Paul Hackett: The North needs action, not window-dressing

Ministers have decreed that city elected mayors are what the North is crying out for and that strong leaders help the region “thrive in the future”. Lord Michael Heseltine, the former Deputy Prime Minister, has warned that a rejection of city mayors would leave the North falling even further behind London and its southern hinterland.

But few experts are convinced that more elections and new faces in city halls will do much to address the deep structural problems facing Yorkshire and the other Northern regions.

New Labour got a bloody nose when it pushed for directly elected assemblies in the North East back in 2004 and the history of elected mayors outside of London since then has been uninspiring to say the least.

At a time of fiscal austerity and financial uncertainty, when real incomes are falling and local firms are struggling to survive, the priority for most Northern councils is battling against the economic storm and supporting local economic development. Re-arranging governance structures without the guarantee of additional money and extra powers shows just how out of touch Whitehall really is.

The Smith Institute’s latest report Changing gear – is localism the new regionalism? is highly critical of the coalition’s understanding of the economic crisis in Yorkshire.

The report questions the economic rationale behind the “long march towards localism” and warns that Cameron’s pledge to rebalance the economy and reduce inequalities (within and between regions) is likely to fail. Indeed, the authors argue that the coalition’s ill-thought through and poorly managed shift from regionalism to localism is undermining the recovery and could in fact exacerbate the North-South divide.

The report, based on the views of 20 experts on local and regional economics (and supported by the Regional Studies Association), suggests that the funding for growth in the North is inadequate and that new city mayors and the network of ad hoc Local Enterprise Partnerships (LEPs) falls well short of what is needed.

The North is arguably in a much weaker position to exploit its potential for growth than it was, and at a time when it needs to be resilient. While the coalition has continued with New Labour’s focus on promoting city-regions, it has been reluctant to give local government clear and unambiguous responsibility for local economic development.

Moreover, as the institute’s report shows, Ministers have also failed to grasp the need for scale and scope in economic development. Small pots of funding, channelled through powerless (unelected) LEPs, operating without a proper spatial planning framework, is a throw back to the failed policies of the 1980s – which witnessed a proliferation of Training and Enterprise Councils.

The Regional Development Agencies (RDAs) were far from perfect, but an independent audit by PwC found that in Yorkshire they did generate economic benefits. Business and local government supported them and most Northern MPs think it was reckless and stupid to abolish them at a time when the North’s economy is so vulnerable.

Closure of the RDAs has in fact cost £1.4bn and that excludes the possible loss of EU regional funding. The new Regional Growth Fund for the whole of England is £2.4bn over four years – less than a third of the funding for the RDAs between 2007 and 2011. Michael Ward, editor of the report, argues that the present structure of local government in Yorkshire and elsewhere is not fit for the purposes of economic development, and calls for a new English constitutional settlement which could include a voice for the North.

The Northern regions are clearly failing to obtain their fair share of public funding, especially on transport. They also lack the means to make the most of what they have.

Following the abolition of the integrated regional strategies, we have now, for example, arrived at the absurd position where the only region with a strategic joined-up plan is the most prosperous place – London.

Under the coalition, the GLA has become more powerful and more influential, while the second-tier cities in the North have become weaker. Too much of the devolution agenda has been transferred to places of opportunity where there are easy pickings, and nowhere near enough to places which suffer from market failure.

The institute’s report is a wake-up call to the coalition. The piecemeal, laissez-faire approach to economic development is inadequate and won’t work at a time of spending cuts and low growth. We need an ambitious, better resourced and more strategic plan for the North. A plan which understands the needs of Yorkshire and the advantages of regions working together, rather than an economic war of all against all.