Plans for a “Northern Powerhouse” could transform English politics
|NEWCASTLE
ANYONE wondering what George Osborne, the chancellor of the exchequer, has in mind when he talks about creating a new “Northern Powerhouse” should visit a patch of land between Newcastle train station and the river Tyne, a few miles from the vast Angel of the North sculpture (pictured). By a large construction site is a long, slightly shabby building, its brickwork worn with age. Here, in 1829, Robert Stephenson, a local-born engineer, built the Rocket, one of the world’s first steam locomotives.
Now, inside two glass office pods within the old workshop, a graphic-design company and a software firm have set up shop, part of a growing tech cluster in the North East that epitomises what Mr Osborne is trying to foster. Last year the chancellor announced that he wanted to use science and technology, improved transport and devolved political power to regenerate the north. Then, after his Conservative Party’s surprise election victory last month, he confirmed that commitment, stating baldly that the old model of running everything from London was broken. Cities can now apply for control over areas such as housing, transport and training, as long as they accept an elected mayor.
The plan would upend what is currently one of the most centralised and economically unbalanced countries in Europe. The gap between London and its regional cities is gaping (see chart). Seven of the eight biggest cities outside London perform below the national average in terms of GDP per person; in Germany, by contrast, the eight largest cities outside Berlin all consistently outperform the national average.
Part of the problem is that local government is so toothless. Central government raises 95% of British taxes. “It’s crazy,” says Nick Forbes, the affable head of Newcastle council. “We can’t even regulate private landlords.” Core Cities, a body representing England’s eight biggest cities, believes that with devolved powers they could generate an extra £222 billion ($339 billion) and 1.2m jobs by 2030.
A convergence of events may now bring this about. The devolution of powers to Scotland to appease secessionists has sparked demands for similar autonomy in England. Meanwhile, the need to make huge spending cuts has sent the central government looking for ways to streamline government. Finally, especially after Labour’s dreadful performance in last month’s election, Mr Osborne spies an opportunity to boost Tory fortunes in the north, where Conservative MPs are greatly outnumbered. Though some initially scoffed at the Northern Powerhouse as an empty southerners’ slogan (“It sounds a bit like the name of a gay club I used to go to in the 1990s,” says Mr Forbes), it is now clear that the chancellor is serious about change.
Over-centralisation is a strange problem for Britain to have. In the 19th century northern towns were like city states, run by Victorian worthies who set up civic institutions and superb infrastructure. It was only with the coming of the welfare state in the 1940s that London took control. Tony Blair tried to devolve power in England but his attempt to set up an elected assembly in the North East was rejected in a referendum in 2004, mainly because there were no real powers attached. The coalition government then offered a mayor to ten cities in 2012, but only Bristol voted in favour.
Manchester, meanwhile, has been leading the way in bottom-up transformation of local government. In 2011 ten local councils combined to form the Greater Manchester Combined Authority (GMCA). Last year Mr Osborne gave this super-council control of the city’s transport policy, as well as a £300m housing-investment fund and £500m to spend on skills and training. Most radically, in February he announced that he would devolve control of the GMCA’s entire £6 billion health and social-care budgets, allowing the city to integrate the two. EY, a consultancy, says that if other cities follow suit, such integration could save the taxpayer between £9 billion and £21 billion over five years.
The chance to save money gives local leaders a big incentive to buy into devolution. The central government’s austerity programme has forced councils to cut their budgets by up to 25% over the past five years. Councils can now see that if they gained control of budgets for health care and other areas they, too, would be able to make savings and free up money for other decimated local services.
Other city-regions, and not just those in the north, are signing up to the plan. On May 18th the head of Coventry council, Ann Lucas, agreed to join a proposed West Midlands Combined Authority, reassuring locals that “power is moving from Whitehall to the West Midlands, not from Coventry to Birmingham.” Leeds, Bradford and Wakefield are reassessing whether a mayor is a price worth paying for the benefits a deal could bring to West Yorkshire.
The newly formed North East Combined Authority now faces the same decision. It is not a natural constituency for a single mayor, with its large chunk of rural Northumbria and competing urban centres whose rivalries are legendary. (“Be careful, pet,” urged the receptionist at your correspondent’s Newcastle hotel, when told he was heading to Sunderland.) Devolution of health care is not a priority, says Mr Forbes. With unemployment at 7.7%, control of “inefficient and fragmented” training budgets is more important. “It cannot be just one-size-fits-all,” he says of the plans, which some council leaders complain have been copied from Manchester without much regard for different regions’ circumstances. In the end, though, the deal on offer may prove too good to miss. “I think you will see six metro mayors in place by the time of the next election [in 2020],” says Tony Travers of the London School of Economics.
Strengthened regional leadership could also help to create a better transport system to connect the north. Government spending on transport per person per year in London has been more than double that in the North East over the past five years, according to the Treasury. Although air connections are improving—direct flights have opened from Newcastle to New York and Dubai—rail links can feel like they have not moved on since Stephenson’s Rocket. It is quicker to travel by rail from London to Paris than from Liverpool to Hull, which is less than half the distance. A new high-speed railway will link London with Birmingham by 2026 and with Manchester and Leeds by 2033, with a possibility that it could be extended to Hull and Newcastle after that. Cross-country motorways are also in need of improvement. The main artery between Leeds and Manchester, the M62, is often jammed. Most of the road from Newcastle to Scotland is single lane.
Despite the challenges, there is optimism. “We’re in a different world now,” says Mr Forbes. Where that leads is another question. Scottish devolution has brought sweeping fiscal powers to Edinburgh. If devolution to English cities goes well, they might want them, too. The Northern Powerhouse could end up not just rebooting northern cities, but restructuring how England itself is governed.
This article appeared in the Britain section of the print edition under the headline "Spreading their wings"
