More than seven years after throwing away at least £30mn a year and the opportunities that go with having a seat at local government’s top table alongside metro mayors like Greater Manchester’s Andy Burnham and, yes, Tees Valley’s Lord Ben Houchen, the North East’s seven councils have all at last accepted a devolution deal.
The last two councils, Northumberland and Sunderland, agreed the deal negotiated with government at their meetings this week. Parliamentary approval is expected early next year and a mayor to be elected in May.
Once established, the new North East Mayoral Combined Authority (NEMCA) will have significant powers in transport, including running the Metro, adult education and housing, and the power to create mayoral development corporations like the controversial Teesworks site.
NEMCA will receive £48mn a year for 30 years from the government as a devolution grant to invest in the economy – a total of £1.44bn – and other significant funding for transport and adult education.
History
We have been here before. In 2015 the seven North East councils signed a devolution deal worth £30mn a year with then Chancellor George Osborne. But after months of dithering they changed their minds in September 2016. The four councils south of the Tyne – Gateshead, South Tyneside, Sunderland and County Durham, voted against.
Gateshead’s council leader, Martin Gannon, having ousted his predecessor who had signed the deal in 2015, led the opposition.
The three councils that voted for the deal at the fateful leadership board meeting in September 2016 – Newcastle, North Tyneside and Northumberland – broke away, formed their own North of Tyne Combined Authority (NTCA) and signed their own devolution deal worth £20mn a year for 30 years. Jamie Driscoll was elected as the first North of Tyne mayor in May 2019.
The four refusnik councils south of the river remained in their diminished North East Combined Authority (NECA). When NEMCA is established next year NTCA and NECA will cease to exist.
Today Dame Norma Redfearn, Mayor of North Tyneside, is the only one of the seven leaders who signed the original, now defunct, deal in 2015 who still holds her position. Councillor Gannon remains a leading figure in North East politics, chairing the North East Joint Transport Committee as well as continuing to lead Gateshead.
Funding
In addition to its £48mn annual investment grant for 30 years, NEMCA will receive:
- £1.849bn from the City Regional Sustainable Transport Settlement (CRSTS – round 2) between 2027/8 and 2031/32;
- an indicative budget of £60m a year for adult education, devolved from the Education and Funding Skills Agency (ESFA);
- control of the area’s share of the UK Shared Prosperity Fund (UKSPF) from 2025/6; the UKSPF, replacement for the European Structural and Investment Programme, is worth £2.6bn nationally in the years up to 2025/26;
- £17.4mn to build new homes on brownfield land;
- £20mn by 2024/25 to drive place-based regeneration.
Powers
The mayor will have the following powers (see also below under “Constitution and governance”):
- power to designate mayoral development areas and establish mayoral development corporations;
- housing and land acquisition powers to support housing regeneration, infrastructure and community development and well-being;
- power to set a precept [supplement] on council tax to fund mayoral functions;
- power to charge a business rate supplement (subject to a business ballot);
- power to draw up a local transport plan and strategies;
- bus franchising powers to develop high-quality bus services as part of an integrated local transport system and smart, simple integrated ticketing across all local modes of transport, extending the “Pop” ticketing brand throughout the region;
- ability to pay grants to bus service operators;
- key route network power to direct highways authorities to construct, maintain and operate bus priority measures and cycling infrastructure, subject to legislation.
Investment and private sector growth
There are proposals in the deal for a Regional Wealth Fund and specific financial innovations that could support inclusive economic growth within key sites such as Newcastle’s Accelerated Development Zone, the International Advanced Manufacturing Park (Sunderland/South Tyneside) and port-and-river-side sites in North Tyneside, South Tyneside and Gateshead, Netpark in County Durham and possibly Aykley Heads in Durham City.
The government and NEMCA, says the deal, will work together to create a connected package of investment, flexibilities and investment incentives in the offshore, engineering and green sectors across the region.
Constitution and governance
The mayor’s powers in the areas listed above are not unfettered. Mayoral powers are controversial, and have led to allegations in Parliament of corruption connected to the Teeswoks site, contested by Tees Valley Mayor Lord Ben Houchen and currently undergoing a review ordered by Levelling Up Secretary Michael Gove.
In another example of controversy, Tees Valley Combined Authority’s constitution did not stop Houchen, through a combination of forceful personality and astute public relations, forcing through the municipalisation of Teesside Airport against the wishes of his entire cabinet. The constitution of the new NEMCA is therefore worth considering in some detail.
NEMCA will consist of the elected mayor, one councillor from each of the seven constituent councils, the chair of the Business Board, who will be a non-voting member, and a non-voting representative of the community and voluntary sector. A quorum will be the mayor (or deputy) and at least five council representatives.
The Business Board will replace the current North East Local Enterprise Partnership (NELEP), representing the business community, which will be absorbed into NEMCA. The combined authority will also absorb Nexus, the Tyne and Wear Passenger Transport Executive, and its role may be extended to cover Northumberland and County Durham.
Some functions will be exercisable by the mayor alone:
- compulsory purchase powers for housing, regeneration and planning purposes;
- spatial development strategy powers;
- powers to prepare the Local Transport Plan and to pay grants to bus service operators;
- power to pay grants to constituent councils for highway functions;
- powers relating to mayoral development corporations;
- power to levy a supplement on business rates for economic projects (subject to a business ballot).
The mayor will have the power to issue a council tax precept (supplement) to cover the costs of mayoral functions. All these mayoral powers will, however, be subject to certain conditions. The mayor will be required to consult NEMCA on his/her strategies, specifically:
- decisions on the adoption of any mayoral spatial development strategy will be by majority vote including the mayor;
- NEMCA will be able to amend the mayor’s budget if five of the seven councils agree;
- NEMCA will be able to amend the mayor’s transport strategy if a simple majority of members agree.
Some decisions by the mayor will require the consent of the NEMCA member appointed by the council in whose area it will apply. These include:
- the designation of any area of land as a mayoral development area leading to the establishment of a development corporation;
- the compulsory purchase of land or buildings by the mayor;
- any decisions that could lead to a financial liability falling directly upon that council.
Proposals for decision by NEMCA will be able to be put forward by the mayor or any member. The mayor will have one vote as will other voting members. Questions will be decided by a simple majority.
For any question that arises relating to existing functions being carried over from NTCA or NECA, the mayor will not need be in the majority in favour but instead can ask NEMCA to review decisions it has voted against. For new functions with new funding the majority in favour must include the mayor.
Decisions about the NEMCA budget, but not the mayor’s budget, and about levies which are charged to the seven councils to pay for public transport must be unanimous.
Some decisions on non-mayoral functions – i.e. those exercisable by NEMCA as a whole – will require a unanimous vote by the mayor and all seven council members:
- approval of, and any amendment to, NEMCA’s annual budget excluding those elements relating to mayoral functions;
- approval of, and any amendment to, the setting of any levy by NEMCA on any constituent council;
- agreement to confer upon the mayor a duty to produce a spatial development strategy;
- approval or amendment of the NEMCA constitution or standing orders.
In addition, the adoption of a spatial development strategy will require the support of at least four council members; NEMCA may amend the Local Transport Plan by a simple majority; it may amend the mayor’s budget if at least five council members agree.
There will be an overview and scrutiny committee (OSC) to hold NEMCA to account and an audit committee, each made up of an equal number of members from each council. The OSC will be chaired by a councillor from a different political party to that of the mayor and the audit committee will be chaired by an independent co-opted person appointed by NEMCA. OSCs have long been notorious for their inability to restrain powerful council leaders and can only be effective with well-informed, independent-minded and determined leadership.
Is it a good deal?
Yes. As devolution deals go, it is a good deal. The North East devolution deal is a Level 3 deal, the highest as defined in the 2022 Levelling Up White Paper in terms of powers and functions.
Funding for the North East – while doubtless not enough for some – is high in comparison with that going to other mayoral combined authorities. The region’s £48mn-a-year devolution grant is more than in other mayoral combined authority. West Yorkshire’s is the second highest at £38mn followed by West Midland with £36.5mn. The others are between £15mn and £30mn.
The City Region Sustainable Transport Settlement coming to the region in 2027/28-2030-31 is £1.849bn, third highest behind West Midlands with £2.648bn and Greater Manchester with £2.474bn.
Opponents of the 2015/16 deal complained that the funding was not nearly enough to compensate for the cuts to council budgets during the austerity years. The critics were right about that but missed the point that devolution funding was never meant to make up for council budget cuts. The cuts affected revenue funding for day-to-day services; devolution funding is for long-term investment in the economy.
What next?
Formally, the next move is for Michael Gove, Levelling Up Secretary, to lay a statutory order before Parliament, probably in the new year, to allow all the changes outlined above, to take place. An election for the new mayor will take place on 2 May and NEMCA and its mayor will assume their roles immediately, with the North of Tyne and North East combined authorities ceasing to exist.
In the longer term, NEMCA will be hoping to expand its powers, particularly with a new “trailblazer” deal like those announced by Chancellor Jeremy Hunt in the budget on 15 March for the West Midlands and Greater Manchester, involving still greater powers in areas such as local rail services, buses, post-19 skills, post-16 technical education, housing and regeneration and achieving net zero.
A ”trailblazer”, says the North East deal, would bring a holistic package of powers, roles, functions and strategic relationships to grow the private sector at a local level. This offer would aim to build the resilience of businesses and households in the region to cost of living pressures, strengthen the North East’s global competitiveness and empower local entrepreneurs.
In some areas of activity the deal holds out the prospect of future developments but goes no further. There are warm words but no firm commitments on topics like digital and connectivity; arts, culture, heritage and sport; health; and resilience and public safety. Those with an interest will be hoping to see progress on turning words into action. And while bus franchising is firmly embedded in the deal as a mayoral power, there are a lot of hoops still to jump through before it eventually arrives. Passengers will be wanting to see a start made on the process as quickly as possible.
