George Osborne

City Deals: it will all end in tiers

By: David Walsh, Deputy Leader, Redcar and Cleveland Borough Council
Published: Wednesday, November 11, 2015 - 16:32 GMT Jump to Comments

City Deals in England seem to exhibit similar templates and the same hyped-up expectations. Time, perhaps, for some sober reflection based on one such deal in Teesside.

Having myself pictured looming above George Osborne at the recent Tees Valley City Region Devolution Signing ceremony, an image that seems to be everywhere locally, has made my new profile a hot topic amongst those who I meet on a daily basis.   

Some of my more literary pals reminded me of the final paragraph of Orwell's Animal Farm, where the pigs and the men became impossible to tell apart.

That aside, the day was of interest for how it was structured. Choreographed by Osborne's Balliol-educated private office, it inevitably went smoothly. The Chancellor was working to a tight timetable, so a set piece speech was polished off in about three minutes. The same speech was repeated verbatim, albeit with different location names, later in the day in Newcastle. The speech was low on specifics, and he only managed to get the dread words "steel job losses" out in a sotto voce gabble.

To me, the most interesting part was the way the Treasury PR machine operated ahead of, during and after the event. The exercise was handled on a Treasury-imposed "confidential" basis, meaning our regional media had no idea what had been originally asked for by us. A compare and contrast style approach was impossible.   

Thus, the event itself and its intended subliminal message became transmuted into unalloyed fact, bereft of any real analysis given the complete absence of material. This fuelled headlines about the supposed millions heading our way, with little or no knowledge about what had originally been asked for. In this analysis I will show what was gained and what was missing - and from that, what still needs to be fought for.   

There are some - indeed many - who feel that we should have stood aside from the whole circus.  They are wrong. Some would have wished us to boycott the whole shooting match. The bleak truth, however, is that this would not have brought any succour to a community still absorbing the shock of our steel job losses. To get back those elements of the deal which the government repealed, we needed to have our foot firmly in the door: with an inside grip, and not kicking from the outside.

So what was gained - and what do we still have to fight for? First, the pluses.

A lot of concern was expressed about a possible omnipotent City Region Mayor. What was achieved from our side were blocking mechanisms on such a person ever seeking to throw his or her weight around, via balanced voting on the new Combined Authority.

The Deal did recognise the needs of our area, and does grant a Tees Valley investment fund via a multi-year settlement of some £15 million per annum, plus some promises on retention of business rates. It does agree that we will become what is called "an intermediary body" for allocating EC Structural Funds for projects to expand our industrial base, without having to go cap in hand to London hoping for the crumbs from the table.

The deal allows for the Combined Authority to set up a development company to invest in housing and economic growth on underdeveloped sites, and the ability to recycle and retain profits from this to carry on a beneficial investment programme. By identifying some key schemes, it does recognise the transport needs of Teesside: new crossings across the River Tees, better connections to our docks complex, and electrification of the line linking Middlesbrough with York and the South. It also gives us some role in the commissioning of post-16 education and the work programme.

For all those reasons alone, the grounds for me to sign the document (albeit with one of those little blue betting shop pens, something that might be a bit apt under the circumstances) was clear...

But I said there were minuses. So what were (or are) they?

As I said, the Investment fund is seen to be capitalised via a £15 million per year grant from HMG for 30 years (this led to some spurious "£450 million for Teesside" headlines in our regional media).     This is small beer, however, when set against the concurrent cuts to our local council budgets. These will be nearer to £40 million by my estimate - and that's just this year! The question might need to be posed: In a decade's time, how much will £15 million buy?

As mentioned earlier, we can now retain all our business rate growth that occurs above a baseline from 2015/16 - but in the present climate, how much growth will there be? On planning and housing, we get a Development Company which will bundle up publicly owned "underdeveloped land" for sale and development. This looks OK, but we have to realise that under the austerity ratchet most publicly owned "underdeveloped land" is already up for sale, and in most cases with little sign of any eager buyers wanting to tap into the potentially expanding market. 

In Teesside, most real underdeveloped land is mainly ex-industrial and would need cash upfront to take into the portfolio. That is before we start to compute the sheer scale of the remediation exercise needed for the suddenly underdeveloped land, that only a few weeks ago was a bustling steelworks.

The transport list looked impressive, but what the local media missed utterly was a condition of these schemes going forward. It was to be done under the authority of what is called 'Transport for the North', a coalition of local councils and Passenger Transport Authorities covering the whole of the North of England. This area stretches from Cumbria to Cleveland on the one hand, and from Birkenhead to Berwick on the other.  

This means "our" Teesside schemes have to compete with the big trans-pennine rail and road schemes already in the frame. The power to fund the top ranking schemes does not rest with Transport for the North, but with a cash-strapped Department for Transport, a ministry already under the HS2 cash cosh.

The business support agreement is, I suppose, as good as it gets. One key good idea that was in the original proposal, however, was the concept of a tax negative industrial "Freeport" zone around Teesport. This has now been resisted by HMRC who merely suggest - and I quote -  "better transparency around customs regulations". I wouldn't mind, but Freeports already exist in parts of the UK, so we were not asking for anything all that special.

Moving on from the economic development side, when we get to post-16 education we enter a minefield of a cat's cradle, laced throughout with ambiguous phrases. I gather that we'll be able to work with the regional Further Education Commissioners, but our direct influence will only really be around the shaping of the Adult Skills Budget area. This only represents some 25% of a FE college budget, and is a budget heading already being cut by the Commissioners and the Department of Education.

More fundamental is the stark announcement that apprenticeships would not be in the devolution agreement. This is the only direct negative to appear in the agreement document. HMG do say they will "work with the Tees Valley to drive up demand for apprenticeships, and work with employers to this end". That is as good as it gets.

I suspect that much of what has already been agreed in other English regions will mirror our own experience. One particular feature - the hotchpotch of differing powers - will perhaps prove a big problem in the future. Take the original Greater Manchester City Deal. It included some new influences in public health and local NHS provision, but neighbouring Merseyside's did not. 

This would mean that the good folk of Leigh, through their councillors, have some say in their health. Three miles down the road, however, their neighbours in Merseyside's St Helen's will not enjoy those powers. In the Tyne and Wear Deal, their input on FE seems to be less than ours. They do get additional powers from the DCLG on "aggressive begging", which seems an odd thing to have in a top level deal - but there we are.

What will prove to be interesting is the future evolution of the Combined Authorities. Once up and running, my guess is that they will seek to accrue additional powers, lying alongside the mainline economic development and transport functions that are central to them. If this occurs without change to their governance, then a looming democratic deficit emerges as local people and local opposition parties chafe about a body run by a small cabal of indirectly appointed council leaders.   

If this deficit is to be remedied, we will have to see popular elections and a wider form of political management. Then, hey-ho, we will see what will be in all essential features; the rebirth of Ted Heath's Metropolitan County Councils of 1970's vintage on a far wider scale. As they say, it will all end in tiers...

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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