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Westminster Hall

Thursday 26 November 2015

[Andrew Percy in the Chair]

backbench business

North-East Devolution

1.30 pm

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

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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

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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.

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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.

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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.

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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.

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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.

1.56 pm

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

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“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.”

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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,

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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,

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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.

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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.

2.19 pm

Mr Steve Reed (Croydon North) (Lab): It is a pleasure to serve under your chairmanship, Mr Percy.

I start by congratulating my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) on securing this important debate about the devolution deal on offer to the north-east. It is very important that such deals are subject to scrutiny, and one of the problems in the way that they have been put together is that the Government have not appeared to be as keen as they should be on exposing them to a level of scrutiny that can maximise the benefits from the deals that are being negotiated.

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That said, devolution is a Labour agenda. It is being led by Labour in local government, and I am pleased that my right hon. Friend said that he was not philosophically opposed to deals of this kind, because this is the most over-centralised country in the western industrial world, and we need to get powers out of Whitehall. Decisions taken as close as possible to the people who are affected by them will be better decisions, because those people have a vital and urgent interest in making those decisions work as well as they can for the local community that they are part of. However, what the Government are offering is not living up to the full expectations or potential of devolution if it was delivered in that way.

In my view, the Government are too cautious and too slow, and offering too little to our great cities and regions, and they are doing that because they are simply afraid to let go. We have heard examples of that from my two colleagues who have spoken in this debate—my right hon. Friend the Member for Newcastle upon Tyne East and my hon. Friend the Member for North Durham (Mr Jones). Those examples show that the Government are either failing to devolve powers that should be devolved or they are trying to devolve responsibilities without providing the resources necessary to deliver them properly, which threatens to undermine the integrity of some of these devolution deals.

The Government have no real commitment to devolution. They are offering some devolution with one hand. However, and I have made this point to the Minister before, his colleagues on the Front Bench and in the Cabinet are busily centralising, doing the polar opposite of what the Minister and the Secretary of State for Communities and Local Government are doing when they talk so eloquently and supportively about devolution.

The Housing and Planning Bill is currently going through Parliament and comes from the same departmental team as the Cities and Local Government Devolution Bill. It contains more than 30 measures that are centralising powers, taking powers away from local communities and concentrating them in the hands of Secretaries of State here in Whitehall. The same ministerial team cannot claim to support devolution while they are also promoting a Bill that actively centralises powers, taking them away from the communities that they claim they are trying to devolve powers to.

The sell-off of social housing comes at a time when millions of people across the country are desperately in need of affordable homes. The Government are forcing those localities, even if they want to provide more social and affordable houses, to sell off social housing, whether or not they want to. That is a centralised diktat to local people; it is not devolution.

Mr Kevan Jones: The other thing that is being centrally imposed is the rent cap of 1%. In my own constituency, that has led to two housing associations not only having to cut back their existing programme but having to question deals that they have already entered into for the building of new housing.

Mr Reed: I am grateful to my hon. Friend for that intervention, because the truth is that we see the same kind of thing time and time again. The rhetoric says one thing, but the action is the polar opposite. The Government are not really interested in decentralising

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or devolving anything that they themselves want to control, and they want to control and hold the power for themselves here at the centre.

My hon. Friend referred earlier to post-16 skills, which is another excellent example of where devolution would massively improve the efficiency and effectiveness of those services, but I am afraid that Conservative Ministers just refuse to let go.

The Work programme is another example. It was designed and constructed here in Whitehall without the involvement or engagement of local communities, local councils, or local democratically elected representatives. That is one of the reasons why it is floundering. The Government refuse to let go and things do not work.

I will use free schools as a final example of how the Government are centralising things. They are trying to set up schools from Whitehall, with no understanding of local communities, no involvement of local communities in deciding where the schools should be located, and no accountability to local communities about those schools, because the schools are all being controlled from the centre. That is one of the reasons why we are seeing some free schools fail to perform as well as they could. If the Government would only trust local communities in the way that they say they want to, they would find that that approach worked, and I wish the Minister would sometimes go and talk to his colleagues, and persuade them of the case in the way that he likes to try to persuade us of a commitment to devolution. Actually, we already share that commitment, but his party colleagues have refused again and again to understand and accept it.

My colleagues referred to unfair funding, particularly in the north-east, although it is not the only region that is affected by unfair funding. We heard some shocking examples about how the north-east is being stitched up in terms of funding. It is at a dreadful funding disadvantage relative to other, better-off parts of the country, and my right hon. Friend the Member for Newcastle upon Tyne East referred in particular to the appalling share of infrastructure spend that it receives. There is little point in the Government devolving decision making about infrastructure to a region if they are not going to allow it access to the resources that it needs to make decisions that can actually make a difference to the lives of people in that region.

Perhaps we should not be surprised by that situation, because in recent years under this Government the 10 poorest local authority areas have received cuts 18 times greater than the 10 wealthiest local authority areas. Time and time again the Government hit the poorest areas the hardest. In many of our inner urban areas, we have very poor and very deprived communities; it is not only in inner urban areas that we have such communities, but in many cases communities in inner urban areas are very poor. These are the areas that are in the lead on devolution, but my fear is that if desperately unfair funding settlements continue to be offered to those areas that are taking devolution, we will be setting them up to fail and undermining devolution. The Government are undermining devolution in the way that they are going about it.

My colleagues have also said, and they were absolutely right to do so, that one of the things at the back of the Government’s mind on this issue is that they want to devolve the blame for cuts being made in Whitehall and

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they think devolution is a cunning ruse to shift the blame on to Labour councils that are doing their best to protect communities from the effects of an unfair set of decisions which, on the whole, are taken in No. 11 Downing Street but, sadly, are peddled by other Ministers in other departmental teams in the Government.

Just yesterday, we heard that there would be a 56% cut in the revenue support grant, and no information was given about any equalisation measures that might be introduced to accompany the localisation of the business rate. Without that information, local areas cannot plan, and we can only fear—given what we have seen during the last six years—that what has already been a desperately unfair approach to sharing out funding around the country will get significantly worse, and significantly less fair. We were promised that we would see the equalisation mechanism at the time of the autumn statement. The autumn statement was made yesterday, but we have not been given any clarity about what that mechanism might be.

My hon. Friend the Member for North Durham also referred to the Government’s decision to make devolution deals in urban areas contingent on the imposition of a Mayor, even if they do not want a Mayor. I have heard the Minister say before that the Government are not imposing Mayors because local areas do not have to accept a Mayor if they do not want the devolution deal, but that is absolutely unfair on areas that would like to take devolution, and would like to go a lot further than the Minister is prepared to go, but do not necessarily want a Mayor as part of that offer. Surely, if we believe in devolution, we should allow areas to choose the governance model that best suits them, and they should be allowed to use that model for themselves; a model should not be imposed by Ministers here in Whitehall.

Also, far too often these devolution deals are made behind closed doors. We heard calls from my colleagues this afternoon, and I have heard them from many Labour MPs and many leaders and members of communities, to be part of these deals as they are being put together. They want to be able to influence them. Businesses, community organisations, public service users—all the people living in the communities that would be affected by devolution deals want to be able to influence and shape them. However, time and time again the Government insist that the deals will be done behind closed doors and then offered to a locality only once they have been signed off by the Government themselves.

In my view, taking decisions in a more open and transparent way makes those decisions better. There is more challenge, more creativity and more sources of information and thinking about how those deals can be made to work better, but the Government appear to be afraid of the people. They need to start to learn to trust people, because devolution will not work if the Government are not prepared to trust the communities that will be affected by devolution when those powers are transferred. Labour councils have an absolute duty to get the best deal that they can from the Government of the day, whoever they are. I believe that Labour councils are doing that, but it will never be the best possible deal so long as we have a Government who, despite their fine words about devolution, from their actions appear to be afraid to let go.

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2.30 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (James Wharton): It is a pleasure to serve under your chairmanship, Mr Percy. We have had an interesting and wide-ranging debate, and I congratulate the right hon. Member for Newcastle upon Tyne East (Mr Brown) on securing it. I know he has had an interest in regional policy and in regional economic policy in particular for a long time. One way or another, the comments today have covered the past 20 years or so of north-east regional economic policy and the things that Governments of different colours have done to try to support growth in a region that is close to my heart and those of the right hon. Gentleman and the hon. Member for North Durham (Mr Jones).

I will touch on a number of the broader topics that have been raised before talking specifically about the points that have been made on the devolution deal that the north-east has struck. First, I challenge the assertion that I have heard so many times in this place about the deal that the north-east gets and the suggestion that we somehow do not get our fair share and that the north-east is somehow treated unfairly. Public sector spending per head in the north-east is higher than in any other English region outside London, and the difference between London and the north-east is marginal at best.

Over the past five years—that period of austerity Government—Opposition Members have stood so often in this place to bemoan the decisions that the Conservatives and the Liberal Democrats had to take in government to put right the economic mess that we inherited from 13 years of profligate Labour rule. Taking two authorities at random, in that most challenging of periods, Durham doubled its reserves to something in the region of £214 million and Newcastle doubled its reserves to something in the region of £100 million.

Mr Kevan Jones: Because of their unitary status, those councils have been able to save money. The fact of the matter is that the budget has been cut by 40%. The reason for the reserves is that the next round of rationalisation will involve redundancies, which have to be paid for. The idea that there is a magic pot of money lying in County Hall in Durham to pay for future services is complete nonsense.

James Wharton: I have stood in this place many times and had this discussion many times over. I welcome the steps that Durham County Council has taken to drive efficiency, and I welcome the recognition that local authorities have a responsibility to find value for money and that every penny that government spends, whether local or national, is a penny that we take out of the economy and away from taxpayers. I recognise all those things, but none the less it deserves to be stated on the record that across the period of the last Parliament—a period of austerity—Durham managed to double its reserves by saving £20 million a year. Whatever purposes it might choose to use those reserves for, it is important to put that point on the record, because it is rather at odds with the impression that is sometimes given by these debates and the statements that Opposition Members make.

Mr Jones: Will the Minister give way?

James Wharton: I will, but I want to move on from Durham County Council’s reserves.

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Mr Jones: The Minister has to recognise the fact that he is part of a Government who have reduced the budget of Durham County Council by 40%. The council has to make redundancies. How will it pay for them without those reserves?

James Wharton: The fact is that over the past five years, Durham County Council has added more than £100 million to its reserves, but the rhetoric here is of a council that one might think did not have a penny to spare. It is welcome that local authorities look to find efficiencies and to spend money carefully. I do not deny that difficult spending decisions have to be taken, but it is right to challenge the assertion by some Members that the sky is about to fall in. That assertion has been made in all but those exact words so many times in this place over the past five years. We should put on record the reality and recognise that the spending power per head of Durham and Newcastle remains as it has for the past five years: significantly higher than the average spending power per head of local authorities across England.

Having put those matters on record, I want to focus on some of the devolution issues at the heart of the debate. We started with discussion of the old regional development agency. I agree with the right hon. Member for Newcastle upon Tyne East on some things, so he is clever to find an area on which he knows we do not agree. I was never a great supporter of the old RDA. I felt that it did not give Teesside the recognition it deserved. I accept that we disagree about the work of the old RDA, but I continue to be grateful for and pleased by the changes we saw when the local enterprise partnerships were introduced. Having the Tees Valley LEP allows the area to determine its future and to look to co-ordinate with more close local control on where we want our economy to go and what we want it to do.

I accept that there is disagreement about what the structures should look like, but it is important to put on record my support for the decisions that were taken and my ongoing support, particularly for my LEP. My desire is to see all LEPs, including those in the north-east or the rest of the north-east—however one might want to term it—being successful and contributing to and driving economic growth in the north of England and elsewhere.

Mr Nicholas Brown: Just on the narrow point of the performance of the north-east local enterprise partnership, is the Minister wholly satisfied with the progress it has made so far and how it has been conducting itself?

James Wharton: The right hon. Gentleman raises an important point. I recognise some of the good work that the north-east LEP has done, and I put on record the Government’s gratitude to those from the private sector, local authorities and the public sector who have, through their joint endeavours and contributions, been able to deliver some of the successes that have been enjoyed in the north-east. However, some genuine concerns are being expressed, not least in the regional media, about how that LEP is working. I want to see those matters resolved and to ensure that the private sector voice is retained, is strong and is recognised for the value it can bring. I also want to see the public sector and local authority representation working with that voice to deliver on the shared agenda to grow the economy of the LEP’s area.

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I clearly recognise some of the great things the LEP has achieved and the good work done by many individuals contributing to it—I thank them for that—but I want to see the problems talked about in the media resolved. We know those problems exist, and I want to see real and lasting recognition of the need for that private sector voice and the cross-sector co-operation to drive forward the economy in the interests of the region.

Mr Jones: Does the Minister share my concern that the chair of the north-east LEP has been appointed as the director of another member of the LEP’s company? Even if there is nothing wrong with that in terms of transparency, concerns would be expressed if a local councillor was doing that.

James Wharton: I have lost count of the number of debates in which I have had the opportunity to discuss a range of issues to do with the north-east with the hon. Gentleman and he has named and targeted an individual Conservative from the region. We should focus on the bigger issue: how we get the LEP to do the best job it can for the communities that Opposition Members represent and for the area. We all want to see the area realise its significant potential. Some of the more party political or partisan comments do not contribute towards making progress in that direction and securing the sort of economic growth we want to see.

Economic growth, of course, is important. It comes in many ways to the heart of the devolution argument and discussion. We want devolution to drive economic growth. We recognise that the potential across the north of England is significant. If we can unlock that potential, it can make an even greater contribution to the UK’s economy. If between now and 2030 the northern power- house grows its economy at the average rate that the UK economy is predicted to grow, that will add in the region of £40 billion in real terms to our GDP. That will be good for the people who live in the north and good for the UK as a whole. We want to see that delivered. That is something that all parties can agree on. We perhaps differ on some of the detail of how it should be done, but there is agreement to some extent that devolution has a role to play in empowering local decision makers and unlocking economic opportunities.

The economic opportunities in the north-east are significant. We have had mention of Nissan, that great Conservative legacy to the region. We have seen announcement after announcement from Nissan in recent years about its plans for expansion and to extend the new lines that it wants to produce. That has a significant impact not only in Sunderland with the direct jobs that it delivers, but through the supply chain in the region and the whole UK. Our region should be proud that Nissan in Sunderland, in our region, makes more cars than Italy. That is a real achievement that speaks to the quality of the workforce, the dedication of the people of the north-east and the things that can be done if companies choose to invest there. It is a great showcase for what the north-east can do.

Along similar lines, the hon. Member for North Durham mentioned Hitachi at Aycliffe, another good news story and a significant investment in the region of just short of 1,000 direct jobs, with 8,000 or so jobs through the supply chain. We want to secure as many of

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those jobs as possible for our local economy and secure the value that the supply chain can deliver for the local communities surrounding that investment.

In the spending review yesterday, it was announced that there would be new enterprise zones across the north-east and Tees Valley areas. There will be significant extensions of zones that exist and new areas will be given enterprise zone status and support. There will be new opportunities to drive our economy and unlock the potential about which I have already spoken.

Mr Nicholas Brown: I wholly agree with what the Minister says about Nissan and Hitachi; they are very welcome corporate citizens in the region. He is right to give credit for the original Nissan investment to the Government led by Mrs Thatcher, but does he recognise that those great achievements of the private sector working with the Government to invest in the region and create stable and enduring jobs required Mrs Thatcher’s Government to take regional policy seriously and take charge of the negotiations and give a political lead, thus stimulating the eventual outcome? The failure of the Government’s current structures to get us anywhere near their accepting such responsibilities is my core complaint. So the examples that he cites underpin my argument, not his.

James Wharton: I will certainly join the right hon. Gentleman in recognising and praising the excellent work done by Mrs Thatcher’s Government in delivering Nissan. The core point that he makes about public and private partnership, with the Government looking at the private sector’s needs and working with it to ensure we deliver and secure the investment we want, is important. I suspect that we perhaps have differences in how that should be delivered, which is what I want to deal with when I talk specifically about the devolution deal in the north-east.

Mr Kevan Jones: On Nissan, will the Minister also pay tribute to the Labour-run council in Sunderland, which plays a key part in working with other agencies to deliver investment? On the most recent development in relation to Hitachi, Durham County Council, a Labour authority, has played a key role in attracting Hitachi to Newton Aycliffe.

James Wharton: The hon. Gentleman’s comments underline the point that I have just made in response to the intervention from the right hon. Member for Newcastle upon Tyne East. Such things are not delivered by a single individual or even a single policy or a single actor, whether national Government, local government or the private sector. It happens occasionally, but they are often delivered by collaboration and the recognition that we can put aside things on which we disagree, so that we can focus on something of broader benefit that we all want to deliver.

Devolution takes us further along the path. It gives the north-east the opportunity to hold closer to it the powers and levers that will enable it to unlock the economic potential. Devolution does not work by taking powers away from local authorities. I have been keen to stress that message during the progress of the Cities and

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Local Government Devolution Bill, but I am keen also to stress it with specific regard to the deal that local authorities in the north-east have made with the Government. It is not about powers going up and being taken away from local government, which has happened before, particularly when local authority mayors took powers that were held by local councillors, cabinet members and executive officers at a local level, and they moved upwards to become an elected individual.

Instead, the devolution we are proposing is about taking Government powers and moving them down. It is about empowering local decision makers to make decisions over areas of policy that they know best, because they are making those decisions closer to the communities and economies affected by them.

Mr Steve Reed: The hon. Gentleman says that the issue cannot be about taking decision-making powers away from localities and centralising them, but does he recognise that that is precisely what is happening in housing policy? Councils that want to provide more council housing are building it, only to have it sold off by the Government, who force them to do it whether they want to or not. That is the centralisation of decision making that should remain at the local level. It completely contradicts what he has just said.

James Wharton: The hon. Gentleman tempts me to shift the debate into the Housing and Planning Bill, which I do not want to do. I know his colleagues are engaged in detailed discussions about that in Committee at the moment. The Government have ambitious—but right—targets and commitments to deliver on housing. We need to ensure that we put in place the structures that enable us to do that. We need to ensure that we build the right houses in the right places for the people who need them. We need to give as many people as possible in our society the chance to own their own home, whether it is a local authority home or a privately built property.

Devolution is about transferring powers held by central Government down to local decision makers. However, within that, there is the opportunity for powers to be transferred up from local authorities, but only by consent. Local authorities might want to pool such powers and functions because they recognise the positives that can be driven by that; the opportunities for closer collaborative working; and the economic benefits that can then flow from such decision making.

No deals are being imposed. No area is compelled to have a devolution settlement. Areas have been invited to bid. We are having discussions with more than 30 of them about what the package might look like. That bespoke approach looks at the reality and recognises that different areas will need different things if they are to achieve what the policy can deliver. It recognises that what Greater Manchester needs will in some areas be different from what Tees Valley needs, which might be different from what the north-east needs, or different from what rural counties such as Cornwall might want and need from a devolution settlement. That is the right approach to ensuring that we get settlements that not only deliver on the commitments and the potential that we know they can unlock, but that stand the test of time and can actually deliver on a local area’s needs.

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Mr Jones: I have asked this question before, in Committee, so I do not expect to get an answer. I accept the point that the Minister is making about areas being different and needing different solutions. However, the north-east was told quite clearly that it could have devolution, but a Mayor was not part of the model. There was no devolution settlement on the table.

James Wharton: The hon. Gentleman has asked that question many times, and I have answered it many times in the past. No area is compelled to accept devolution and no area will be compelled to have a metro Mayor, but where areas want a package of powers akin to that in Greater Manchester, there is an expectation from Government that a Mayor would come as part of the deal. That is what has happened in the north-east. I have a copy of the deal here. If it was more easily reachable, I would wave it energetically at hon. Members. It has been signed by local authority representatives, because a deal is a two-way thing. It recognises that we have reached a consensus on the powers and the structures that are agreed to deliver our shared objectives.

Mr Brown: I do not think we will be waving any document back at him this week.

If the people of Durham—if they are allowed more generally—vote against the mayoral model, and that is their will, will the Minister respect that and go ahead with the rest of the deal anyway?

James Wharton: The right hon. Gentleman has generously given me the chance to reach into my little red book and find the document in question, which I will now wave, signed as it is by so many of the great and good of local government in the north-east.

It is for local authorities to agree these deals through their leadership and to pass the resolutions to enact them through their democratic structures. If one local authority decides to remove itself from the deal, we will not allow that to prevent other local authorities from going ahead and delivering it, but, consistent with what I have already said, nor will we compel any area to be part of a devolution deal. If Durham decides not to pass a resolution, or through a council mechanism decides not to be part of a north-east deal, if the other local authorities want to go ahead, we will work with them to deliver it without Durham, should that be their choice. I hope, though, that that is not a choice that they will make—the hon. Member for North Durham and I disagree on that.

With a deal will come a number of areas of control and a number of possible levers with which local authorities will be able to help to drive the economic growth that we want to see.

Mr Jones: Is the Minister aware that the Conservative members on Durham County Council support the approach agreed by the county council at its last meeting, which was that we should actually ask people by putting the matter to the ballot?

James Wharton: The hon. Gentleman tries, as always, to nudge the debate back to a slightly more party political platform. Mischievous as he occasionally is, I absolutely recognise that it is for the local members in local authority chambers to vote as they wish and speak

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on behalf of the residents they represent. I put on record the excellent work done by County Councillor Richard Bell in the Conservative group on Durham County Council. He is a great advocate not only for the area he represents but for our region as a whole.

As I have said on the record quite clearly, I hope that Durham will be part of the north-east devolution deal. At the end of whatever processes Durham County Council decides to go through in its own area, I hope that it will pass a resolution to be part of the deal, because of what I think it could do for the north-east. If Durham chooses not to, and the other areas that have signed up to the deal none the less want to go ahead, we will work with them to deliver that, but I hope that we will not find ourselves in that position.

What comes with the deal? Why do I think that these deals are a good thing? I was interested in the somewhat straw man-esque discussion of artificial boundaries, or the A1 having more than one Mayor along its length—the solution to which, I suppose, would be a very long and winding constituency travelling either way up the full length of the road. When we are driving forward devolution deals, we have to look at all the existing boundaries and try to see through them to what makes sense economically. We are not going to say to areas, “You must follow one geography or the other”; that is exactly the opposite of what we are doing. We are saying to local areas, “Come and tell us the geography on which you want to do a deal. Identify the economic geography that makes sense to you. You know your local economy better than Whitehall and Westminster possibly can. You live and work in it; you understand it. Come to us and show us the area and the package of powers that will best enable you to drive growth in your area.” That is the approach we are taking, and its value has already been demonstrated clearly by the disagreement in this debate about what should happen in the north-east of England and in Tees valley. It is the approach that I think will ultimately stand the test of time and be successful.

With the deals, of course, comes more control over a number of areas. In the north-east, that includes strategic planning controls for the Mayor and closer working with UK Trade & Investment to drive investment. We saw in the spending review the announcement of additional support for UKTI, as well as for northern powerhouse investment work to bring investment to the north of England. That is welcome, not only because it gives us additional power to sell the UK abroad but because additional investment will go not just to London and the south, although we want them to continue to be successful, but further, coming up to the north, the north-east, the north-west, Yorkshire and Humber. We want to see that succeed and we want closer co-operation between local decision makers and the bodies that deliver that support.

Joint responsibility is being agreed for employment and skills to redesign post-16 education across the north-east through its devolution deal. Again, that will recognise that the particular needs of the economy in that area are different from the needs of the economy in the Tees valley or Greater Manchester, or, indeed, in London or the south-east or wherever. We want to ensure that local decision makers have more of a say about and more control over how to target the available funding and ensure that the future needs of the economy are met by the skills of the workforce.

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Mr Brown: Will the Minister say precisely how the elected Mayor will drive up inward investment in the region? What will he add to the work that is already done? Will he confirm that, for skills, what is on offer is a board member in a structure that effectively exists now? Is he saying that the whole of the will of the north-east of England—all the local knowledge and contribution that can be made—will be expressed through the cabinet member of the combined authority who is appointed to the skills group? I say this meaning no disrespect, but as far as I can see that group is composed of departmental officials who are not the elected representatives, or any sort of representatives, of the north-east of England.

James Wharton: In his questions, the right hon. Gentleman in some ways gets to the heart of some of what devolution is going to be about. On foreign investment and UKTI, the Government are saying that we want to see additional focus and support from that national body, which has been successful at selling our country abroad with its “Britain is GREAT” campaign, for the north of England to drive the opportunities that exist. With that additional support will come the opportunity to bring in more investment, but it is not for me to tell any future Mayor of the north-east—or of the Tees valley, Greater Manchester or wherever—how to go about doing their job and how to maximise the opportunities that exist. There are different opportunities in different places, which will require different approaches. That is the very essence of why devolution can be a powerful driver of growth. It is about empowering the people who know best what decisions are right.

I want to make a couple of points about the skills budget, because the right hon. Gentleman entered into an interesting area of debate. I know the importance of skills to our regional economies. I recognise the concern that he wants to project, but I do not agree with it. Having more localised control over skills is a significant positive step. The over-19s skills budget is going to be devolved to the north-east through the devolution deal that has been signed, and the north-east combined authority and Mayor will have more say over—and joint work to be delivered over—the 16-plus skills budget, which is to be welcomed.

Even more important than that—which is positive—is what devolution will allow us to do in future. It has started in this debate: we can already see that there are matters on which Members would like things to be a bit different or to go a bit further. There is a debate to be had about that in any devolution settlement. The value of the Cities and Local Government Devolution Bill, which has gone through its Committee stage and will no doubt come back soon to the House on Report and Third Reading, is that it gives us the powers we need to go further when it is appropriate to do so.

Greater Manchester is on its third round of asks for devolution of powers. When it has been given a package and agreement with the Government, it has either identified things that the Government were unable to agree to initially and asked us to work with it to deliver them, or, through the process of thinking about the powers it has, it has identified new opportunities and come back to Government saying, “We want to go further” in this area or that. It is saying, “We want to take the next step,” or, “We want to bring in a policy area that we had not even thought of before.” That remains on the table

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because of the nature of the devolution we are talking about: it is evolutionary and bespoke; it is custom-made for each area it affects; and it is being delivered along sensible and locally determined economic lines.

Mr Jones: Will the post-16 budget be protected when it is devolved?

James Wharton: As the hon. Gentleman will have seen announced only yesterday, both the Department for Business, Innovation and Skills 19-plus skills budget and the Department for Education 16-to-19 skills budget are protected in cash terms. In a time when we are still having to take difficult spending decisions because of the legacy left to us by the last Labour Government, that was a significant and welcome statement about the money that will be available to deliver on that agenda. Significant sums will remain available in those areas, which are being protected in cash terms because their value is very much recognised by the Government.

The north-east devolution deal will create a north-east land board to bring more public land into use and to look at the assets that exist across the region and how they can best be used to drive economic growth and improve opportunities across the region, tying in with some of the strategic planning work that will be going on through the new Mayor. By co-ordinating across local authorities, there will be the power to deliver that.

The devolution deal for the north-east is an exciting opportunity. Consider the investment fund of £30 million every year for 30 years, with, if that is spent wisely, the scope to increase—not to mention the additional funds that that can leverage in. The nearly £1 billion in that pot alone over the life of that part of the agreement is significant. I hope that a Mayor elected by the people of the north-east will focus that spending on the things that will drive forward the economy of the north-east—on the right things, determined by the local people who know what they are, to grow that economy and generate further growth and investment. That will enable more to be spent and the virtuous circle to continue.

This is an exciting time and an exciting agenda. I am pleased that the region I call home—Tees valley and the north-east, however the boundaries are drawn around it—is at the forefront of this process. I hope that those who have concerns will express them constructively and engage in this process, which can deliver real benefits to the people represented by the Members attending this debate today, with the honourable exception of the hon. Member for Croydon North, although I know that his genuine and deep-seated interest in the process of devolution extends to the north-east, as it does more broadly in the Bill that we have discussed. I hope we can use this process to enable those people to drive real change and bring real benefits to their regions.

I commend the Government’s programme of devolution. I look forward to seeing it through, and I hope that in a few years’ time hon. Members will come here to talk not about their concerns but about where they want it to go next, because it is doing so much already.

3 pm

Mr Brown: This has been a good debate. We have explored the context and the detail of this devolution deal far more thoroughly than we are usually able to do

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in the House. I am particularly grateful to my hon. Friends the Members for North Durham (Mr Jones) and for Croydon North (Mr Reed)—you will notice that they both represent the north, Mr Percy—for their contributions. I thank my hon. Friend the Member for Croydon North for pointing out the difference between the Government’s stated approach to the matters we are considering today and their approach to housing matters in the devolution deal, which we did not touch on, but which seem to be being centralised elsewhere.

The Minister, whose sincerity I acknowledge and whose interest and depth of knowledge I admire, made the best of pretty thin material. It is clear that we have not agreed on much; that is the nature of these things. The Government are walking away from their responsibility for regional policy, which is underpinned by their devolving their responsibility for the structures that they created in the north-east without devolving the money. In parallel, nationally they are walking away from their responsibility for redistribution by devolving business rates and making them a local government tax base, and getting rid of the redistributive element of the Department for Communities and Local Government grants. Indeed, it is clear that they intend to get rid of the grants and leave local authorities to get by on their own tax base, including their business rates tax base. That will have profound long-term consequences for our country and awful short-term effects on the north-east of England.

I urge the Government, even at this late stage, to think again about the structures and strategic approach that they are adopting nationally. It would be a mistake to walk away from the poorer parts of the country and say, “Get by on your local tax base” without any acknowledgement that the Government would be on the receiving end of all the centralising effects of the economy, but would have no responsibility for pushing back outwards or, in parallel, for dealing with the problems of the very poorest in our society. That is a long way from John Major’s vision of the Conservative party.

The key fact is that the poor are not distributed evenly around the country and do not form the same proportion of council tax payers in various areas. Morally, demand has to be met, but there is also a statutory responsibility. This debate is overshadowed by what will happen to local authorities when their funding has been so diminished that they are pushed back to carrying out

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only statutory functions, not carrying them out very well and then finding that they cannot do even that. It is no coincidence that the poorest local authorities in our country are also the most indebted. The Minister deployed the figures for reserves in the debate. It would also be good to look in parallel at the figures for indebtedness, because local authorities are of course responsible for the debts they carry, and there is a limit to how far that can be pushed.

I think the direction in which we are heading is wrong for our country. This debate is about just a small facet of that. Far from healing and giving new consents and justifiable resources to the areas that need them, the Government are doing the opposite in practice. I think that this deal will turn out to be unsatisfactory even from the Government’s point of view, because they have constrained the relationship of the elected Mayor—who will not come into play until 2017 in any event—with the combined authority.

The region needs strong leadership. I have no quarrel with the Minister over whether it should be a single person or done in a more collegiate way. There is strength in the single-person model, but it must be somebody who has got authority. I reiterate that there is a pretty strong case for having a regional Minister with the Government behind them to get involved and help. The Government should not abandon their responsibilities while retaining the right to intervene and meddle and devolving a sum of money that is wholly inadequate to the purposes to which it is supposed to be applied.

So there we have it. We have not agreed on very much. My fear is the broader issue of the cohesion of the country as a whole. When an elected local authority cannot discharge even its mandatory statutory functions, what happens then? That question hangs over this debate, and so far it remains unanswered. It is not a theoretical question; the north-east of England could be there within two years if present trends continue. That would be an absolute disaster for the people whom every single political representative in this Chamber is trying to help.

Question put and agreed to.


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

3.7 pm

Sitting adjourned.