Explainer: Inside the new North East devolution deal

The week before last, a new devolution deal for the North East was announced by the secretary of state for levelling up, housing and communities. Subject to local and parliamentary approval, the new North East Combined Authority will represent over 1.9 million northerners, with a new mayor elected in 2024 and expanded powers in areas like transport.

The background

Devolution has not been an easy journey for the North East. While promises to level up and take back control have had resonance among our communities, Geordies, Mackems and Smoggies alike maintain scepticism about new ‘layers of politicians’. In 2004, central government’s high-profile attempt to establish a regional assembly returned a 78 per cent ‘no’ vote, a decisive rejection of the top-down offer of a weak tier of new politicians with few powers. A decade later, North East leaders tentatively embarked on new plans, with the seven North East councils outside the Tees Valley establishing a new North East Combined Authority (NECA) in 2014. This, too, ran into problems; in summer 2016, the four authorities south of the Tyne rejected the proposed mayoral model, citing dissatisfaction with post-Brexit funding promises.

The result was the North of Tyne Combined Authority (NTCA), formed of Newcastle upon Tyne, North Tyneside, and Northumberland councils in November 2018, and which elected its first mayor, Jamie Driscoll, the following May. As well as an elected metro mayor, the deal brought £600 million in investment funding over 30 years, alongside new powers over housing, skills and employment. Since then, NTCA has made the most of its powers. It has sought to offer around 47,000 training places through its £23 million per year adult education provision; it has launched an £18 million ‘Green New Deal’ fund, investing in low carbon projects; last year, it celebrated generating almost 4,600 jobs, on track to exceed its 30-year 10,000 jobs target.; it has launched an £18 million ‘Green New Deal’ fund, investing in low carbon projects. Some of its more impactful achievements, however, have been outside the specific powers set out in its devolution deal. For example, our proposals on child poverty reduction were adopted by the authority, which is now carrying out child poverty prevention work in 90 schools. The new combined authority, which will elect its mayor in 2024, should seek to build on this work. But what new powers and funding will it have to do so?

The powers

‘Wider and deeper’ has been the mantra oft-repeated by those involved in negotiating the deal. ‘Wider’ certainly applies to the geography of the new combined authority; the new, expanded deal adds South Tyneside, Gateshead, Sunderland and County Durham together with the NTCA’s three authorities. At some 3,000 square miles, the new combined authority will be one of the largest, covering swathes of rural and coastal areas from the Tees Valley to the Scottish border. Part of this geographical expansion is thanks to the inclusion of Durham County Council; Durham decided to join at the eleventh hour, having previously been pursuing a single-county deal. This reunion of the seven founding authorities behind the original 2014 plan represents a significant and positive shift in regional collaboration. Geography has historically been a challenge to devolution in the North East; lack of consensus over territorial identity was a major factor in the 2004 referendum. The North East is polycentric, with economic activity spread linearly down the coast. Its southernmost areas, in the Tees Valley, identify more closely with North Yorkshire than the North of Tyne. So, the inclusion of County Durham here is a sign of genuine, shared commitment to work together across and between local identities. As we set out in response to the York & North Yorkshire devolution deal last year, ensuring meaningful involvement of citizens from across the new combined authority’s diverse communities will be critical to its success.

More importantly than their geographical footprint, the new mayor will also represent over 1,970,000 people. This is a powerful platform from which to speak up for our region. More people also means more funding – around £4.2 billion, including a £1.4 billion investment fund across 30 years. The deal stops short of enshrining some fiscal levers which Mayor Driscoll had been hopeful for, such as a regional wealth fund, but does commit to hearing proposals for these financial innovations. The deal also includes powers to raise money through business rates and council tax precepts, comparable to mayoral combined authorities in the North West.

Table 1: Investment funds as agreed in initial northern devolution deals

Source: IPPR North analysis of initial northern devolution deals (available at www.gov.uk), Bank of England Monetary Policy Report – Nov 2022, ONS population projections.

Notes: Total 30 year investment funds are in the prices of the year the deals were made. Population figures used are for the year the deal was made. Per person calculations are adjusted for 2023 prices.

In terms of what it might do with its money, the new combined authority’s biggest expansion of powers is in transport policy. The North East has been conspicuous in its absence when it comes to transport powers to date. NTCA and NECA are the only combined authorities in the North without them, save for joint responsibility over Nexus, which runs the Tyne and Wear Metro, Shields Ferry and some subsidised buses. The new settlement includes the full suite of ‘Level 3’ powers. This means the new North East Mayor will have the ability to introduce bus franchising, influence rail infrastructure, and manage a £730 million transport funding package up to 2028. There are specific transport policy commitments within the deal, too, including capacity upgrades for the A19 and the East Coast Main Line, and recognition that major rail projects will need central government funding, for example reopening the Leamside Line and extending the Tyne and Wear Metro.

Other public services are not included in the deal – a change from the widely rumoured proposal to draw together Fire Authority, Police and Crime Commissioner, and some health powers, as in Greater Manchester. However, the deal leaves the door open to 'consider devolving further powers’ to support public service reform, particularly with regards to health and care. While much will rely on local collaboration, the emphasis on health and social care in the deal is stronger than in other initial deals to date, and includes specific programmes of joint work, for example on place-based care.

Some of the ‘deeper’ powers are in housing and skills. In addition to the skills provision highlighted above, NTCA already has powers to develop land, and has piloted a brownfield housing programme; the new deal includes £17.4 million to expand this, as well as £20 million for wider housing regeneration, and commitment to co-commission affordable housing, a success in Greater Manchester. On skills, the deal makes available a fully devolved adult education budget, estimated at £44m a year - almost double the £23 million NTCA currently receives. Along with shaping the adult education offer to improve digital and green skills, this budget could also be used to strengthen relationships between industry, universities and local colleges. The combined authority will have influence over the local skills improvement plan, and will be committed to expanding NTCA’s child poverty prevention work. We have long called to put child poverty at the heart of devolution deals, and enshrining this commitment here is an important step.

The road ahead for the North East

What we have learned so far from the process of devolution in England is that deals like these are a foundation to build up from. Mayors regularly negotiate further funding; in Greater Manchester last year, the combined authority spent almost double the amount set out its initial deal. This deal is not an endpoint, but a new milestone in the North East’s devolution journey.

Where is it that the North East should seek to go? Well, that’s up to its combined authority, its mayor, and crucially, its people. During negotiations, one council leader was reported as saying he had “never known the North East as united as this”. If the region can maintain that unity, then it is well-positioned to thrive. The North East has the strong industrial heritage, the people, and can-do attitude to succeed. Today, it is in prime position for the net zero industries of the future. Indeed, the region is already home to the world’s largest offshore windfarm in Dogger Bank, and incredible natural assets in its beautiful coastline and countryside. The new combined authority should seek to capitalise on untapped potential for green skills and green energy; this could include new jobs in electric transport, retrofitting the housing stock, and growing the clean energy sector.

The latent potential of rural economies in Northumberland and County Durham will also be a worthwhile avenue for investment. From our farmers to our former mining communities, devolution can play a powerful role in supporting rural economies to grow. The North East’s polycentricity should be seen as an asset rather than a barrier to success – a way to foster a more collaborative region, sharing prosperity across our economy. Getting the right relationships and infrastructure in place between rural areas and their urban neighbours is key.

None of this will be straightforward. People in much of the North East are struggling right now – not just with the cost of living crisis, but with the impact of over a decade of austerity, deindustrialisation, widening inequalities, poor connectivity, and a gutting of public services. Our recent IPPR North participative research groups in places like Redcar showed a people who are deeply proud of where they live, but feel locked out of meaningful opportunities (Webb et al, forthcoming 2023). The new combined authority will need to empower our communities at a time when they struggle to afford to heat and eat.

Despite these challenges, if local leaders can come together, innovate, and empower people, then the benefits can be transformative. We should be ambitious and optimistic about the future ahead. Grabbing the opportunities afforded to us through new local powers can allow us to build a stronger, greener, fairer North East. After all: shy bairns get nowt.

Luke Myer is IPPR North’s research fellow for the North East and tweets @IPPRLuke.