Post-referendum fears about replacing lost European Union funding helped sink the North East devolution deal, council leaders have said.
Members of the North East Combined Authority voted by four-to-three on Tuesday to reject the government’s devolution offer, leaving it unclear whether some revised deal can be struck.
Newcastle City Council, Northumberland Council and North Tyneside MBC favoured the deal, while Sunderland City Council, Durham CC and Gateshead and South Tyneside MBCs were opposed.
A government spokesman said: “It is disappointing that some North East councils have been unwilling to support this deal, which would certainly have benefited local people.
“If councils in the region wish to discuss devolution proposals further, our door remains open.”
Combined authority chair Paul Watson (Lab), leader of Sunderland, told LGC that the region stood to lose some £500m of support for regeneration in the current round of EU funding when the UK leaves the union.
He had opposed the deal because of insufficient reassurance about whether the government would replace this, and concerns about new council tax precepts.
“We need a stronger assurance than we have on replacing EU funding, [the government] should go a bit further,” he said. “They have done that for the universities and farmers, they should do it for us.”
Without this Cllr Watson said councils feared they would gain devolved responsibilities but not the resources to deliver them effectively, and so would be blamed for any failings.
The combined authority has not had reassurances beyond the chancellor’s statement that funding for all projects agreed under EU funding streams before the Autumn statement will be guaranteed.
On taxation, he said: “The big issue for me was that we were being asked to approve mayoral and [combined authority] cabinet precepts on the council tax, and the mayor being able to levy businesses.
“That’s three extra taxes on the people of the North East and I didn’t get elected to put taxes up, I’m not happy about that.”
Gateshead leader Martin Gannon (Lab) said councils had four times unsuccessfully sought government assurances on replacing the EU funds.
“The North East gets a lot of money from the EU as we are recognised as an area of need, which is more than a Conservative government would recognise,” he said. “Brexit supporters said UK funding would replace EU funding and they have to make good on that.”
Cllr Gannon said that without such replacement funds “it would turn the Northern Powerhouse into a Zombie Powerhouse”.
He said a North East elected mayor was now “very, very, unlikely”, but given widespread support for the principle of devolution “there are other models than a mayor; you could have a larger combined authority with opposition members on it and a wider scrutiny role”.
Cllr Watson said: “The government says the door remains open, so the talking goes on. Everybody wants some devolution so I think something will happen but what sort of when I don’t know.”
Writing on his blog, Ben Harrison, director of communications and development at the Centre for Cities think tank, said rejection made it likely the region would fall economically behind those with devolution agreements.
But he said the deal’s collapse “shows that taking a pan-regional approach to mayoral devolution is inherently fraught with difficulties.”
“The truth is that, as in some other parts of the country, a devolution deal process that was initially designed to boost the economies of major urban areas and city-regions has been stretched to encompass a far larger, more multi-polar and less densely populated area than it was originally designed for,” he added.