Peterlee, near Sunderland, was once a mining town. Now, it’s home to a vast, hi-tech manufacturing plant for US truck-maker Caterpillar. In every direction, blue-overalled workers clamber over the massive yellow vehicles, whose tyres are taller than a man, brandishing drills or lowering giant parts meticulously into place from ceiling-mounted hoists.
Chris Fairs, the human resources manager, explains that his staff manufacture almost every part of the vehicles here: rolled steel comes in, giant trucks roll out, in what they call a “plate to gate” process. Many of the workers are former miners, or welders from the defunct Sunderland shipyards. “This is a world-class manufacturing facility,” he says.
When times were hard during the downturn, amicable relations with trades unions allowed Caterpillar to negotiate a sharp cut to working hours to save jobs. Now capacity has expanded, and the workforce is back to pre-crisis levels. When the company advertised for five apprentices this year, it got 1,500 applications.
Caterpillar is a lean, shiny, success story with a well-trained workforce – precisely the kind of firm George Osborne hopes to boost with his plan to build a “northern powerhouse”, which he will flesh out in Wednesday’s budget. Other firms nearby are thriving: Hitachi is building a train plant at Newton Aycliffe; BAE Systems and Siemens have operations here, too, building on the north-east’s tradition of engineering skills. Ross Smith, director of policy at the North-East Chamber of Commerce, says: “If you look at the point where austerity started and if you look at how well the economy in the north-east has done, it is a testament to how well businesses have performed.”
But it’s far from clear what Osborne’s northern powerhouse project, fronted by newly minted Mancunian minister Lord (Jim) O’Neill, means here. Officially launching the scheme in a warehouse in Manchester in May, Osborne promised that it would mark “a revolution in the way we govern England” and close the “decades-old economic gap between north and south”. “Within 40 miles of Manchester, you have Leeds, Sheffield and Liverpool, Lancashire, Cheshire and Yorkshire – a belt of cities and towns that contains 10 million people – more than Tokyo, New York or London. Bring those cities together, connect Liverpool to Hull, the north-west to Yorkshire and the north-east – and the whole will be greater than the parts,” he said.
Manchester has been given sweeping powers over everything from transport to health policy, under a deal known as “Devo Manc”. While that approach may work well for Manchester, which constitutes a coherent “city region”, deep-seated rivalries between Newcastle and Sunderland could make it hard to impose such a pattern there – and indeed Newcastle voted against the idea of an elected mayor in a referendum called by the coalition government in 2012.
Simon Henig, Labour leader of Durham county council and vice-chair of the Association of North-East Councils, says: “We are in the early stages of talking about what a northern powerhouse might mean. It has to move beyond Greater Manchester if we are to move beyond rhetoric … Greater Manchester is 100 miles from the north-east.”
Ed Cox, director of thinktank IPPR North, agrees, and says if the chancellor is to make a genuine difference to Britain’s north-south divide he will need to put up some money.
“The northern powerhouse has been a great concept and absolutely galvanised local politicians, businesses and government,” he says – but then he points to the recent announcement by the transport secretary, Patrick McLoughlin, that a series of key rail projects, including the electrification of the TransPennine route between Manchester and Leeds, as well as the Midland mainline from London to Sheffield, will be “paused”.
Cox hopes the budget will be a chance to correct course, “with a significant funding commitment on transport particularly and infrastructure more generally”. There does appear to be growing confidence among local authority leaders that the government will keep its word on devolution – not just for a northern powerhouse but across England.
A report by consultants PwC last week found about 20% of English local authorities expect to become part of a new combined authority, governed by an elected mayor, by 2020. This is up significantly from 12% before the election.
But PwC warns there is much more to delivering the benefits of decentralisation than elected mayors. Too much focus on governance could come at the expense of delivering actual results in terms of skills, transport and growth, says Jonathan House, government and public sector partner at PwC. “Decentralisation cannot be an end in itself.”
Smith at the North-East Chamber of Commerce believes that if the northern powerhouse means beefing up local powers over training and skills, that could be helpful in a region where skills shortages are the subject of constant complaint from employers – particularly in engineering, and in the region’s rapidly growing IT sector.
“There’s no doubt for our members that their top concern right now is getting people with the right skills to meet the requirements in their workforce,” says Smith, whose chamber represents around 4,000 businesses.
“It would also provide a bit more flexibility in the way funding is used. For example, it can be difficult to get funding to train older people in the workforce – and by that I don’t mean people over 55, I mean people over 24.”
For a region that has been shedding experienced workers from a shrinking public sector, such adult training is vital. “There are good people coming out of the public sector, but they might not have the right skills for specific businesses, so it comes back to training,” adds Smith.
And there’s a much deeper worry about whether the Conservatives can expunge the legacy of decades of deindustrialisation: this is a government that has already presided over five years of austerity, and Osborne is about to announce a fresh round of cuts. There is growing concern about whether private sector success stories like Caterpillar can offset the spending squeeze.
Frances O’Grady, general secretary of the TUC, says: “The chancellor is effectively pulling the plug on his grand project even before it has begun. As well as shelving much-needed upgrades for the TransPennine and Midland mainline routes, which would have boosted jobs and growth in the north, his new round of austerity cuts will set existing regional inequalities in stone. A more apt name for his plan would be ‘northern poorhouse’.”
The TUC’s research suggests that between 2010 and 2014 London created jobs at four times the pace of the north-east. Henig, who was meeting fellow council leaders from up and down the country at the Local Government Association in Harrogate last week, says they are focused as much on the autumn spending review, when the chancellor will spell out the fine details of his cuts programme, as this week’s budget. “Our ability to generate resources is lower than in other parts of the country,” he says. “We can’t turn to hiking up fees. So we can’t rake in millions from car park fees or whatever because there isn’t enough wealth in the area to stand it.”
The latest employment numbers, released in June, showed that the north-east created a net 17,000 jobs over the year. But unemployment stood at 95,000, or 7.4%, well above the 5.5% national average and the highest for any region by some margin.
A group of local union reps, gathered in Newcastle to share their experiences of the past five years, chuckle at the phrase “northern powerhouse”. They tell a sorry tale of cutbacks and layoffs, and the insecurity of short-term contracts and limited working hours. They also talk of charities, activists and public-spirited citizens stepping in where the state has withdrawn. Food banks have been joined by clothes banks, which help parents who cannot afford to clothe their children; teachers are bringing in breakfast for underfed pupils.
Nicky Ramanandi, deputy regional convenor of Unison, says: “We have seen a real attack on the core services that provide economic and human growth: Sure Start centres; domestic abuse services. I’m very, very worried about what the budget will bring.”
Fran Heathcote, president of the Department for Work and Pensions branch of the PCS civil service union, many of whose members will implement the £12bn of welfare cuts George Osborne has promised to spell out on Wednesday, says it is ironic that 40% of the staff she represents are in receipt of in-work benefits, such as tax credits, to top up their take-home pay – the very payments expected to be top of the chancellor’s hit list.
Cox, of IPPR North, says: “The black cloud on the horizon is the spending review, because all of this talk of devolution and targeted investment and so on will all bring the long-term gains. In the short term, if you see a spending review that is devastating for local services, the social disruption that could cause will, in my opinion, outweigh the benefits that we will accrue with devolution.”
This article has been ammended. Hitachi is building a train plant at Newton Aycliffe, not Bishop Auckland as we orginally stated.
- This article was amended on 16 July 2015 to correctly identify the coalition government as the instigators of a referendum on the idea of an elected mayor in Newcastle in 2012 – not a Labour government.
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