Twice the North East region has been offered a devolution deal, only for it to fail to get enough support. While other (equally gritty, equally Labour-dominated) northern conurbations have grabbed the Conservative government’s latest city region devolution deals, the North East has said no.
The latest gift-horse-smacking episode came in September when, by three votes to four, local councils rejected the deal and the extra powers (and £1bn funding) that went with it.
The consequences were immediate. In January, a £130m Local Growth Fund bid from the North East was knocked back by the government: instead it got just £49.7m. That translates to £25.50 per head of population – under half the per capita allocation to Lancashire, and just over half of that awarded to Manchester and Liverpool. Either way, it did not look good.
Speaking at the time, Andrew Hodgson, chair of the North East LEP, said: “Historically, we have got the biggest settlement. We are often defined as the area of highest need. The government has made it pretty clear to us that areas that have got the [city-region devolution] governance model will be looked at favourably in terms of growth deals.”
Just the start?
The strong local expectation is that this is just the start. According to many market observers, it is Gateshead that could potentially feel the blows first and hardest.
The difficulty is this: like any package that has been fractured, devolution will arrive in pieces. The three north-of-the-Tyne authorities are putting together a devo deal of their own. Newcastle, North Tyneside and Northumberland make a relatively coherent unit – despite the absence from the deal of several of the co-owners of the Metro transport network – and the government is said to be smiling on their endeavours. Talks continue. The result is likely to be enhanced funding and access for the Northern Three.
Alas for Gateshead, on the other side of the debate and the other side of the Tyne, this could be bad news. With an economy inextricably linked to its northern neighbour – they even share a local development plan – Gateshead is likely to suffer from a two-speed North East.
Jonathan Rudge, partner in Cushman & Wakefield’s Newcastle development and planning team, says: “Gateshead is the obvious stress point because its economy works together with Newcastle’s. What we could see is potential access to funding for north-of-the-Tyne schemes on a scale than gives the north a real advantage. Basically, their projects – such as the 24-acre Science Central, development sites around the airport and the £200m Stephenson Quarter – will move faster. But in Gateshead, their big development sites – around the Metro Centre – have large infrastructure requirements and will require external support to get going. Gateshead may have to look at alternative funding streams.”
In short, devo-related infrastructure funding means north-of-the-Tyne projects will be out of the traps first. That is not condemning Gateshead schemes to failure, but it may mean north-of-the-Tyne schemes could have a clear competitive advantage.
Even if this unhappy scenario turns out to be less damaging than some fear, Rudge says Gateshead (and the three other south-of-the-Tyne councils) have a more general problem to confront.
“Gateshead has just missed out on how it presents itself nationally and internationally. Not being able to reach agreement with the northern councils does not present well,” he says.
Join Newcastle?
Some say – and many hope – that the answer is simple: at some politically convenient time, Gateshead will simply have to capitulate and join Newcastle.
Gateshead Council is whistling a happy tune and says there is no immediate cause for concern about sites such as the 53-acre Baltic business quarter. “This remains a fluid and evolving situation and it would be risky to make broad assumptions now,” it says. The council’s upbeat tone is shared – in fact, is played at full volume – by the other southerners, because in this context that is what they are.
The southerners point out that the region south of the Tyne includes the Port of Tyne, the mighty Team Valley estate, Doxford, the Nissan cluster and Durham’s Hitachi Rail and its full order books, not forgetting the emerging 247-acre International Advance Manufacturing Park.
The suggestion is that the southern councils have formidable economic assets. The (very definitely) unspoken implication is that if this is a contest to see who has the weaker economy, it is not them but the other lot who need to watch out.
Councillor Paul Watson, chair of the North East Combined Authority, says: “All our members support the principle of a devolution deal that would benefit the whole of the North East region. We continue to work with the North East LEP and with Invest North East England and we all want a healthier, wealthier and more prosperous North East region. However, it may not be right or proper to stand in the way of some others who decide to set a different course.”
South-of-the-Tyne hopes are pinned on the International Advanced Manufacturing Park, which scooped £42m from the government in January, and as much again from Sunderland and South Tyneside councils. The aim is to secure more automotive supply chain jobs following Nissan’s recent announcement on the Qashqai and X-Trail replacement models being manufactured in Sunderland from 2020. Up to 2.8m sq ft could be developed.
Southerners are also focusing on the £100m New Wear Crossing, and new link roads opening up more regeneration and transport benefits.
Shared strategy
The campaign groups G9 (for agents) and Developing Consensus (for developers) worked hard on the Newcastle/Gateshead shared strategy, and on pressing the benefits on the devo deal. Members are despairing at the way things have turned out.
Bill Lynn, active in G9 and director at Lambert Smith Hampton, says: “The Northern Three are already looking at more funding. Long-forgotten road schemes are being revived, and the government seems quite clear it will support them. It’s a disgrace the seven North East councils couldn’t agree. If another Nissan requirement comes along, obviously the Northern Three have an advantage.”
Lynn adds: “For Gateshead, all this is a crying shame. The main approach to the Tyne Bridge is in dire need of repair – is that now the kind of thing that goes on the back burner? Will the kind of site infrastructure servicing Gateshead needs now not happen south of the Tyne?”
He declares the entire North East devolution scenario “tribal and a travesty”, and blames council leaders’ “self-interest and insecurity”. He adds: “Gateshead Council was the first to show their colours against the deal.”
GVA regional senior director Roger Speirs and GVA consultant Ian Parker share the frustration. “Gateshead was also seen as the second tier to Newcastle in the office market, now that will be even clearer,” says Speirs. “They are missing out on a gift.”
Parker says desperation could force the four southern councils to change their minds.
“The G9 agents group and Developing Consensus both thought they were having an influence. It turns out we were hitting a wall,” says Parker. “I suspect the other authorities will have to join the devo deal, but that will only come when they realise their own independent efforts have been exhausted.”
It may be some time before another gift horse risks its good looks by venturing into the North East.
Second time unlucky
This is the second time the North East has failed to agree on devolution. In 2004, a referendum turned down proposals for a regional assembly, in part because it seemed too focused on Newcastle. The same problem has undone the latest scheme.
Anna Round, Newcastle-based senior research fellow at think tank IIPR North, says: “The North East just isn’t a standard city region – and the model on offer was for city regions,” she says. “There’s a huge rural hinterland, and several cities. There’s now a real risk the North East will lose out. Maybe the region needs a new devolution model?”
