Northeast ponders not going it alone as Scotland prepares to vote

Ten years ago, Labour's John Prescott offered the northeast of England a regional assembly, but it was turned down by three-quarters of those who bothered to vote.

Back then, the public said No for a variety of reasons. Some believed it meant just another layer of politicians and officials. Some felt it could not do much.

However, a significant percentage in a region often riddled by local divisions, rejected the Prescott proposal, believing that Sunderland, Middlesborough and elsewhere would have lost out to Newcastle.

Today, many of those responsible for the northeast's future, who have looked on enviously at developments north of the border in Scotland over the last 15 years, wished that No had been Yes.

"I think people will look back at that result with hindsight as the wrong result for our region," Nick Forbes, the Labour leader of Newcastle City Council declares.

“We could have been the first properly devolved region within the UK, with our powers to restructure our public services and grow our economy.

"We are now on the back-foot as a result," he tells The Irish Times.

From September 18th, the northeast of England’s situation gets more difficult: Scotland either votes for independence, or it begins the journey to getting more Home Rule powers.

In April, the British Chamber of Commerce reported that one in eight businesses in Britain said the referendum is delaying final decisions on investment plans.

Nevertheless, three-quarters said that independence, if it happens, will not influence future business decision; though one in seven said it it would hurt sales.

The North East Chamber of Commerce, which has surveyed its own membership, said half of them believe that an independent Scotland would be able to compete more strongly against them.

Nearly two-thirds of them believe independence will be actually harmful for the northeast, says Ross Smith, director of policy for the North East Chamber of Commerce.

The Scottish National Party’s promise to cut corporation taxes by 3 percentage points could help Scotland win foreign investment – though there are doubts if the SNP could afford to do it, if it wins.

The memory left behind by one battle for inward investment still rankles, when Newcastle had a major Amazon distribution centre snatched from it at the last minute by Scotland.

Unlike the English regions, which have seen regional foreign direct investment agencies come and go on a minister's whim, Scottish Development International has a global reach in the hunt for new firms.

“Would a call from the First Minister of an independent Scotland be enough to make the difference the next time a deal comes along? Those are the kind of problems facing the northeast,” says one analyst.

Rejigging the famous Henry Kissinger question about Europe, he went on: "It's the same: Alex Salmond speaks for Scotland. Who speaks for the northeast with the same authority?"

If Scotland votes Yes, 18 months of negotiations are planned to untangle 300 years of ties – which simply prolongs uncertainty, Matt Boyle of Sevcon told a Newcastle Journal conference last week.

The Scottish appetite for independence should be met, if it is there, says Boyle, who runs a company making electric vehicle parts: “But there should be a logical process that leads to that point. We’re in a very dangerous place, with one vote on one day that will be so monumental. If there’s a rational argument for this, then nobody is articulating it.”

Trading partner?

If Scotland goes, Nick Forbes says the northeast “becomes the place in England that is furthest away from the capital” in a country that is already too-focused on London.

Scotland could become an ever-bigger trading partner over time, but “that depends on whether you think an independent Scotland would be successful, or not.

“My view is that an independent Scotland is probably too small to be a viable economic entity. It might have a good run for a few years, but problems would very rapidly set in,” he goes on.

So far, Scotland, with a larger per-head block grant from the Treasury than the northeast enjoys, has not had to deal with the kind of public spending cuts imposed in England.

"An independent Scotland would very rapidly have to come terms with less public money and I think that that would cause all sorts of problems north of the border," he told The Irish Times.

The UK minus Scotland will become ever-more London-dominated, business and political leaders in the northeast, region fear.

“Interest rates need to rise to curb London house prices. But they don’t need to rise in the northeast, and they might be more likely to rise if Scotland is out of the union than if it is still in it,” said the analyst, who spoke on condition of anonymity said.

Extra devolution, meanwhile, creates almost as many problems: Scotland would retain its higher share of UK public spending, but enjoy further local levers of power.

“We would legitimately argue that Scotland already has higher per capital public funding than the rest of the UK and, as a result, we’re always at a disadvantage,” says Forbes.

Equally, there are concerns that greater devolved powers to Holyrood could include control of air passenger duties – where changes could directly impact upon Newcastle’s own airport.

“[If it was cut there] we would see a leakage of passengers and business travel north because it is actually not that far from here to Edinburgh. It is only an hour-and-a-half on the train.”

Either way, the English regions will make demands, says Forbes, who has long argued that England’s major cities must have control over local taxes, “rather than shipping it off to London”.

German cities keep one in seven Euros raised in taxes inside their boundaries; cities in the United States keep even more, but British cities have little, or no powers.

“I keep reminding people that England’s eight biggest cities outside of London are more than 28% of our economic activity, which is more than London and we have more population,” he says.

Local authorities have begun to co-operate more, while Newcastle has begun to speak with Manchester, Leeds, Liverpool and the other big English cities for greater powers.

The imbalance in spending in the UK is starkly revealed by spending on public transport: £246 will be spent on it in the northeast over the next two decades per head, compared with nearly £5,000 in London.

Forbes acknowledges the difficulties that the pro-union Better Together campaign has had in creating persuasive messages for voters: “For the Yes camp, it is a brave new world.

“It is much more difficult to make the case for the union because there is a lot of dissatisfaction with the way that the UK works. It is pretty clear to me that our national political system is broken.

“The idea that you can have a government for the whole of the UK who can come into Whitehall, pull levers of power and make things happen and everybody is happier is a fallacy of a notion,” he says.

However, independence offers the northeast opportunities, too, says the Newcastle city council leader, who makes it clear that Newcastle will target Scottish businesses seeking to transfer if Scots vote Yes.

“I did have one conversation with a bank based in Scotland, which said it is not entirely fanciful that they would move a significant part of their operations out of Scotland south,” he says.

The northeast offers a safe-haven, with a high quality of life but still close enough for who “don’t want to decamp as far away as London. Edinburgh is only 90 minutes away by train”.

“If there is an independent Scotland I am not prepared to see Newcastle simply become a distant remote outpost of a London-run government,” he says.