure was followed in the making of those appointments.

Before my hon. Friend’s intervention, I was expressing my anxiety about the fact that opposition parties in the region are finding it difficult to hold any of those figures to account in any practical way. It is worth pointing out that the joint boards, which were the successors to the old Tyne and Wear county arrangements, contained a precise mixture of governing party and opposition party representatives. It is one of the great ironies of debates such as this that I am calling, as an Opposition Member, for the proper representation of the Conservative and Liberal Democrat parties, and the Conservative Government are resisting that, preferring a one-party arrangement made up solely of Labour politicians.

The details are not clear, and yet we are being asked at every stage to agree to these new structures without all the information. I have tried to tease the answers out of the Government through parliamentary questions, so it is not through want of trying. However, I have not really managed to extract any further detail, so we are left to assume that the Government do not know or that they have not decided yet.

The Government appear to intend—just in case anyone gets the impression that they are completely walking away from all this—to maintain a close involvement and a say in the workings and decisions of the new structures without accepting any responsibility for them. The proposed employment and skills board has no fewer than five Government representatives on it, from BIS, the Department for Education, the Department for Work and Pensions, and, separately, the Treasury. It is being chaired by a Minister, and—this is the great concession to the new localism—there will be a representative of the combined authority.

The Government propose to maintain joint responsibility on issues such as inward investment, proposals for a science and innovation unit and broadband roll-out, as well as keeping a say in the health and social care integration commission, the integration of transport services and any further devolution—no decision has been made on this yet—for the Tyne and Wear metro and the Northern and TransPennine rail franchises.

The Government talk enthusiastically about devolving power. However, it seems that they are less keen on letting go of the levers. They are not devolving the money or the exercise of control, just the responsibility. Uncertainty remains over the future relationship of the Mayor and the combined authority in relation to the local enterprise partnership and other regional structures. Only this week, local press have reported of in-fighting and turf wars between these organisations, and that is to be expected when the Government’s structures and responsibilities are so poorly defined.

In the deal, vague statements are made about police and fire services. Are they to come under the control of the Mayor or the combined authority? Are the different police force areas covering the north-east to be merged? What, then, would happen to the commissioners? They are another example of the Government’s pursuit of single figureheads that have been subsumed in devolution deals—in Manchester, for example. The deal needs to be seen in the wide political context facing the region.

Just yesterday, we heard the Chancellor’s spending review announcement, which includes cuts of 30% to the budget of the Department for Communities and Local Government and a 37% cut to the Department for Transport. Whatever the Chancellor is proposing to give the north-east in his devolution deal with one hand, he is doubly taking away with the other in the form of cuts to local councils and their services. It is estimated that local councils in the north-east will no longer even be able to fund statutory services, let alone other services, within the next few years. His 2% rate rise proposal will simply not fill the gap.

In Newcastle, the city that I have the honour and privilege to represent, the 2% rate increase would raise just over £1 million, which would leave an anticipated shortfall of £15 million a year in the adult care budget. The Chancellor’s business rates proposal will make matters much worse. North-east councils simply cannot raise the revenue locally. Our council tax is a much smaller proportion of the total council revenue on residential properties, largely because of the high number of lower-band properties.

The proposal would require large increases in the business rate—forbidden by the Chancellor—to plug the gap left by the removal of the central Government grant. Removing the local government grant also removes the redistributive element of local government finance. Therefore, more prosperous local authorities can see why this might be a reasonable policy to pursue, but those who rely on the redistributive element because they are poorer and have more demand for the statutory services that they have to provide are obviously looking at this with considerable concern.

Different council areas can raise significantly different amounts of money from local taxation. A 1% council tax or business rate rise in parts of London can raise tens of millions of pounds. The equivalent 1% council tax rise in Newcastle would not even raise £1 million. Any commitment in devolution deals to a “fair funding settlement”—to quote the Government—are completely worthless against this proposal. It is an unfair and deeply divisive proposition. The Government need to look at it again urgently before proceeding any further.

Economies gravitate towards their centre and it is a core duty of the Government to push back against that through focused regional policy. This would also have the effect of tackling congestion and overheating in the centre as well as strengthening the economic base of the rest of the country. It does, however, require a determined lead from Government, not a parcelling out of responsibilities to local authority leadership boards without the capacity to tackle the problem adequately.

The Chancellor’s northern powerhouse initiative is ostensibly his attempt to redress the balance between London and the south-east, and the north of England. As we have seen with the initiatives that preceded it, the reality does not match the rhetoric. The Government call for a “New pan-northern approach”, harnessing the endeavours of 15 million people to create

“a new scale of activity and rival the best trade centres in Europe”,

making it

“one of the easiest places in the world to do business”

with “transformative transport interventions”.

However, in their official answers, the Government cannot tell us where the northern powerhouse is. They delay our rail projects, refuse to intervene to save highly skilled manufacturing jobs in northern steelworks, and beg the Chinese to invest in the north, so the Government do not have to. There was one shimmer of hope in the spending review, however. Buried away in a footnote on page 10, it states:

“The north is defined as the North East, North West, and Yorkshire and the Humber regions.”

I am still not entirely sure that that means they know what turf their powerhouse concept occupies, but it is a step forward.

Yesterday’s spending review sets all this in context. The business rate changes will further impoverish local government in the north-east. The elected Mayor will be hobbled by the governance structures of the combined authority and the lingering hand of Government. The region will undoubtedly take more than its fair share of cuts in Transport funding and Communities and Local Government funding. Overshadowing all that is the ending of the redistributive element of central Government support for local government.

The more that the details of the proposal are examined, the weaker the case for it becomes. At the very least, the north-east should be allowed to vote on the proposals in a referendum. Ideally, the Government would have accepted their responsibilities and had the comprehensive, regional intervention that the north-east so badly needs.