The Scottish referendum has “electrified” the debate about how the North East should be governed and whether it should have the power to manage its own affairs, Deputy Prime Minister Nick Clegg has said.
But he defended controversial plans to retain the Barnett Formula, a funding system which helps determine how public money is distributed across the United Kingdom - and helps ensure Scotland receives more cash than the North East.
Councils should increasingly be allowed to raise their own funds instead of relying on central government, Mr Clegg said.
He was speaking to the Newcastle Journal at Westminster as Scots prepared to go to the polls to take part in an historic referendum which could see the United Kingdom broken up.
Mr Clegg has launched a consultation called Northern Futures to ask people in the region how they should be governed.
The North East could be allowed to make decisions about train franchises, bus services and more, he said.
Mr Clegg said: “Where previously enthusiasts for greater devolution and decentralisation like myself were considered to be somewhat eccentric and debating these matters in a constitutional backwater, I think the referendum in Scotland has electrified the debate, not just about Scotland’s place in the United Kingdom but also about the powers and freedoms that we enjoy - or currently don’t enjoy - in the North of England.
“That’s why I very much hope that Northern Futures will catch the mood and will act as type of catalyst to create a consensus on which powers should be as quickly as possible decentralised to other parts of England, not least the North.
“For example, on transport, I just cannot see in the future how people can accept that all the rail franchises are dealt with in London. The Northern Rail franchise is the subject of a very lively debate.
“Why does London have a well regulated bus system but no city in the North does?
“Why does everybody in the North East have to go cap in the hand to the Highways Agency for plans to expand the A1, rather than having the freedom to try and raise the money themselves?
“All of these things are really now coming to a head as people start focusing not just on the future of Scotland in the United Kingdom but also the missing bit of the jigsaw, namely the English question.”
But he defended the decision to pledge, alongside other party leaders, to protect the Barnett Formula, which is used to help decide how state spending is allocated in different parts of the United Kingdom.
It’s partly as a result of the formula that identifiable expenditure on services per person was £9,582 in the North East in 2012-13, but £10,327 in Scotland. Transport spending was £213 in the North East and £539 in Scotland, according to an analysis published by the Treasury earlier this year.
Mr Clegg joined David Cameron, the Prime Minister, and Labour leader Ed Miliband to sign a pledge earlier this week vowing to keep formula, in a bid to convince Scots to vote “no” to independence.
He said: “If you give, as I would like to, more financial freedoms to the North, to raise money, borrow money, you can do all of that and let the North off the strict leash from Whtehall financially without having to have some fruitless debate that goes on for years and years about the Barnett formula.
My own view is that what is becoming a more important part of this debate is not the continued existence of Barnett so much, it’s what financial freedoms to borrow and to raise money you give not only to Scotland but to communities in the North of England.
We’ve started already. In the centre of Newcastle you can see diggers in the grounded funded by borrowing through the Tax Increment Finance. That didn’t exist before.”
The Tax Increment Finance scheme allows councils to borrow to pay for economic development against future tax revenues which result from business expansion.
Mr Clegg said: “And that’s the direction we need to push in. And in my view, all that can happen and should happen irrespective of what happens to Barnett.”
But while he said he wanted to hear the views of as many people as possible before making decisions, he said he personaly was unlikely to back a new regional assembly or anything similar.
Proposals for an elected North East regional assembly were rejected by voters in a referendum in 2004.
He said: “We shouldn’t repeat the mistakes of the past and build great new castles in the sky whether it’s an English parliament or some regional quango.
“I think the last thing the public want now is more expensive talking shops for politicans and I think we should work with the grain of the city regions, combined authorities and counties that people already associate with and feel loyal awards.”