Angela Eagle: Osborne’s Northern Powerhouse remains a myth

We have heard a lot in recent years from George Osborne about the so-called Northern Powerhouse. We have had a blizzard of press releases and endless photo ops with a gesticulating Chancellor in hard hat and high-vis jacket. The Chancellor mentioned it no fewer than six times in his Budget speech on Wednesday and it has mysteriously appeared as an entirely new region of the country on Treasury maps of the UK. It is clear the Chancellor sees the “Northern Powerhouse” as the driving force behind his bid to succeed David Cameron as Tory leader and Prime Minister. But as with so much that we see from this Government, the rhetoric is not matched by the reality.

In his Budget speech, George Osborne boasted “We’re building the roads. We’re laying the track. We’re making the Northern Powerhouse a reality and rebalancing our country”. If it were only true, I’d be the first to cheer but, unfortunately, the facts tell a very different story.

There is a glaring inequality in terms of infrastructure investment around the UK. Of the projects in the Government’s infrastructure pipeline, just a fifth are under construction, and most are in London and the south-east. Amazingly, the north-east accounts for less than one per cent of the value of the projects under construction. I visited the North East Chamber of Commerce a fortnight ago and heard how chronic under-investment in roads, railways, airports and skills are holding back the potential of their economy to grow. And it’s the same in Yorkshire and the north-west.

The IPPR has shown that the money allocated to Crossrail alone was nine times more than every rail project in the three regions of the North combined. This is not to say Crossrail isn’t necessary; it is. But this sobering statistic just goes to show the shocking regional inequalities in this Government’s oft announced but rarely delivered infrastructure investment plans.

The Tories promised major investment in railways in the North ahead of the election before brazenly scrapping projects the month after. Many of the most eye-catching announcements on infrastructure in the Budget were merely re-announcements of projects which haven’t yet got off the drawing board. We need less talk and more action.

The Government has failed to build the roads, they have failed to lay the track, and with the trade deficit and household debt soaring, they have patently failed rebalance the economy. Partly as a result of the neglect of Northern investment, productivity in London remains 50 per cent higher than in the North.

In addition to failing to rebalance geographically, we have not seen a sectoral rebalancing of the economy. Manufacturing is in recession, with output being lower today than it was in 2011 when Osborne talked of a Britain “carried aloft on the march of the makers”.

George Osborne talks of a radical devolution of power to the north. Yet farcically 97 per cent of the senior civil servants working on the Northern Powerhouse are based in London.  Whilst there is some devolution of power, this is certainly not matched by a devolution of funding. Our northern cities have been hit hardest by the Government’s savage cuts to local government, whilst wealthier areas have been protected.

The Government recently found £300m to ease the pressure on local government. Some £43m went to Surrey and Hampshire. Liverpool and Manchester received nothing. Devolution can’t be mandated by the centre; we need strong local and regional government to lead on growing their local economies. The scale and inequity of the Government’s cuts to local government risk undermining their ability to do this. They also risk stoking cynicism that, for the Tories, devolution is merely a smokescreen for cuts and a way of devolving blame.

This would be a great shame and a missed opportunity. The UK is one of the most centralised countries in the developed world; both economically and politically. Our economy is far too reliant on London and decision-making is far too concentrated in Westminster. Genuine devolution could help drive a rebalancing of our economy and unleash the potential for growth in the North and in regions across the country. For too long our economy has been run from London, and often seemingly in the interests of London.

We need genuine devolution, with local communities in the North and across the country given the levers to drive growth in their local economies and to shape their local areas. But devolving powers alone will not be sufficient. We need to ensure that local areas are able to raise the funding they need to deliver the high quality local services their communities expect. This inevitably means a continuing need for some redistribution by central government in the medium term, given the vast differences between local areas in both need and the ability to raise funds.

We need a modern industrial strategy to help rebalance the economy away from an unhealthy over-reliance on London and the service sector. We need Government to work in partnership with regions, with businesses, and with trade unions to lay the foundations for sustainable and shared growth. Unfortunately our chances of getting that under this Government are slim when Sajid Javid, the Business Secretary, is so hide-bound by his restrictive economic ideology that he can’t even bring himself to utter the words “industrial strategy”.

The principles behind the Northern Powerhouse are sound. It is just that they are yet to be backed up by action. We desperately need an economic rebalancing, with more vibrant local economies and a more sustainable economic mix. And we desperately need a political rebalancing, with greater devolution and more power to local communities to shape their future.

We will continue to hold the Government to account, and to demand action to back up their warm words. But we also need to develop a distinctly Labour vision of devolution, with localism being a key tool to deliver our values of social justice and shared prosperity.

Angela Eagle is shadow First Secretary of State and shadow Business Secretary