Action urged on northern powerhouse
A major barrier to the progress of the northern powerhouse "lies in central government's propensity, or reluctance, to put its money where its mouth is", a report by a think tank has suggested.
An analysis of business attitudes across the north of England revealed a need for the Government to be more radical on devolution of transport and infrastructure funding, the IPPR North research said.
A majority of northern businesses who took part in the research welcomed devolution in England and thought the northern powerhouse should proceed "full steam ahead".
But the report identified two external factors which risked "undermining" the northern powerhouse agenda, including concern about Scottish devolution and London.
It said: "First, there is resentment at the generosity of the Barnett formula and a very real sense that - with London treated as a special case - Scotland's gain is the north of England's loss. Second, there is a real worry that the new Scotland Bill will give Holyrood fiscal powers that will enable it to attract business and investment away from the north of England."
It noted fears that in next year's London mayoral elections the demands for Crossrail 2 "could easily be counterposed against investments in northern infrastructure".
The IPPR (Institute for Public Policy Research) North report entitled: "Full Steam Ahead, Business Attitudes Towards The Northern Powerhouse", was based on two round table discussions with businesses, a series of five interviews with business leaders and an online survey which attracted 81 responses.
The report said: "Whether in terms of a more devolved skills system, more local control of transport and other infrastructure, or even business rates and local tax variation, northern businesses clearly put more trust in local government and the emerging combined authorities in city-regions to work in their interests than they do in central government.
"Although the limitations of this research project are clear, its conclusions reflect a growing consensus among businesses regarding the opportunities of the northern powerhouse agenda."
It noted that among the "core cities there are genuine concerns that the northern powerhouse concept does not extend much beyond backing for Manchester and Leeds", adding that "more work needs to be done to bring the Liverpool, Sheffield, Newcastle and Hull city-regions more fully into the northern powerhouse frame".
The report identified that a "critical element" of the northern powerhouse project concerned major investment in transport infrastructure, adding that the "sooner the Government demonstrates its commitment in substantive terms, the sooner private investors are likely to show more concrete interest".
It said: "Through the impending budget in July and then the spending review due in the autumn, the chancellor has two opportunities to make a much bigger financial commitment to the northern powerhouse than has been made thus far."
The research also raised the issue of proposed cuts, stating that they "increase the risk that devolved services will themselves fail due to insufficient funds, undermining trust in local government and stalling the current momentum behind devolution". It recommended a more generous settlement for local government.
The analysis found a "greater appetite" for "meaningful fiscal devolution" adding that the Government "needs to use its review of business rates as the first step in a much more extensive programme of fiscal devolution that would see combined authorities much better able to raise and spend tax revenues at the local level, in line with much of the rest of Europe". It also identified a need for greater leadership.
Ed Cox, director of IPPR North and co-author of the report, said: "Northern businesses have overwhelmingly embraced the northern powerhouse agenda and welcome the fact central Government is finally 'talking up' the North.
"But despite its remarkable popularity, the northern powerhouse must go beyond its current guise as a brand. Bosses told us they want to see a more radical devolution of powers and funding over key economic issues, such as transport, infrastructure and business rates."
He added: "This means the powerhouse can go forward full steam ahead, ensuring northern prosperity can create national prosperity.
"But there are substantial risks to the project, from the inevitable focus on London and Scotland, to the continued squeeze on public spending. The Budget is a prime opportunity to signal the extent of the Government's ambition and put its money where its mouth is."
A Department for Communities and Local Government spokesman said: "Reducing the decades old gap between the north and south is one of this Government's biggest priorities and we agree with this report that our work to build the northern powerhouse should continue full steam ahead.
"For the whole country to reach its full potential every area should have the tools it needs to fulfil its ambition. That's why the decentralisation Bill will pave the way for cities, towns and counties around the country to gain new, wide-ranging powers. The Bill provides a huge opportunity for the north of England to build on its enormous economic potential to attract firms and create jobs.
"It is also why we will invest £13 billion in transport across the whole of the north in this Parliament, and why we have agreed a historic deal with Greater Manchester to hand significant powers to local leaders."