North-East Devolution

Andrew Percy Excerpts

Thursday 26th November 2015 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Percy. The Government started in 2010 from completely the opposite position to where they are now. It was very much an anti-regional agenda. In response to anything that had “region” before it, the right hon. Member for Brentwood and Ongar (Sir Eric Pickles) would say that the Government did not actually believe in regions. As my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) outlined, we saw the abolition of the regional development agency and of the Government office for the north-east—the only Government office that co-ordinated events and activity from central Government. They were replaced by local enterprise partnerships, which I think were initially an idea of the Liberal Democrats.

What did we do in the north-east, which is a small region of only 2 million people? We stuck an artificial dividing line in the region, creating two LEPs. I accept the argument that the Tees Valley LEP is working possibly more effectively than the north-east one. North East LEP, as my right hon. Friend just outlined, has been a complete and absolute failure. It has lacked leadership and has had more policy documents and initiatives than any organisation I have seen. It has led not to the clear decision making that we would expect in setting out what economic development is needed for the region, but to an agenda that pitches business against the local authorities. That is not being done by accident; it is being conducted in a most aggressive way by a very good friend of the Chancellor—Mr Jeremy Middleton. Now, we have ended up with the inertia we have described.

Let us remember that the Government came from the position of the right hon. Member for Brentwood and Ongar arguing that regions do not exist. Now, they are saying that there has been some kind of damascene conversion—that the Tory party is now in favour of maximum devolution not only of resources, but of decision making. That clearly is not the case. What we actually have in the devolution agenda is what we saw yesterday. The Government’s real policy—it is certainly that of the Chancellor—is a small-state Britain, where they shrink the state to be as small as possible. Many of the things that we and many of our constituents would think are proper functions of the state are at the mercy of his axe. He is also a coward in respect of not being able to take responsibility for those cuts, because, with the devolution agenda for the north-east, he will devolve limited responsibilities but none of the resources to go with them, which is one of the major problems. If it was true devolution, it would need the resources to go with it, but it is not true devolution. Central Government will keep a tight hold on the purse strings and will centrally cut budgets as they wish to meet their targets, and local politicians will be blamed for the tough decisions that they have to take.

One classic example of that is skills and post-16 education, which we learned yesterday will face cuts—there is talk of reorganisation in the region. That was one of the key things in the devolution settlement for the north-east. We all know what that will mean in practice: the budgets will be devolved locally. I have no problem with decisions on skills and other issues being taken in the region, but what will happen is that the budgets will be cut, while they are being devolved, which will leave the combined authority, local council leaders and others to make the decision to close and reorganise further education colleges. When people rightly complain about their local FE college being closed or merged, the Chancellor will be able to say, “It’s not me, guv; it’s your Labour council leader’s responsibility.”

If we were having a serious debate about devolution, we would have had a far clearer, worked-out policy and a debate within the region. Frankly, the debate in the region has been pathetic. Devolution has been sold by some of its proponents as a once-in-a-lifetime opportunity for the region, as though it is akin to selling sofas or other bargains in the Christmas sales, but if people ask questions about it, they are treated as though they are somehow anti the region or anti-business and are holding back the region, which I find insulting. Those individual councils and others who oppose the devolution settlement and the mayoral system that, whatever the Government say, has been imposed as part of the deal have a great track record of working closely with business in the north-east; they are not anti-business.

My council in County Durham has worked closely with business, and just two recent successes are the attraction of Hitachi to Newton Aycliffe, which could not have been done without Durham County Council championing it very hard, and the County Durham plan, a far-reaching economic plan for prosperity. The plan was drawn up with local businesses to consider County Durham’s future. I take great exception to individuals, including Mr Middleton and others in the Conservative party, who badge themselves as business people but always somehow forget to say that the agenda is being pushed by the Conservative party. Somehow, they say that Labour councils in the north-east are anti-business, but we have a great track record: councils took a key role in attracting Nissan. Before the regional development agency, we had the Northern Development Company, a pioneering partnership between local Labour councils, business and trade unions that played an active part in attracting Nissan to the north-east. I want to knock on the head this idea that people who question devolution are somehow anti-business.

The devolution deal needs to be looked at more closely. As I have said, a lot of responsibility is being offered without the resources to go with it. One of the key points is that we will get an extra £30 million a year over 30 years and the combined authority will get the ability to bid for additional resources, but as my right hon. Friend the Member for Newcastle upon Tyne East said, we need to put that in context. Taking the current consultation on public health as an example, the suggested formula means that County Durham alone will lose £20 million a year. With the reductions in local government budgets over the next few years, £30 million is, frankly, a drop in the ocean.

We heard announcements yesterday about social care and education funding and other such things, and I have heard it said by Conservative Ministers that, somehow, everywhere in the country is equal in how it should get resources. That is why the Government want to do away with the revenue support grant. The poorest areas have the biggest demands, and they will end up having to continue to meet those statutory requirements without the resources to do so, while we have the ludicrous situation in which the budgets of wealthier councils in the south-east and other parts of the country will be increased. It is no coincidence that those councils are controlled by the Conservatives.

The other thing that was championed yesterday, and I said that it was nonsense when Lord Adonis mentioned it, is the idea of 100% collection of business rates. Again, that will hinder the amount of cash that councils in the north-east will be able to get because County Durham, for example, will not see huge growth in business rates compared with, say, the City of Westminster or somewhere else. Added to that is the situation that we have seen over the past few months in Redcar, which has lost some £11 million a year from the steel industry, one of its major business rate payers. In Committee, I asked what the mechanism is for councils to replace the business rates of a large employer or other such entity that goes bust or moves away. Not surprisingly, I got no answer.

The funding formula for fire services and the police is, again, moving resources from the north-east. The £30 million a year suggested in the devolution deal, which is supposed to be a giveaway and a great opportunity for the north-east, is a trifling amount over 30 years. As my right hon. Friend said, the sum should be seen in the context of the former regional development agency’s budget to invest in local business. We have to ensure that the proposals are joined up; my concern is that this is not a joined-up approach. I am still not clear on what extra resources or powers will be given to the Mayor or the north-east authority that will make the real difference that we need.

The Mayor was imposed on the region, no matter what the Minister says. The arguments were put when the council leaders met the Secretary of State. Every single time they asked whether they could have a deal without a Mayor, the response they got was, “No, George wants a Mayor.” The Chancellor wants an elected Mayor. There is a notion that if we have one individual, they will somehow drive economic development, but I ask people to look at the track record of development in the north-east, in Newcastle and on Tyneside and Teesside. I was part of that when I was on Newcastle City Council, and much of it is driven not by one dynamic individual but by the old committee system and by the council working closely with business to get investment, thereby ensuring jobs and prosperity.

One of the best examples is Newcastle airport. The council part-own the enterprise, of which I was proud to be a director, but its resources were stymied when the Conservatives were last in government because they would not allow the airport authority to borrow money to invest. It was only through the good practice of councils and the airport board in reinvesting the resources developed that the airport could expand and then go into partnership with the private sector, which has made the airport not only an important gateway for the region in terms of exports and individual travel but a huge economic powerhouse in creating jobs and prosperity. There is a track record and willingness, but the Government’s approach is that that is not important: “We’ve got to have control still, and if you don’t have what we’re proposing, you’re backward-looking and negative.” That is not the north-east that I know.

The other issue involves the Mayor’s role. I have asked the Minister in written questions what the Mayor will cost in terms of the budget. How much will it cost to run his office, for example? How much will the election cost? The reply was that he did not know, and that it was down to local councils to decide. Again, if the Government are proposing a major change in the structure of local or regional government, some of those basic questions should have been answered first.

We come back to my right hon. Friend’s point about the role of the people. In 2004, we put a proposal for regional government to the people of the north-east, which I think was the right decision. If we had not done that but just imposed a new regional structure, as the present Government are doing, there would have been clear outrage, not just among the public but from the same voices in the Conservative party in the north-east who are now talking about the importance of an elected Mayor. There is a basic question here about asking local people and involving them in the process. I am pleased that County Durham is undertaking a consultation exercise and asking people directly, in a vote, whether they want to be part of the process, because that deals with a fundamental weakness.

My right hon. Friend asked other questions about the Mayor’s role and how scrutiny will be conducted in practice. If we are to move forward with devolution, not just in the north-east but elsewhere, it must be at least thought out in practice. I do not think that this scheme has been thought out at all. In Committee of the whole House, the hon. Member for Bromley and Chislehurst (Robert Neill) compared the Secretary of State to a modern-day Chamberlain figure in terms of his reform of local government. This is nothing of the sort. This is a clear, well-thought-out plan by the Chancellor to cut budgets centrally and push the blame downward to local level, where local authorities will have to take hard decisions.

The north-east has a lot of strengths; its main strength is its people. During the blasting and butchery of industries there, did they sit back? No, they did not. They adapted. They ensured that the region changed its focus in terms of jobs, the service sector, tourism and other industries. That was supported by Labour local authorities, and I pay tribute to my right hon. Friend in his role as the Minister for the north-east under the last Government.

What is needed for the north-east? It is clear: we need investment, and some of the big investment infrastructure decisions involve things such as transport. If the Government were suggesting that we would get a larger slice of the national pie for transport infrastructure, to be decided locally, that would be fine, but they are not. What has happened in transport over the past five years is that the north-east’s share has been cut by 13%, compared with only 8% in the south-east of England. If we had an agreed position on some of the major transport issues that need to be addressed in our region, it could make a difference, not just by making the region more interconnected but by attracting business, skills and jobs.

We now have an artificial dividing line through the region, however, and it will be even worse once we have two Mayors. In my constituency of North Durham, people travel north to Tyneside and to Teesside to work. The idea that an artificial line across this small region is needed for decision making will seem bizarre to them. If we are to have a joined-up public transport system, for example, how that works in practice will be interesting. Will one half of the A1 be governed by the Mayor for the north-east and the other half governed by the Mayor for Teesside? There are many practical questions that would have been addressed if we had had a good debate and come to a proper policy decision, but we have not. The scheme has been thought up by the Conservative party not to benefit the north-east but for clear political reasons.

On the way forward, if people in Durham ask me, “Is this good for Durham and the north-east?” I will say, “No, it is not,” and I will argue that they should vote no strongly to the proposals. My right hon. Friend made another point about how other councils address the issue. They should ask people directly whether they want to sign up to the proposal, in case they think that they are being excluded. That was the policy under the last Government—we heard a lot about localism and asking local people—but it is not the policy under this one; it is the last thing that the new Conservative Government are doing. That was clearly baggage from the days of the Liberal Democrat coalition, because now, irrespective of what Ministers and others say, the deal is just being imposed. It was put to the council leaders, who were told to take it or leave it. If they did not take it, they would get no deal and no resources, and the chorus of Conservative-backed interests in the north-east would say that Labour councils were holding back the development of the north-east. That could not be further from the truth, as shown by the record that I have outlined of working closely with the Government.

This is not good news for the north-east. What was announced yesterday, as my right hon. Friend said, will be worse news for how local councils function, given the reduced budgets that they will get. I fear that some councils in the north-east might fall over completely, financially speaking, because of what is coming down the track. I fear that we will not be able to take care of the most vulnerable—the elderly, whom we would expect to be able to take care of in a decent, caring society—because of the funding gap created by the proposals announced yesterday.

I do not think that this is a bright solution for the north-east of England. What we need and what I would have expected from the Minister and possibly some of those arguing for an elected Mayor, who never seem to criticise the Government for the vicious cuts that they have implemented in the north-east rather than in the southern Tory shires, is for them to make a case to the Government for increased spending directed at those areas where people need it, rather than coming up with a structure that might ultimately, as my right hon. Friend said, involve a lot of time and effort, and a lot of newsprint and hot air. Will it make a difference to the north-east by ensuring the lives and prosperity that we all want there? No, I do not think that it will.

[Andrew Percy (in the Chair)]

There is nobody else trying to catch my eye, so we will move to the shadow Minister, Steve Reed.