There are signs of a productivity resurgence in pockets of the North of England, according to researchers at the Northern Powerhouse Partnership business-led thinktank.

Both the North East and the North West, along with the South East, have outperformed average productivity growth across England between 2022 and 2004 (when data was first available).

Although London’s productivity growth over this period was the second lowest in England (after the East Midlands), it remains the most productive region in the UK, with productivity around 27% higher than UK average in 2022. It was 33% higher than average in 2004.

The North’s success has been concentrated in a few key areas, with Greater Manchester seeing a 26.4% increase – the largest increase in the country. This has been largely attributed to substantial improvements to transport connectivity across the city region, as well as ambitious and strategic local leadership.

The Humber, the most carbon intensive industrial cluster in the UK, has also seen strong productivity growth over the past two decades. The region has embraced opportunities in the energy transition, attracting international businesses such as Siemens and Phillips 66.

West Yorkshire, Northumberland and Tyne and Wear, as well as the Tees Valley and Durham (14.2%) were the only other Northern subregions to outperform the average productivity growth across England.

The UK’s longstanding productivity problem is well known: our growth is weaker than most of the G7 and this has worsened since the 2008 financial crisis.

This is in large part driven by the underperformance of the regions outside London and the South East, which has contributed to some of the most significant regional divides in the world.

The Northern Powerhouse economic was set up by then Chancellor George Osborne in June 2014 to address this issue, inspired by findings from the Cities Growth Commission led by renowned economist Lord Jim O’Neill.

Boosting productivity would not only boost tax revenue for the Treasury, it would mean higher wages and better living standards for people across the North.

The Northern Powerhouse vision focused on the key drivers of economic growth, including transport, education, skills, innovation, and devolution.

The aim was to create a whole greater than the sum of its parts by linking the great towns and cities of the North into one cohesive economic geography and empowering local leaders to drive long-term economic change.

Lord Jim O’Neill, Chair of the Northern Powerhouse Partnership, said: “While London’s productivity growth has been weak in recent years, particularly since the pandemic, Greater Manchester and the wider North West is continuing to improve – and that has appeared to have accelerated since COVID.

“Since the IRA bombing in 1996, the local leadership in Greater Manchester has been laser-focused in delivering a consistent, ambitious economic vision targeted at inward investment and key productivity drivers such as transport is paying dividends now.

“With the right focus and determination, other city regions – many of which alongside Greater Manchester continue to lag behind – could see the same kind of progress. This would not only be a victory for these local economies themselves and the local workers who will benefit from higher wages, but will deliver a massive boost to the UK economy as a whole.

“It goes without saying that a more stable and committed policy towards England’s regions from the next government, whoever it is, should enable further positive progress.”

Tracy Brabin, Mayor of West Yorkshire said: “The regions outside of London are packed full of potential that has gone untapped for too long.

“Boosting productivity and closing the North and South gap should be a priority for all as it will create more jobs and put more money in people’s pockets.

“Devolution is allowing us to rebalance our economy and deliver the growth our country desperately needs.

“As Mayor I am bringing investment and opportunity to all parts of our region. But with greater devolved powers for the North we can go further and faster, delivering a brighter future for all.”

Read the full report below.

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By Tom Bridges, Arup UK Government & Innovation Lead & Leeds Office leader

A year ago, the UK government set out its long-term ambition for increasing prosperity and opportunity through twelve national levelling-up missions, a far-reaching programme of devolution, place-based investment in research and development, and major urban regeneration projects.

In November’s Autumn statement, the Chancellor set out further measures to bring greater local powers and investment, with an emphasis on the North of England.

It is in places such as the Humber where the success or failure of levelling-up will ultimately be determined. While the region performs below the national average on economic and social indicators, it has huge growth potential.

With huge opportunities for growth in the Humber around advanced manufacturing, clean-tech, green energy, and digital and creative industries, and leveraging the assets of the area’s freeport and universities, it’s an exciting time for this part of Yorkshire and Lincolnshire.

The region’s unique geographical position, industrial capabilities, and innovative businesses have created a huge opportunity to lead the UK in the green industrial revolution and to net-zero.

Devolution is no longer a concept in the Humber. Local powers have been granted and collaboration is very much underway. The area has seen significant public sector investment, with £184.6m of Government funding confirmed in the last 18 months. Highlights includes the Humber Freeport with £15m seed capital, and £66m across the Towns Fund projects in Grimsby, Goole and Scunthorpe, with major infrastructure projects such as the East Coast Cluster focused on hydrogen and carbon capture, and the improvements to the strategic road and rail networks.

Devolution in practice is gaining real momentum. There are plans for a Humber Economic Plan to be collectively developed by Combined Authorities in the region, with an accompanying Investment Strategy. A Net Zero Strategy will be produced by the Humber Energy Board and partners, with an observer from the Department of Energy, Security and Net Zero, supporting. The UK government is also considering relocating roles closer to policy issues they are addressing.

Arup has worked in the Humber for many years. Our firm has been involved in some of the most significant growth projects in the area, including helping to regenerate Hull’s city centre for City of Culture, designing Siemens Mobility new train manufacturing facility in Goole, supporting Grimsby to secure the first Town Deal in England, advising on the proposed advanced manufacturing park at Scunthorpe and working with Hull on improving water resilience through the Rockefeller Foundation 100 Resilient Cities initiative.

Most recently we worked with Metsä Tissue to create their first paper production facility in the UK in the region. We also supported British Steel as it unveiled its Low-Carbon Roadmap in 2021, to invest in a range of technologies to deliver net-zero steel by 2050, and significantly reduce its OC2 intensity by 2030 and 2035, which would put the Humber on the map in terms of green credentials.

There is potential for the Humber to act as a testbed and exemplar for boosting economic growth through decarbonisation. As it stands, the region accounts for 37% of the UK’s industrial and process carbon emissions.

Achieving decarbonisation milestones would give the Humber an opportunity to export its expertise globally too: 60% of the world’s population and two thirds of the world’s largest cities are in estuary or port regions, meaning the Humber experience can lead learnings internationally.

The Humber, like other regions, is competing for investment on the global stage. That is why it’s essential to have a shared vision and a shared, investor-focused voice.

We only need to look to the Siemens Mobility train manufacturing plant in Goole which will support as many as 700 jobs, the world’s largest offshore wind operations and maintenance centre developed by Orsted in Grimsby, or Reckitt’s £200m investment in its major science and innovation centre in Hull to see that the private sector is recognising the Humber’s potential.

If you travel merely one decade back in time, the Northern Powerhouse was launched as a partnership, a concept about growth and opportunity in key regions across the North of England. The investment seen by government, paired with local authorities and major businesses now striving towards shared goals, means that the prize is now closer than ever.

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The Treasury pays a heavy price for the Northern economy’s continued underperformance. Our analysis of ONS data has found that the North’s productivity is roughly 40% lower than that of London and the South East, with Northerners earning £8,400 less a year on average.

Our key asks for the Spring Budget 2024 include:

1. Increasing funding for long-term disadvantaged pupils by £1,000 per pupil.

2. Bolstering local government financing through a revaluation of all domestic properties in England in the immediate term and council tax reform in the long-term.
   
3. Extending and deepening devolution, extending a single funding settlement to new Level 4 mayoralties. Metro mayors must also become more fiscally autonomous, with full business rates retention and the ability to introduce a tourism tax.
   
4. Reforming our rigid fiscal rules to support long-term infrastructure investment.

Read our full submission below.

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By Jessica Bowles, Director of Strategic Partnerships and Impact at Bruntwood and Visiting Fellow at the Heseltine Institute for Public Policy, Practice and Place.

Powerful local leadership is a necessity for a successful economy, and it needs the tools and resources to govern effectively.

I’ve spent a career trying to figure out how we best create successful cities – first as a civil servant at the Department for Transport, then at Manchester City Council, and as an executive committee member of the Northern Powerhouse Partnership, the organisation bringing businesses together with local leaders to drive productivity and growth across the North of England.

Productive, prosperous economies all need the same key ingredients to thrive. An efficient transport system and access to an educated, skilled labour market are essential – but the thread that ties these elements together is the ability of local people and places to set their own agenda and decide on their own priorities.

Since Greater Manchester’s devolution deal was agreed in the early days of the Northern Powerhouse project, the government’s commitment to devolution has waxed and waned, with other major constitutional issues and global health emergencies taking up Whitehall’s core capacity. Nearly a decade on it feels like devolution is properly back on the agenda, with recognition from both the government and opposition that the UK’s centralisation problem is acting as a barrier to growth.

In the Budget this month Jeremy Hunt, the Chancellor, announced details of trailblazer deals for Greater Manchester and the West Midlands: multi-year single funding settlements that give the mayors of both authorities greater long-term flexibility over their priorities, including keeping 100 per cent of the income from business rates.

A week after the Budget I was in Liverpool to discuss these latest developments in English devolution. Standing in the sunshine on the bustling Albert Dock, which might have been demolished in 1980s without Michael Heseltine’s hugely successful regeneration project, gave me a powerful reminder of how much has already been achieved. We were there to launch a new report from the Northern Powerhouse Partnership – a blueprint for how to devolve tax to the regions of England and truly empower mayors and council leaders.

It won’t be an easy process, and there is resistance in some quarters. Westminster’s old mindsets and habits die hard, and it was reported recently that officials in central government found it “psychologically tricky” to accept that devolving more powers and responsibilities to local areas would result in better decision-making.

That is perhaps unsurprising, given that the UK has long been one of the most centralised countries in the developed world, with ministers and officials in SW1 setting all but a tiny fraction of taxes and hoarding control over key decisions. According to statistics from the intergovernmental Organisation for Economic Co-operation and Development (OECD) from 2021, taxation at a local or regional level amounted to 16.2 per cent of GDP in Canada, 13.3 per cent in Germany, 9.4 per cent in the US and just 1.7 per cent in the UK.

The result has been what Andy Street, the Mayor of the West Midlands, described in January as a “begging bowl culture” – local government beholden to changing winds and constant churn in central government departments in London, with little to no control over their own economic destiny. When a place wants to improve bus services, build a new tram system, train its workforce or invest more in innovation, more often than not it needs to ask the central government for the money – and the government doesn’t always say yes.

^{West Midlands Mayor Andy Street and Greater Manchester Mayor Andy Burnham}

That needs to change, and Hunt has already said that “we need to move more decisively towards fiscal devolution”. Firstly, implementing a tourism tax is straightforward and would bring us in line with much of Europe, bringing in roughly £5.5m a year for the Lake District alone to support culture and protect the natural environment.

Secondly, we should consider copying France’s example of a ring-fenced versement mobilité tax, and devolve 1p of employers’ National Insurance contributions to fund local transport services and infrastructure. This would ensure that businesses get the transport system they need to grow and succeed.

Thirdly, devolving property taxes such as stamp duty and a reformed business rates system could transform local government financing and massively reduce councils’ reliance on Treasury handouts.

Together, these changes would bring decisions closer to the communities they affect, giving local leaders greater independence, flexibility and control. Local leaders know best what projects and policies their areas need. Skills and transport policy will be radically different in Cornwall to the policies needed in Newcastle, Leeds or Sheffield, cities which themselves will have vastly divergent requirements.

Local control would also make for better policy implementation. At a national level, ministries are too separated and too complex to see everything everywhere. Joining the dots between housing, health and employment, for example, can be a thankless task for government departments that are used to guarding their own patches and don’t have a culture of working to resolve issues holistically. Making those pieces fit together is far easier at a local level. Whitehall has to recognise that it can’t successfully micromanage the affairs of more than 300 diverse local authorities and local economies from an office in the South East.

Places aren’t all the same, and each place needs tailored policy to fit its own specific needs and opportunities. Giving them flexibility over their priorities allows businesses and the public to work together in a more effective, innovative way. Devolution was never a single shot, it’s a long-term process of change. Fundamentally rewiring public financing and rebalancing the British state won’t happen overnight, but it’s vital to our future prosperity.

We’ve come a long way from where we started – but there’s still a long way to go. 

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By Henri Murison, Chief Executive of the Northern Powerhouse Partnership

Could the North finally be starting to take back control? No, I don’t mean Brexit (but more on that later) – I mean devolution.

For many years devolution was rarely discussed outside local government. Recently, however, something has shifted.

Businesses are seeing the benefits of empowered local leadership for their own priorities. Activists are becoming louder in their calls for decision-making to be brought closer to communities. They want locally-led, joined-up policy-making that understands the unique opportunities and challenges of each city region.

For decades, politicians and civil servants in Whitehall and Westminster dominated but now mayors are in the ascendancy.

At the start of December, Gordon Brown, Keir Starmer and Rachel Reeves came to Leeds to unveil Labour’s plans for devolution, which they said would constitute “the biggest ever transfer of power from Westminster to the British people”.

It was a big moment, one which signalled an opportunity for genuine political consensus. A few days earlier Jeremy Hunt had told the Northern Echo, ” I want to explore what we could do where we’ve got really inspired local leadership to set elected mayors and council leaders free…our structures in the UK are very centralised and usually it ends up with someone having to come and ask the Treasury for something.”

Both Labour and the Conservatives have put devolution at the heart of their offers to close the North – South divide. The remaining question is who is better placed to deliver on those promises.

Of course, this isn’t a new idea. A number of prominent politicians from across the political spectrum, including David Miliband and Michael Heseltine, have long been advocates for the devolution and wider decentralisation agenda.

Most recently, when George Osborne was Chancellor, he signed a series of ground-breaking devolution deals with city regions across the country, creating the first metro mayors in 2017.

“Global cities have powerful city governments” he said, and if we wanted to build the Northern Powerhouse as an international brand, if we wanted to give each place “the different specific things it needs to get growth going”, then we needed a champion for each place – a mayor.

Many of that first generation of mayors are now in their second term. While still somewhat hemmed in by Whitehall, there’s no denying they’ve have had an impact, whether in bringing down bus fares or improving skills provision.

And they’re only just getting started. The M62 Mayors Andy Burnham, Steve Rotheram and Tracy Brabin have been joined down the M1 by Labour’s Oliver Coppard in South Yorkshire – together they’ve been a powerful coalition fighting for better rail infrastructure, including Northern Powerhouse Rail across the Pennines.

Meanwhile, Tees Valley Mayor Ben Houchen is a rising star in the Conservative Party, bringing his own brand of Johnsonian boosterism to the region.

There’s a new mega-deal on the cards for the North East, where my own political career and ambitions started (and ended). While the region already has a mayor, this would create a much bigger, more substantive coalition of councils together into one economic entity.

Elsewhere in the North, a new devolution deal for York and North Yorkshire could see a new mayor handed £540m in gainshare funding over a 30-year period. Access to this funding has to be one of the most compelling reasons for councils (and voters) considering becoming a metro mayoral authority.  

Breaking the dominance of Whitehall is also hugely important for making sure the idea of Global Britain becomes more than just rhetoric. While researching our report into inward investment this year, we found that the North’s story was one that international investors recognised and understood, one they could work with. That strategy seems to be working – foreign direct investment into the Northern Powerhouse has soared 72% in the last five years.

Who should decide where buses or trams go? Who should decide what skills we need to be equipping our workforce with, in order to fit the needs of local businesses? Who knows where investment for local research and development assets would be put to best use?

In the new year the Northern Powerhouse Partnership will be taking a closer look at fiscal devolution – both the opportunities and challenges it raises. Clearly, it would see reductions to what the Treasury itself receives, and we need the right stabilisers in place for areas with the lowest tax revenues.

After all, if ultimately we want to become less reliant on Whitehall, we must be able to pay our own way.

I want to make the case for devolution as a transformative economic policy, as well as a path to genuine political reform, with metro mayors helping reconnect people to power.

Which brings me back to Brexit. When the UK (including many here in Yorkshire) voted to leave the European Union in 2016, it went much deeper than just a disdain or distrust of Brussels, stoked by the money of those like the businessman Paul Sykes. It was about a feeling of powerlessness which had built up over decades, of being ignored by the powers that be who think they know better.

Post-Brexit, that feeling hasn’t gone away, not least because the promises made by those like Johnson turned out to be ones he himself couldn’t keep.

If we want to heal divisions, we need to empower communities and reconnect them to a sense of shared destiny, over which they can have a proper say. People must feel able to change their destiny, rather than just accept it.

This is the only way to fix our broken political system and truly ‘take back control’.

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This will be only the second Mayoral election for most of the regions – and the first for West Yorkshire.

What are Metro Mayors?

The first Metro Mayors were elected in 2017 as part of then-Chancellor (and our chair) George Osborne’s plan to decentralise power away from Whitehall through a series of devolution deals signed between 2014 and 2020.

Metro Mayors oversee a number of local authority areas across a ‘combined authority’ (usually with a city at its core), creating a new tier of government between Westminster and local councils.

The aim was to create empowered local leaders who could raise productivity by shaping a long-term economic strategy across the city region. Directly-elected by voters, Metro Mayors are accountable to their electorate and are there to make the case to central government as to why their region deserves investment.

As well as the seven regions electing a new Mayor this week, two other regions already have deals: Sheffield City Region, which elected Dan Jarvis in 2018, and the North of Tyne, where Jamie Driscoll became Mayor in 2019. 

What can they do?

Each Mayor’s individual powers and budgets vary region to region.

In Greater Manchester – which has one of the most comprehensive devolution deals – the Metro Mayor has powers over policing, housing, health and transport. This has allowed Mayor Andy Burnham to take control over the bus network, meaning he can now set ticket prices, routes and timetables.

In Liverpool, Steve Rotheram has been able to create the Apprentice Travelcard, which allows young people to access better job opportunities through subsidised public transport.

Earlier this year, Sheffield City Region unveiled an £860m spending plan to help the area recover from coronavirus with the help of “gainshare” funding, the £30m promised every year for 30 years as part of its devolution deal.

In the Tees Valley, Metro Mayor Ben Houchen has secured a new base for the Treasury in Darlington and taken the local airport into public ownership.

As our vice-chair Lord Jim O’Neill said: “All are hugely important changes for Northern areas. All were made possible because central government trusted local leaders to do their job.”

Who is likely to win?

Polling suggests that almost all the incumbent candidates are likely to win, indicating that voters are increasingly convinced of the Mayors’ ability to affect real change in their communities.

It’s no surprise that Labour Mayors Steve Rotheram and Andy Burnham are expected to win by a landslide in Liverpool City Region and Greater Manchester but even in historically marginal areas, data suggests that the current Mayors are seeing off challengers easily.

According to our polling (conducted by Opinium), Conservative Mayor Andy Street is predicted to win comfortably in the West Midlands on first preference votes alone, with 54 per cent compared to 37 per cent for Labour’s Liam Byrne. Once second preferences are taken into account, Street’s lead grows from 17 to 18 points, winning 59 per cent to 41 per cent.

In the Tees Valley, Ben Houchen is predicted to win by 16 points, taking 43 per cent of the vote compared with just 27 per cent for Jessie-Joe Jacobs, his Labour opponent.

Why does it matter?

There is cross-party consensus that local issues such as transport and skills are best decided at a local level, allowing for a more efficient use of funds that is best-suited to the specific needs of each city region.

“The structure and size of central government means that it rarely tackles issues that bridge several departments at once.  Problems are addressed in silo rather than through a comprehensive, multifaceted approach that is far more effective.” – Lord Jim O’Neill

However, Metro Mayors remain hemmed in by Whitehall’s tight grip on powers and funding. Since the last devolution deal was signed, there’s been little evidence that the government is committed to pushing the devolution agenda further – despite the success of Conservative Mayors Ben Houchen and Andy Street in winning over new voters in historically Labour strongholds.

Read more on why devolution is at the heart of the Northern Powerhouse in our report here.

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By Lord Jim O’Neill, vice-chair of the Northern Powerhouse Partnership

In March, Greater Manchester (where I grew up), became the first city region outside London to take control over its bus network.

Though much of the media focus centred on the economic and environmental benefits of a London-style bus system, it’s important to remember why Andy Burnham was able to make that decision in the first place.

While I served as Commercial Secretary in the Treasury, Greater Manchester signed a series of devolution deals with central government, deals that would grant the region powers over areas including transport, skills and even health.

The Mayor’s bus franchising announcement was devolution in action. A case in point for how empowered local leaders could instigate real change in their communities, making progress on key local issues that mattered most to the electorate.

Just a few weeks earlier, Sheffield City Region had unveiled an £860m spending plan to help the area recover from coronavirus with the help of “gainshare” funding, the £30m promised every year for 30 years as part of its devolution deal.

^Sheffield

Meanwhile, Tees Valley Mayor Ben Houchen has been able to improve local rail services, preparing Darlington station for Northern Powerhouse Rail.  

All are hugely important changes for Northern areas. All were made possible because central government trusted local leaders to do their job.

This week, West Yorkshire will choose its first ever Metro Mayor. It’s an important moment, one which could see the first ever female candidate elected to the post.

Whoever is elected will need a comprehensive plan for spearheading a recovery – and in a recovery, there is no substitute for local knowledge and place-based expertise.

The case for devolution has never been stronger. Voters are becoming increasingly aware of the disconnect between themselves and officials working in Whitehall.

Moreover, the structure and size of central government means that it rarely tackles issues that bridge several departments at once.  Problems are addressed in silo rather than through a comprehensive, multifaceted approach that is far more effective.

Devolution is built on co-operation and trust. It was George Osborne, a Conservative Chancellor, who gave away funding and powers to city regions led by Labour councils – a move made possible by politicians reaching across party lines to find compromise.

We need to approach a recovery in the same spirit. Metro Mayors can and must be trusted to lead the bounce-back of our great Northern towns and cities, decarbonising the economy from Liverpool to Blyth while creating jobs right across the Red Wall.

Decades of Westminster decision-making and underinvestment for areas outside the South East has left the UK as one of the most centralised and regionally imbalanced countries in Europe.

We need to find a way to re-engage the voters in left-behind areas, many of whom feel locked out of a political system that has ignored them for years.

That means raising education standards among long-term disadvantaged children and investing in skills to allow workers to access higher-paid careers. It means building better transport and digital infrastructure to connect people living in the North to better opportunities.

And it means securing devolution deals for the whole of the North, from Cumbria to the Humber.

Taking back control was never just about the European Union. If politicians in Whitehall fail to learn the lessons of recent decades, if they fail to take long-term economic and social reform seriously, talk of ‘levelling up’ will mean nothing.

These voters want change – real change. It’s time to put devolution back on the agenda.

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By Henri Murison, director of the Northern Powerhouse Partnership

The campaign for a Mayor in West Yorkshire has begun. Both candidates will need coherent, innovative ideas on how to tackle our most pressing challenges in the months and years to come: economic recovery, decarbonisation and solutions for entrenched inequalities.

My plea to all those in local government is to remember our campaign for greater devolution has been hard-won. Now that we have some of the tools to build a better future for our region, let’s not squander them.

The intricate process of decentralising power away from Whitehall began under then-Chancellor George Osborne and Lord Jim O’Neill in the Treasury. Starting in Greater Manchester, it spread as far as Sheffield City Region but then stopped in its tracks in Yorkshire.

In those areas able to secure devolution deals, Labour civic leaders and the government put aside their differences to commit to invest in long-term priorities.

Improving social mobility or investing in better rail services isn’t partisan, it’s a no-brainer. Whilst Westminster thrives on gladiatorial contests between right and left, leading cities and regions requires a more mature approach – one able to reconcile opposing political factions in the pursuit of the greater good.

Local leaders need strong principles, good judgement and boundless energy. They need to be capable of reaching across party lines to deliver real change to local people, avoiding any instinct to land a political punch on the other side.

Steve Rotherham and Judith Blake, soon to became Baroness Blake once she joins the House of Lords, are just two of our great political leaders here in the North. There are tough times ahead and we need leaders such as them to make the case for further investment across the Northern Powerhouse.

Liverpool City Region Metro Mayor Steve Rotheram and Greater Manchester Metro Mayor Andy Burnham

However, while we are clear that more funding is needed in areas such as education and large-scale transport infrastructure, our real goal is to reach a point where we are not reliant on Whitehall hand-outs.

Once the North’s productivity has drawn in line with the rest of the country, and once we have real power over local decisions, we can take control over more of the taxes. This would not mean increasing tax overall, simply restructuring how it is raised so that we can align investment decisions with future returns.

Taxes should raise funds to unlock growth, later capturing the monetary uplift generated as a result. Taxes used to fund local services and investment must be overseen locally, replacing the outdated and unfair Barnett Formula.

Again, this requires grown-ups at the table to make reasoned judgements on how our priorities are ranked and paid for – not engaging in spats over unrealistic demands for the sake of short-lived popularity. The Chancellor, himself a fair and reasonable decision-maker, can spot those serious about real economic growth from those just in it for the glory.

Our current funding and powers are nowhere near enough to recover economically. Nor will they be enough to deliver the sorely-needed transport upgrades to boost connectivity, such as a new rail line from Leeds to Manchester, through Bradford. Once again, we find ourselves in a situation where our future depends on politicians in Westminster.

This forces us to start thinking creatively about ways to generate money, such as a road user charging system to replace fuel duty, once the electric car makes it irrelevant.

Megaphone diplomacy cannot and will not secure a recovery. Real leadership isn’t about lobbying for more money – it is about making the case for why an investment will pay dividends for local communities (and the taxes they raise) later down the line.

The North is on the up. Invest in us now, give us more powers over local decisions – and reap the reward in years to come.

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By Lord Jim O’Neill, vice-chair of the Northern Powerhouse Partnership

In last week’s Spending Review, the Chancellor announced a £4 billion levelling up fund, intended to be the light at the end of the tunnel after fifteen minutes of dismal economic forecasts.

It was a little underwhelming. Managed jointly by the Treasury, the Department for Transport and the Ministry of Housing, Communities and Local Government, the fund will require local areas to compete for money, rather than handing powers and funding to the directly elected Metro Mayors.

 For those of us hoping for a bigger say for these local areas, which have both the capacity and democratic mandate to lead the recovery, it was a setback. However, it is those areas yet to sign devolution deals that are of even greater concern. Places such as Cumbria – without a Mayor to deliver a coherent plan to government – risk wasting money on economically irrelevant projects, which will fail to address the UK’s fundamental spatial inequalities.

Levelling up can only be achieved by tackling the productivity gap at the heart of the North-South divide and – without transformational infrastructure – this simply won’t happen.   Developments such as the proposed £125m Eden North in Morecambe – an innovation-led project with the potential to simultaneously spearhead a green revolution here in the North and revive tourism in the local area – will be passed over in favour of cheaper, minor schemes.

Since its inception, the driving theory behind the Northern Powerhouse has been devolution. Working in the Treasury alongside then-Chancellor George Osborne, we advanced the case for the intrinsic value of empowered local leaders, directly answerable to their electorate.

In 2017, the first of the devolution deals were signed and we now have Metro Mayors in Greater Manchester, Liverpool City Region, South Yorkshire and the Tees Valley, with an election this May in West Yorkshire.  

While we’ve started to see some promising in-roads in areas such as in the Tees Valley and in city regions like Greater Manchester, the Mayors’ powers have been limited due to governments failing to recognise their potential and devolving further. It wasn’t until the introduction of local restrictions in August – and the ensuing well-publicised battle between Mayors and Whitehall – that people sat up and began to take notice.

Until local areas aren’t forced to go with a begging bowl to Whitehall whenever they need funding, this tension will continue to sow conflict – each time growing a little more fractious. Far easier and more effective would be a system that trusted Mayors to do the job they were elected to do.

And we’ve seen time and again that it works. Bradford Council have implemented a hugely successful track and trace system themselves months before overly centralised health bureaucracies understood the role local authorities could play.

I still believe that the Chancellor, a longstanding supporter of Northern Powerhouse Rail across the Pennines long before he arrived at the Treasury, is committed to the North. Most important of everything announced on the Spending Review was his promise to rewrite the Green Book – the Treasury’s ‘Bible’ when it comes to signing off infrastructure spending. Its purpose is to determine a particular project’s value for money but, in its current form, it has led to a cycle of decline where rich areas get richer and poor areas get poorer.

The next step is devolution – real devolution that cedes real power. This should be the moment Whitehall realises it becomes stronger by sharing power with the North – not by tightening its grip.

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The Northern Powerhouse, since its launch in 2014, has seen some progress but too many false dawns. As we recover from this deadly pandemic, the time is now for the North of England. Much has been made, and many words spoken, of ‘levelling up’. Northern Powerhouse Partnership’s plan is for government, for Metro Mayors, for civic and business leaders and for university Vice Chancellors. And it can, and must, be implemented now.

Levelling up in recovery needs all of us to work together to support and enable every community and place in the North to make a contribution, and benefit from the proceeds of our success together.  Co-operation has to be the legacy of the challenges we have all been through.

The route to leave this crisis behind and to build back better is not to simply try and recover our economy as it was pre-crisis, because the North’s underlying productivity problems would hold us back. This is a critical moment to take levelling up from words to action, to make the long term decision to close the North-South divide by driving up productivity. We have to create new jobs for those who work for businesses that will not survive this crisis.

Our proposals:

1. Establish a national Patient Capital Fund up to £25bn to invest in start up and growing businesses, with greater proportion allocated to Northern businesses. The focus would be on new investment or recapitalisation on priority areas like decarbonisation.
   
2. Devolve health spending and investment decisions to areas with Metro Mayoral deals, integrating health and social care with a fair national funding approach. As has been proved in Greater Manchester, this approach can work and will extend benefits of joining up patient records and data to address new services, new community models and funding opportunities.
   
3. Start building HS2 from the North, from Leeds onto Leicester; from Manchester and Liverpool towards Crewe; and a new line across the Pennines. This would mean splitting the eastern leg to ensure that the North begins to benefit from high speed rail as soon as the rest of the country. Give the North the powers and funding to set up an Olympic Delivery Authority body to start work on new lines alongside funding the upgrading of lines by Network Rail.
   
4. Draw on graduates from across the North’s universities as Catch Up Tutors,  in time for schools going back in September, and reform pupil premium distribution to better target long-term disadvantage. Set up new networks of highly-focused Opportunity Areas to work in a joined-up way on closing the gap with how children progress from better-off families.
   
5. A green energy revolution: rollout of Small Modular Reactors (SMRs) built as a fleet, backing the UK Rolls Royce led consortium with significant private investment multiplying public funding, deploying a high temperature cooled demonstrator in West Cumbria and providing certainty to Carbon Capture Use and Storage with two clusters up and running in the Northern Powerhouse by 2024.
   
6. Rebalance R&D investment to unlock closing the North-South divide, with an initial commitment to a Net Zero North research programme by the N8. This would be alongside a wider step change in R&D, ensuring that critical infrastructure like HS2 and SMRs generate UK jobs in the supply chain.
   
7. Devolve responsibility for the skills investment we will need post-crisis, including funding to deliver the government’s apprenticeship guarantee.
   
8. Extend existing local investment flexibilities for the areas with Metro Mayoral devolution deals, unlocking up to £5bn in local investment in the North, ensuring local and national priorities are aligned and recognising the government has finite resources available. We will also accelerate new devolution deals to enable sustained economic rebuilding from Cheshire and Warrington to the north bank of the Humber.
   
9. An investment of £260m from Government and the Arts Council to support the theatres, galleries and museums of the North out of this crisis and use it as a springboard for a cultural renaissance.
   
10. Roll out of full fibre across the Northern Powerhouse, addressing areas lacking connectivity, with subsidised provision for the unemployed and low income families of school-age children to ensure they can access better opportunities.

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