Ross Smith: Scotland's policies can't be dictated from London - and neither can the North East's

The director of policy for the North East Chamber of Commerce on the opportunities and threats for the region after Scotland's vote

Andrew Milligan/PA Wire Chris McAleese at Bannockburn Polling Station, as voters go to the polls in the Scottish Referendum.
Chris McAleese at Bannockburn Polling Station, as voters go to the polls in the Scottish Referendum.

In November 2004, I remember watching the count unfold from the referendum on creating an elected North East Assembly.

From the moment the first ballot box was opened, it was apparent that the region had voted ‘no’, and the only real issue at stake was by how much.

The answer to that question turned out to be a lot.

At about 3am, Deputy Prime Minister John Prescott gave a press conference at which there wasn’t really very much to say, and the next day everyone in the region went on with things much as they had before.

But in the run-up to the Scottish independence referendum, it became abundantly clear that this wouldn’t be the case. The result was close enough that the clamour for change couldn’t simply be dismissed.

Leaders of all the main Westminster parties had already cobbled together a tentative ‘devo-max’ plan in order to shore up the ‘no’ vote when polls started to waver.

But south of the border, the demand for change was there too. The calls for more devolution within England were getting louder from councils, think-tanks and business groups; while the ‘West Lothian question’ – why Scottish MPs are allowed to vote on matters that don’t affect their constituencies – was getting impatient for an answer.

Lynne Cameron/PA Wire The sun sets over Gretna with the flags of the Union in the foreground
The sun sets over Gretna with the flags of the Union in the foreground
 

There is therefore every possibility that despite the ‘no’ vote politics students in years to come will look back on the Scottish referendum as a watershed moment in British constitutional history.

But rather than just an academic issue, how this is addressed is likely to have profound consequences for the North East economy.

Since devolution to Scotland was first introduced in 1999, many in the North East have looked enviously across the border. Scotland has had the ability to tailor policies to its own circumstances, the strength of leadership to make strong decisions quickly, and crucially an advantageous funding settlement compared to English regions.

That has all paid dividends with a growth rate that has outstripped large parts of the UK.

Meanwhile, since the 2004 referendum, the North East has had a selection of different institutions with no great transfer in powers, confused leadership structures, and paltry spending levels on some crucial economic functions.

Businesses in the region have performed phenomenally in that time to put our economy in the strongest position it has ever been – but the gap with the rest of the UK has barely moved.

Fundamentally, policies for the North East have remained largely set by Westminster, and usually tailored to conditions that exist 250 miles south.

The ‘vow’ that David Cameron, Nick Clegg and Ed Miliband made – to increase Scotland’s powers while retaining the now infamous Barnett Formula – therefore looked inequitable.

More than that, it looked like a very poor economic strategy from the perspective of UK plc.

The North East is a huge potential engine of growth for the UK which at present has been under-utilised. At a time when there is a drive for elusive export-led growth, our businesses perform better than anyone on international trade.

With energy security one of, if not the biggest long-term issue affecting the country, our resources and expertise are vital to the solution.

Danny Lawson/PA Wire A general view at the border between Scotland and England just north of Berwick-upon-Tweed
A general view at the border between Scotland and England just north of Berwick-upon-Tweed
 

With parts of the country facing major congestion problems, our capacity for growth is essential. And so the list goes on.

Nevertheless, a series of changes are mooted that have the potential to shift investment away from our region, only for it to land a few miles to the north – hardly an efficient way to run a national economy.

If Scotland makes a reduction in corporation tax, could that prompt a few firms to move their assets up the A1?

If it reduces income tax, will some of our most skilled people favour Dumfries over Durham?

If it cuts air passenger duty or subsidises ports, will exporters find their international transport routes are now leaving from north of the border?

It would be hard to begrudge Scotland taking these measures if they had the opportunity to do so. But it would be bizarre for Westminster politicians to allow that to happen when it would be bad for not just the North East but the UK as a whole.

To make the whole cake bigger, rather than just giving Scotland some extra cherries, all parts of the country must be enabled to grow to their potential.

Most business leaders are ambivalent about how that happens. If Whitehall can deliver it, then great – though the record of the last half century fails to inspire confidence. On the other hand, a re-run of the 2004 assembly vote seems unlikely.

But the notion that economic policies in place several hundred miles north of London need to be tailored to local circumstances is now rightly beyond question when it comes to Scotland. It is hard to argue that a different logic applies in Galashiels to South Shields.

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