>> Call for empowered RDAs with local scrutiny from councillors and MPs
>> City region concept in jeopardy
By Nick Golding
A new fissure has apparently opened up in the Labour Party's Blair-Brown divide - and the future of urban local government teeters over the crack.
The Blairite David Miliband's vision of empowered city regions, ideally led by elected mayors, is threatened by a new Brownite enthusiasm for a revival of regional government.
Backers of regional government, who had been licking their wounds since their failure in the referendum on a north-east assembly in 2004, have publicly revived their enthusiasm in the form of a New Local Government Network (NLGN) pamphlet.
Written by two of Gordon Brown's biggest chums, the Treasury ministers Ed Balls and John Healey, and the NLGN's director Chris Leslie, the Evolution and Devolution in England report pours scorn on the concept of political city regions which is expected to be at the heart of this autumn's white paper.
One source close to the trio says: 'This is the Treasury saying 'hold on a moment'. You would be right to report it as scepticism about additional layers of government.'
Many cities had hardly been enamoured by the government's pushiness on city regions but they still have cause for concern with the Treasury's disdain for them.
City regions have been billed as a trade-off in which ministers achieve their goal of more rational, joined-up government to spearhead economic development in urban areas in return for a radical devolution of power. So any criticism of the idea by the chancellor's most trusted associates could, theoretically at least, jeopardise devolution.
The trio pulled no punches. 'We are very sceptical,' they said of the merits of city regions led by elected mayors.
They are not entirely against the concept of city regions - they approve of them as loosely organised groupings of councils - but they dislike the notion of them as political entities.
The group believes the next five or 10 years could be blighted by turf wars between metropolitan councils as they wrangle for supremacy within new city regions. Such disunity could prove disastrous for Mr Brown, who will be anxious to ensure no distractions from smooth service delivery as he heads towards an election.
However, the trio do concede that some places, in particular Manchester and its surrounding councils, have sufficiently cohesive identity and the standard of leadership to benefit from a city region arrangement.
This falls way short of the enthusiasm of the communities and local government secretary Ruth Kelly who recently revealed to LGC that she had rejected England's eight core cities' bids for extra power because they had shown insufficient ambition and creativity in devising new political structures.
Ms Kelly would appear to be at odds with the chancellor in her support for city region mayors and a radical redrawing of local urban political institutions.
Messrs Balls and Healey also have their own reasons for disliking the pooling or centralisation of political power.
Respectively representing Normanton, which would be swallowed up by a Leeds city region, and Wentworth, an area of Rotherham MBC which would lose power to Sheffield, they are aware of local antipathy towards over-bearing regional giants.
They contrast the rationale for the successful Greater London Authority with that for city regions elsewhere.
'Many people think of themselves as 'Londoners' before they see themselves as residents of Camden or Vauxhall. Whereas in West Yorkshire, they are most certainly from Leeds or Wakefield or Bradford before they call themselves a 'Leeds-city-regioner'.'
As Brownites, they are more than familiar with the increasingly frugal chancellor's likely attitude towards an additional, potentially costly, tier of government.
The trio also believe that the outlying areas would suffer if regional power was concentrated in the hands of the core cities, asking what forum would be there for somewhere like Carlisle to make its economic case if a Manchester-led city region held sway in the north-west.
The strengthening of regional government would avoid the problem of areas which lack obvious regional capitals being deprived of leadership.
East Anglia devised Regional Cities East - a regional grouping of six cities and towns - as its answer to the city region debate. But the relationship between Norwich and Luton is nothing compared with that between Bradford and Leeds, undermining the transfer of the concept of city regions to East Anglia.
Centring power around the eastern regional development agency (RDA) would solve that region's power conundrum.
Meanwhile, such was the leadership difficulty in the East Midlands, where Leicester, Nottingham and Derby are all similar in size, that even those most enthusiastic backers of city region mayors, the Centre for Cities, said it was not a suitable candidate. Again an empowered RDA would be a solution.
But the new regionalism is likely to lead to fears cities will be unable to win enough autonomy. Without it gaining unified political leadership, surely greater Manchester cannot become as successful a regional economy as Milan or Barcelona? Those on Ms Kelly's side believe the area would be held back by sharing the same regional leadership as Cumbria, which has a different set of priorities.
Instead of city regions, the Brownites want to see empowered RDAs at the centre of devolution and economic growth.
The trio believe distrust of regional government can be overcome. They insist they are not simply revisiting the old regional agenda.
Rather than having a specially elected regional assembly, they believe democratic accountability can be assured by using existing local government and MPs rather than the extra tier of politicians, which so rankled north-east voters.
Each region's MPs would sit on a body acting like a regional select committee to examine the RDA's performance. Federations of council leaders would also hold the RDAs to account and gain powers of patronage, similar to those just awarded to Ken Livingstone, to appoint key members of regional government staff.
By deriving regional government's power from parliament and councils, they insist they are proposing a simpler structure than would be the case by creating city regions.
But the merest mention of regional government sends shivers down councils' spines.
Local Government Association chairman Lord Bruce-Lockhart (Con) labels regions as 'unpopular, remote and unreachable'.
However, the NLGN's Chris Leslie thinks the revival of regional government could be in councils' favour.
'Councils should be able to draw down powers from RDAs, and the RDAs need to co-operate more and work more closely with local government to improve the role of councils in economic development,' he says.
'This is about getting more power out of Whitehall. If local government has a role in the hiring and firing of these regional quangos and regional organisations, they will respond more to the views of local authorities.'
This all leaves Ruth Kelly with a problem. Is there any point in using the white paper to force or entice metropolitan areas along the city region path if the Treasury could veto or water down any extra financial freedoms?
And if Mr Brown succeeds Mr Blair next year, could he put an end to any legislation designed to get city regions up and running?
Ms Kelly, herself a former Treasury minister who has carefully navigated a fine line to retain good relationships with Labour's two camps, must continue to tread carefully.
Like so many areas of government policy, city regions are at the mercy of the handover of power between Blair and Brown.
Regions and city regions are different sides of the same coin, says Dermott Finch
Over the last year, English city-regions have won growing acceptance. But mixed messages from Ruth Kelly, Ed Balls and John Healey have exposed the debate within Whitehall.
The government is still feeling its way through devolution, thinking out loud. There are some real differences. But we should avoid a polarised face-off between regions and city-regions. City-regions can co-exist with regions.
Despite the mixed messages, an important consensus is building.
First, we all recognise the economic logic of city-regions and want to see closer collaboration between local authorities.
Second, we all want to reduce institutional clutter and devolve powers and funding to the most appropriate level.
And third, we all agree RDAs and other regional quangos are not sufficiently accountable and need greater scrutiny.
The big questions are now around the pace and level of devolution, and city-regional governance.
Radical devolution is not on the cards. We are more likely to see 'evolutionary decentralisation'. But the Treasury still intends to decentralise transport, skills and housing. And the Lyons Inquiry should result in new economic development powers for local authorities.
But what about city-regional governance of things like transport, skills and housing? This is the real sticking point. Elected city-region mayors are not going to appear overnight. But, over time, city-regions may want to go for the mayoral model. Let's be clear - we're not seeking to impose elected mayors, but the option should be made available.
We need regions and city-regions. The Centre for Cities and others would prefer a stronger city-region focus and more radical devolution. But let's keep focused on the main prize - more powers for our towns and cities, so they can grow their own economies.
Dermott Finch Director, Centre for Cities, Institute of Public Policy Research