In an exclusive interview, shadow chancellor John McDonnell announced plans to base a new £250bn national unit – tasked with improving infrastructure – in the region, with decision-making over elements of that expenditure devolved.
“We’re going to break up Number 11,” he told the M.E.N. “Part of Number 11 is going to the north.”
He also reiterated plans to shake up the way the Treasury thinks about spending outside London, arguing it needs to acknowledge ‘the mistakes of the past’.
Mr McDonnell was speaking a few weeks after the launch of Power up the North, a joint campaign between northern newspapers calling for a fundamental shift in the way government treats our communities.
Backing the campaign ‘110pc’, including demands for extra spending and devolution, he said one of his first acts would be to break up the Treasury.
The National Transformation Fund, that’ll be done by a unit in Number 11,” he said of his plans for a decade-long infrastructure pot, which would be used to overhaul northern railways.
“But we’re going to devolve Number 11. We’re going to locate this in the north.
“If we’re going to address regional inequalities, the NTF is one of the big vehicles for doing that.
“Large amounts of that money will go to the north, so therefore, the best thing to do is to put the administrators in the north.”
That would account for a ‘huge’ part of the Treasury, he said, adding: “We’re going to break up Number 11. Part of Number 11 is going to the north…devolved, split.”
Mr McDonnell admitted he had not yet got detailed plans for how decisions over that expenditure would be devolved to local areas, or exactly where the unit would be based, but said he was planning to meet northern mayors in the coming weeks to discuss how it could work.
In future, he said, those mayors would also be able to feed into government budget and spending review decisions.
“We want to devolve the decision-making to the regional and local level,” he said of the fund.
“I’m meeting with all the mayors and we’re going to be asking them what sort of structures they think is best both in terms of their individual decision-making – so when they bid for resources, not just bidding for individual projects but pots of money as well – but also how they think it’s best to coordinate across the north.
“It isn’t just relocating the unit, it’s relocating decision-making as well. But actually the relocation of parts of Number 11 I think is significant, because you do want the civil servants meeting up with businesses and civic leaders and others.
“People think it isn’t important, that it doesn’t matter where they’re located. Oh yes it does. People need to know what lives people are living in those areas.”
Power Up the North calls for a fundamental change in the way the Treasury views spending outside of London and the south east, a demand echoed by former civil service chief Lord Bob Kerslake in his report for the UK 2070 commission a few weeks ago.
Mr McDonnell said he wholeheartedly agreed with the findings of that report, which pointed to an ‘unstated bias’ towards the capital over decades.
“The 2070 Commission report just did everything that we’ve been saying, it exposed the regional inequalities and set forward a programme,” he said.
“The key aspect is you’ve got a programme – and it’s got to be over a couple of decades – of reversing, reversing the neglect of the north, if you like. No government can ever again bias its investment plans so heavily against the majority of the country.”
He backed the campaign’s concerns over the ‘shared prosperity fund’ the government has set up to replace EU structural funding, which historically has gone to areas based on levels of need, such as the north west and Wales. Many senior figures in Greater Manchester fear the government will no longer allocate that cash according to need, but according to population, a concern borne out earlier this week when neither Boris Johnson nor Jeremy Hunt would commit to using the existing formula when quizzed by the M.E.N.
To allocate that cash – which has been used to fund major regeneration projects over the years – according to population size would effectively amount to ‘an attack on the north’, said the shadow chancellor.
“If you go on a per capita basis, it completely reverses the whole logic and purpose of the scheme,” he said of the fund.
“And then you get into a situation that is an attack on the north. You’re losing hundreds of millions.
“We’re giving a guarantee we will maintain the level of funding from Europe. What we want to do then is devolve as much as we can.“
Mr McDonnell also reiterated that the Treasury ‘green book’ – the economic rules officials use to decide what receives funding, which has seen investment pour into the south east – would be ripped up on his watch, calling it a ‘narrow range of economic theory’ that had resulted in London receiving three times more transport cash per head than the north.
And he insisted Labour would not be a centralising administration, but would push ahead with English devolution ‘organically’, according to the wishes of local areas.
“When we go into government, we all go into government,” he said.
“The idea of a Labour administration at the national level, is to devolve power at every level to the individual to the local community.
“And yes, if necessary to regional structures. So again, it’s quite a huge cultural change. Yeah, part of that will be ‘how do we educate the civil service into delivering that’, but you know, in all the discussions I’ve had so far, I think they’re up for it.
“And also I think there’s an increasing recognition now that, we can’t go on like this. The grotesque levels of regional inequality is not acceptable, and it won’t be accepted anymore.”
Of the Treasury’s view on his rebalancing plans, he added: “The impression I’m getting is that actually there’s a new generation that’s gone in there now that are really up for this.
“And I think there’s an acknowledgement that this is needed, and also acknowledgement of, I think, the mistakes of the past and the need to learn some lessons.”
A ‘bank of the north’ would also operate as an arm of his planned regional investment banks, to be created on a model similar to that used in Germany, providing capital to small businesses in particular.
Asked whether such expenditure would still be possible were the UK to leave the EU without a deal, he said that would simply mean Labour would have to ‘invest even more’.
“Our problem at the moment… it isn’t just Brexit, but Brexit is obviously a factor: business investment is stagnating,” he said
“We’ve got some of the lowest levels of state investment, public investment, in Europe. So our economy is stagnating.”
Mr McDonnell also brushed aside the Conservative view that his spending plans would bankrupt the economy, adding that he had drawn up his plans with the help of world-leading economists including Joseph Steglitz.
“The Tories have got a bloody cheek. Between them in this last three weeks, £100bn of expenditure, unfunded, no funding source whatsoever,” he said of various pledges made by Boris Johnson and Jeremy Hunt during the Conservative leadership race.
“They’ve made me look like a fiscal moderate. £100bn! And not a single penny where it’s coming from.”
Manchester Evening News, 7 July, Jennifer Williams