The North East - one region, two systems

One country, two systems’ is the constitutional system that governs China, allowing Hong Kong to operate a successful capitalist economy. In the North East we are now ‘One Region, Two Systems’.

This week marks 100 days since the Tees Valley became a devolved area, with the election of a new Mayor, Ben Houchen, and the transfer of money and powers devolved under agreement with the Government. So far it has been a tremendous success. The Mayor, a Conservative, has worked constructively with the Labour leaders of local authorities and business is responding to devolution with optimism and confidence.

‘I told you so’ is not a very constructive point, but for those leaders elsewhere in the North East, who botched their devo-deal, it is a fair point. As the then Chair of the Institute of Directors and as one of many voices in private business, I was very public in urging North East local authorities to get on with striking a deal and being in phase one of devolution along with Liverpool, Manchester and Tees Valley. Now it is time for some reckoning, facts tell a positive story so far. In Tees Valley since May: 

• Private business has announced the creation of 1,300 new jobs  
• £240 million of private sector investment has been announced
• £200 million investment has been secured from a landmark deal with Teesside Pension Fund
• £7.5 million ‘Routes to Work’ scheme begun to help 2,500 of the most disadvantaged
• £1.5 million Apprenticeships Fund underway
• New Mayoral Development Corporation secured and about to start work
• Negotiations underway to bring Teesside Airport under local control

The best thing about the money coming to Tees Valley is that it does not add to the overall tax burden of the country. This is devolved money that was taken by Government in taxes and administered by Whitehall. The devolution deal cuts out the central bureaucracy, with one Mayor and five Council leaders deciding how the money is spent. The result is more money for the frontline and less for the bureaucratic machine. This is an important point because our country still has to live within its means.

I returned from a holiday in Greece this month. When I hear media outlets and opposition politicians casually use the term ‘austerity’, I think they should see the results of real austerity there. Years of public deficits led to the Greek debt crisis which caused bail outs and loans from international bodies. These finance deals came with strings attached and interest to be paid. The result is seen everywhere that the public sector is involved. The airports are chaotic; where we landed, 1980’s TV monitors showing public notices were broken, baggage conveyor belts didn’t work and not enough staff were available to load aircraft quickly. On the roads, white lines had not been repainted resulting in dangerous junctions. I talked to a teacher who told me her salary was less than 1000 Euros (£900) a month. With VAT at 24%, the black economy is thriving. Renting a car on a Sunday I was ushered into a bar to complete the paper work because I was told ‘wicked tax collectors’ were monitoring the openings hours of the office to calculate business income. Three restaurants I visited would not take debit cards, only accepting cash.  

When we complain about austerity, we should be pleased we don’t have to endure the hardships of Greece. I seldom hear the virtues of free enterprise, the means of generating wealth, being discussed by politicians. Their minds seemed pre-programmed to boast about what they are spending with the media happy to play along with a narrative about cuts and austerity as the root cause of any problem.

Educators also need to come out of their bubble, a professor at Newcastle University was writing in the Journal this month about the Northern Powerhouse and making ridiculous and partisan assertions.  He also castigated the idea of Freeports, suggesting a North East Freeport would be a ‘recipe for low wages’. What nonsense. Freeports are as old as time. In Greece I visited the island of Delos, in 167 BC the island developed as a Freeport and the resulting commercial activity helped it become one of the richest cities of ancient Greece.

After Brexit, Tees Valley wants a Freeport. It could be used to attract industry, it could be home to manufacturing finishing shops - used to add imported components to UK manufactured products or visa versa, then re-exporting them without taxes being levied. A North East Freeport, or Free Trade Zone, on the River Tees could be one of the biggest Brexit boosts to our economy. The Journal’s academic columnist should look for more evidence, I suggest he reads the paper on this matter by North MP Rishi Sunak published by the Centre for Policy Studies. He also could look at ‘International City’ in Cheju, Korea, or one of the 100+ free zones in the USA, many of which attract motor manufacturers.

I keep reading gloom about Brexit, with overly pessimistic interpretations of key data. But my own experience, based on talking to real businesses and on the surveys of organisations like the Entrepreneurs’ Forum, is that there is relative buoyance in the economy. Growth has slowed a bit, but the UK is still out performing France, Italy and Japan. Furthermore, unemployment has now fallen so much that – thankfully – the North East is no longer the number one unemployment blackspot of Britain.  

This one region with two systems has a great deal of good going for it. It is time that the positive stories seen in the business pages of this newspaper were acknowledged and talked up by the politicians and commentators that dominate the news.