NE devolution deals worth more than £1bn to be announced

Two devolution deals covering the whole of north-east England with a combined value of more than £1bn are expected to be announced this week.

The deals would mean the creation of two more mayors, a cornerstone of George Osborne’s vision for greater devolution, who would champion the interests of a swath of England stretching from the Scottish border to the edge of North Yorkshire, bounded by the North East and the Pennine ridge.

The deals cover the north-east’s Local Enterprise Partnership area — Northumberland, Tyne and Wear, and Durham — and Tees Valley, which comprises the urban conurbation around the River Tees, plus Darlington. The north east LEP area, home to about 2m people, would receive £900m, or £30m a year for 30 years. Tees Valley’s settlement would be smaller but relatively generous given its 600,000 population.

The agreements, covering a Labour-dominated region, are very important symbolically to the chancellor’s Northern Powerhouse project, which has encountered scepticism in the north-east amid fears of a Manchester-centric focus. Xi Jinping, Chinese president, will visit Manchester on his state visit to the Uk this week.

Lord O’Neill, commercial secretary to the Treasury and one of the authors of the Northern Powerhouse idea, was in the north-east last week for talks, with the government setting a deadline for the north-east LEP area council leaders to agree a deal.

At the Conservative party’s annual conference this month, the chancellor announced a shift of financial control from Whitehall to town halls, with plans to give councils the power to cut, but not raise, business rates and to keep a greater proportion of revenues raised from the levy.

Last week Simon Henig, chair of the north-east Combined Authority, said talks had been going well. “Reaching a deal takes time but leaders have all agreed to move forward to the next stage of negotiations and are all determined to reach an agreement that is good for the north-east,” he said.

The Tees Valley deal, covering an area whose MPs include James Wharton, the Northern Powerhouse minister, has been finally agreed. However, there was concern it should not be announced at the same time as the demise of iron and steelmaking at Redcar, lest it be seen as a quick fix rather than a long-term strategic shift.

This month the Sheffield city region agreed a £900m devolution deal, subject to councillors backing their leaders in accepting it. This followed Manchester’s firm agreement last year, now worth £7bn, including £6bn health and social care spending.

Nationally, 38 areas have bid for control of powers and spending from Whitehall ahead of next month’s comprehensive spending review.

North-east council leaders have acquiesced, many very reluctantly, to an elected mayor in the belief that devolution can help them to tackle the region’s longstanding economic problems. The elected mayors would chair a cabinet of council leaders, similar to the Manchester model.

Gaining agreement from councillors — vital for the deals to go ahead, with mayoral elections in 2017 — may yet prove very challenging, particularly in the north-east LEP area. Fears remain the government is devolving painful decision making amid more public spending cuts.

Powers to be devolved in the north-east focus on economic growth, business support and investment, skills, education and transport. Its current 8.6 per cent unemployment rate is by far the UK’s regional highest; the national rate is 5.4 per cent.

The Treasury declined to comment on Sunday on plans for an announcement.