News story

Long term economic plan for the North East announced by Chancellor

Jobs, transport, manufacturing, exports and culture are at the heart of the six point long term economic plan for the North East.

• From: HM Treasury and The Rt Hon George Osborne
• Published: 27 February 2015

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Chancellor today (27 February 2015) set out his six point long term economic plan for the North East showing what has been delivered, what is underway and what more can be done to build a Northern Powerhouse that enables the region to reach its potential as a driving force in the UK.

In a speech at Nifco in Stockton, the Chancellor set out the detailed plan as part of a day long tour of the region.

The plan aims to:

1. raise the long term growth rate of the North East to at least the forecast long term growth rate of the whole UK by building a Northern Powerhouse – adding an extra £6 billion to the North East economy in real terms by 2030, equivalent to over £2,000 per person
2. create 50,000 new jobs in the North East by backing the core strengths of the local economy like chemical innovation and exports
3. deliver £4.5 billion investment in transport in the North East, the largest in a generation, including £2.7 billion for the Intercity Express Programme, developing plans for 140mph trains from Newcastle to York which, combined with a potential HS3 scheme, could cut 35 minutes from journeys between Newcastle and Manchester by up to a quarter, improved services and new trains on northern rail routes, and £1 billion for roads in the North East, enabling transformational upgrades to the A1. This also includes a new review into support for regional airports like Newcastle and Durham Tees Valley that could be affected by Air Passenger Duty devolution
4. build on the North East’s strengths in science, chemicals, manufacturing and exports, by increasing government support for inward investment and trade, backing the chemicals industry through new proposals from the Centre for Process Innovation, extending the successful Tees Valley Energy Enterprise Zone and establishing a new health science UTC in Newcastle promoting science and IT skills
5. boost tourism and the rural economy in the North East to attract an additional 150,000 overseas visitors each year with new investment for the iconic Lindisfarne Castle, Hadrian’s Wall and the Captain Cook Museum
6. devolve greater powers to the great cities and counties of the North East - by continuing work with the North East combined authority on devolution proposals and agreeing in principle to a skills devolution with the Tees Valley combined authority once it has been formed

There are no quick fixes to achieving these important goals, so the Chancellor is also setting out a specific timetable to deliver the key concepts of this plan over the five years of the next parliament, and the following decade (see details in timeline for action). As important next steps in the plan to build a Northern Powerhouse, the Chancellor announced a number of new measures to improve transport, back the chemicals industry, science and innovation, and improve quality of life in the North East:

• ensure that the North East gains the full benefit from High Speed 3 by looking at the case for providing the infrastructure needed to allow the new East Coast InterCity Express trains to run at 140mph, which could cut journey times between Manchester and Newcastle by up to a quarter
• launch the Invitation to Tender for the new Northern and Trans-Pennine Express franchises which will deliver 120 new train carriages, replacing Pacers by 2020, and significantly improve local train services
• launch a review of support for regional airports affected by APD devolution, to be published by the summer, examining the case for devolution and variation of APD rates within England and the provision of aid for regional airports
• invite the relevant local authorities to provide a business case for future investment in the Tyne and Wear Metro, and feasibility studies into improvements to roads in south and east Middlesbrough
• expanding the Tees Valley Enterprise Zone to enable it to expand its operations into oil and gas decommissioning
• announce a new University Technical College in Newcastle which will specialise in information technology and healthcare science which will have capacity for 600 students
• announce £1.4 million through the Employer Ownership of Skills Fund to support Nissan in creating the skills base needed to build its next generation of premium infiniti model in the UK, supporting 1,742 staff. Nissan will match this funding with another £1.4 million
• establish the North East as the world leader in chemical formulation technology and development by welcoming the Centre for Process Innovation’s bid for a new bio refinery and continuing to back its new and innovative projects following the £28 million pledged to the Centre at Autumn Statement 2014
• announcing that the broadband connection voucher scheme, which has been available in Newcastle since last year will be extended in Sunderland and Middlesbrough.
• £1.2 million of support for exports and inward investment in the North East with a series of new trade missions
• provide £1.2 million to the National Trust to enhance Lindisfarne Castle
• provide £400,000 of funding to promote tourism around Hadrian’s Wall ensuring dedicated bus services are able to continue improving access to the World Heritage Site and its attractions, as well as a further £500,000 to allow a new section of the Hadrian’s Wall World Heritage Site to be displayed to the public along with the recently discovered nearby Roman bath house at Wallsend
• improve quality of life across the region by supporting the construction of up to 6,000 new homes and improve educational outcomes so that over 24,000 more pupils attend outstanding schools
• support the rural economy in the North East by encouraging the region to bid for new Food Enterprise Zones and for funding from the £70 million Agri-Tech Catalyst

As both the Prime Minister and Chancellor have set out clearly, the only way for the UK’s recovery to be truly sustainable is for it to be truly national. While the challenge is significant, so is the prize ahead. By pursuing this plan the Chancellor aims to achieve real outcomes for the people of the North East who have seen the fastest growth in employment in the UK over the last quarter

The Chancellor will be visiting a variety of businesses and institutions across the North East to hear how the government’s long term economic plan is delivering for them and what more can be done to support the region.

Chancellor of the Exchequer, George Osborne said:

Our long term economic plan for the North East aims to build further on our vision of a Northern Powerhouse, to ensure that we have a truly national recovery. The North East is growing and creating jobs, and on many measures is doing so more quickly than other parts of the country.

The challenge now is to sustain that which is why I am here today setting out our long-term plan to create 50,000 new jobs, and boost the North East’s economy by an additional £6 billion

Further information

Timetable for Action – Implementation in the North East 2015-2030

2015

Productivity and employment

• In the £40.6m North East growth deal expansion announced on 29 January, Government committed to:
  • help the North East LEP with the infrastructure required to provide support to investors and supply chain companies at the site adjacent to Hitachi Rail Europe
  • support the development of Dun Cow Quay in Blyth and the regeneration of South Shields Town Centre through discounted Public Works Loan Board borrowing. These projects will provide 25,000 square feet of new commercial workspace in Blyth and a high quality bus and metro interchange to improve the public transport connectivity of South Shields Town Centre
  • funding for a Newcastle Life Sciences Incubation Hub - lab and office space to support businesses in life sciences and related sectors
• Through the £13.9 million expansion of the Tees Valley Growth Deal, announced 29 January, government will be :
  • investing in infrastructure to unlock a key employment site on Darlington’s Eastern Urban Fringe
  • supporting the Tees Valley LEP in the construction of a roundabout to connect the main highway to South Bank Wharf and open up access to the site which offers commercial potential for oil and gas rig decommissioning
  • investing in the Skelton Industrial Estate –a primary commercial location in East Cleveland – through the provision of road access and utilities to support the development of the estate
  • investing a skills programme to support key growth sectors in advanced manufacturing, low carbon, oil and gas, digital and logistics and investment in a Teesside Advanced Manufacturing Park Technology and Research Centre – the creation of flexible research and development space for SMEs

Transport

• government will publish the Invitations to Tender for the Northern and TransPennine rail franchises in early 2015, and will specify a substantial package of upgrades including better services and, on the Northern franchise, new trains and phasing out of the outdated Pacer trains by 2020
• government’s study on achieving 140mph trains on the East Coast Main Line will include the section between York and Newcastle – providing faster links with a potential HS3 scheme and therefore dramatically improving both north-south and east-west connectivity. With 140mph trains on the East Coast Mainline and HS3, travelling from Manchester to Newcastle could be 25% less than now. This could also take 16 minutes off the journey time from Newcastle to London
• nexus has published Metro 2030, its long term strategy for future investment in the Tyne and Wear Metro – including new rolling stock and potential extensions to the network. The government is inviting Nexus to submit ahead of the next Spending Review a business case setting out its costed proposals for investment
• subject to final approval, construction of the Morpeth Northern Bypass will begin in Spring 2015 relieving traffic congestion in Morpeth and improving accessibility to the A1 in all directions. The works will also provide access to a proposed mixed development, on the St George’s hospital site, creating employment and residential housing
• government invites local authorities to conduct feasibility studies for schemes to address congestion on local road networks to the south and east of Middlesbrough
• initial HS3 proposals are due in March 2015 in the interim report of the Northern Transport Strategy
• new East Coast franchise, starting in March 2015, will benefit all passengers between London and Edinburgh, with upgraded train interiors being introduced from 2015 to 2017
• £600 million Local Sustainable Transport Fund programme 2011-2015 will shortly be coming to a close, with 94 out of its 96 schemes delivering improvements to cycling infrastructure. £30.7 million has been invested in the North East where schemes have delivered schemes to help grow the economy and encourage use of affordable and sustainable transport
• during 2015 we will see continued construction of cycling infrastructure following unprecedented investment in the government’s cycling programme. With £94 million funding from the government invested in 8 cities (£77 million) and 4 national parks (£17 million) through the Cycling Ambition Grants to transform cycling and £54 million match funding from the local authorities, the total investment is £148 million
• for the North East this includes £5.7 million for Newcastle which is delivering a scheme that will link employment and training opportunities to new housing developments in Newcastle and to existing communities where people are currently least likely to cycle. When finished, Newcastle will have a network of seven major cycle routes across the city making the best use of existing infrastructure and linking in with the major improvements currently underway in the city centre. This government investment will be supported by an Active Travel Centre where people can go for cycle maintenance, parking and information. Recognising the potential for cycling, almost a million of public health funding in Newcastle is also being invested in this initiative
• on 27 November 2014, the government announced an additional £114 million to continue funding schemes that will deliver against the programme’s original objectives of increasing levels of cycling, and deliver against the strategic objectives. The funding will be invested in cycling infrastructure across the country. An announcement on how the funding will be distributed is anticipated shortly
• North Eastern LEP to receive £54 million of Local Growth Funding with £23 million allocated to transport schemes, including improvements to Newcastle Central Station, where a new southern entrance is planned to give access to the Stephenson Quarter, and the Metro Station is being refurbished

Science, manufacturing and exports

• government will lead a series of trade missions to promote the North East’s exports overseas, and attract more foreign investment to this part of the country
• Centre for Process Innovation (CPI) is developing a bid for a ‘bio refinery centre’
• government will extend the Tees Valley Enterprise Zone. This will enable the EZ to exploit its existing strength in renewable industries, access to heavy manufacturing in the region, and connections to national and global markets to become a national leader in the oil and gas decommissioning sectors, the market for which from North Sea platforms has been estimated at £1 billion between 2013-2018
• £14 million over 5 years was committed in 2014 to the Graphene Open Access Innovation Centre which will be an addition to the Centre for Process Innovation (CPI), Sedgefield. This will provide SMEs with access to the cutting edge equipment necessary to research and develop novel graphene products
• £20 million was provided to the National Ageing and Innovation Centre at Autumn Statement 2014. Through new facilities, built on a brownfield site, the centre will provide collaboration, demonstration and testing facilities to develop novel products and services which will optimise health and wellbeing for the ageing population
• £28 million has been committed to the High Value Manufacturing National Formulation Centre, which is an addition to the Centre for Process Innovation (CPI), Sedgefield
• government’s rural broadband programme has seen £36 million of public money invested in the North East of England, with over 70,000 more premises now able to access superfast services. £10 million has been provided for trials of new technologies and approaches which could help reach the most remote premises. One trial will start in the South Tyne Valley in Northumberland shortly
• Newcastle is one of the UK’s 22 Super Connected Cities, and the broadband connection vouchers scheme is available in the city, providing grants of up to £3000 for businesses and social enterprises in the region to get faster and better broadband connections
• broadband connection voucher scheme will now also be available in Sunderland and Middlesbrough from 1 April
• BT will begin trialling their ultrafast G.Fast technology, which can provide speeds of up to 500mps, in Gosforth in the summer of 2015
• first of two 50MW energy from waste plants being built by Air Products will be complete this year. Government has supported this facility with a 20 year innovative Power Purchase Agreement

Regional infrastructure, education, culture and tourism

• £1.2 million funding to the National Trust to protect and preserve the 16th century Lindisfarne Castle
• government will provide £500,000 to the Captain Cook Birthplace Museum for the creation of a new interactive exhibition offering a wide range of educational and visitor experiences
• Hadrian’s Wall is one of the most visible international tourism assets of the region attracting over 46m visitors in 2012 and generating over £2.28 billion spending. The government will provide £400,000 of funding to promote tourism around Hadrian’s Wall ensuring dedicated bus services are able to continue improving access to the World Heritage Site and its attractions, as well as a further £500,000 to allow a new section of the Hadrian’s Wall World Heritage Site to be displayed to the public along with the recently discovered nearby Roman bath house at Wallsend
• as part of the North East Growth Deal announced on 29 January 2015, the government committed to:
  • providing support for a National Centre for Healthcare Photonics to develop and commercialise photonics based therapies. The facility will be led by the Centre for Process Innovation, part of the High Value Manufacturing Catapult
  • upgrading the facilities at Northumberland College to improve skills levels and support economic growth in key sectors such as advanced manufacturing, renewables and ICT.
  • investing in Newcastle Gateway 24/7 Centre – a new entry portal to the college to allow increased vocational resource workspace and provide a new library and learning centre
  • Investing in the Sunderland Enterprise and Innovation Hub. This will comprise the first ‘Fab Lab’ in the North East, incubation spaces and workshop, office and laboratory space for manufacturing, creative and science-based businesses
  • government has driven up educational standards in the region through its academies programme, with 7,138 more students attending outstanding schools in August 2014 than in 2010. Over this parliament, government has opened 182 academies, 7 free schools, and 2 studio schools in the North East. To continue to drive up standards, there are another 16 academies due to be established shortly in the region. There are also another 2 free schools and one University Technical College due to open shortly in the region, which will have the capacity of approximately 1,660 additional school places between them
  • government will provide £3.3 million for the Regional Schools Commissioner operating in the North East to support the very best academy chains to expand into local authorities with the weakest educational provision.
  • homes across the country will be better protected from floods thanks to an unprecedented six-year £2.3 billion flood defence programme, announced at Autumn Statement. Communities in Greatham South, Lustrum Beck and Monkton Village in South Tyneside will be amongst the main beneficiaries. The new flood defence scheme in Greatham South and Port Clarence, just one of 116 schemes in Northumbria in the programme, is worth over £15 million, of which £8.1 million is Grant in Aid in the next 6 years. Some examples of the other schemes funded in the first two year ‘construction’ phase in Northumbria include:
  • over 120 properties will be protected from non-tidal river flooding as a result of a new flood defence scheme at Lustrum Beck
  • £4 million is set to be invested in flood defence schemes that will protect 750 homes in Monkton Village
  • approximately £15.2 million is expected to be spent in the financial year 2015/16 as part of flood risk protection programmes in the North East
  • government’s commitment to building new homes has already seen:
  • Affordable Homes programme invest £191 million to deliver 9,300 affordable homes in the North East
  • over 4,400 households have been supported into home ownership in the region through Help to Buy
  • Get Britain Building scheme has committed to an investment of £26 million which enabled work to start on 524 new homes in the North East
  • HCA Land Programmes have invested £113 million to support local economic growth and regeneration in local communities, and has seen work start on 1,689 homes
  • Builders Finance Fund, which has shortlisted schemes worth £1.4 million covering 20 units, will see the first starts on site during 2015
  • Local Growth Fund has shortlisted projects bidding for £6.8 million with the potential to unlock up to 706 units. The first schemes are expected to go to contract in 2015/16

2016

Transport

• new Trans-Pennine Express franchise starts
• further Local Growth Funding of £124 million, for future transport schemes such as improvements to the A1094/A185 “The Arches” Junction, Sunderland Strategic Transport Corridor Phase 3, and A19/A1 Corridor Junction improvements, start to become available for delivery between 2016 and 2021
• further investment in roads with the A1 Coal House to Metro Centre scheme completing. This involves widening the A1 south of Gateshead from two to three lanes between junctions 67 and 71, plus new parallel link roads between junctions 68 and 69 to remove traffic from the main carriageway
• in addition the A19 Coast road scheme will begin, with replacement of the junction between the A19 and the A1058, allowing free-flowing movement for traffic along both the A19 and A1058. This provides uninterrupted access to the northern end of the recently-widened Tyne Tunnel. Together with the A19 Testos, this scheme raises the A19 to expressway standard from Yorkshire to north Newcastle

Science, manufacturing and exports

• second of two 50MW energy from waste plants being built by Air Products will be complete this year. Government has supported this facility with a 20 year innovative Power Purchase Agreement
• High Value Manufacturing National Formulation Centre is expected to formally open in 2016
• Phase 1 equipment procurement and installation is expected to be complete at the new Graphene Open Access Innovation Centre which will provide SMEs with access to the cutting edge equipment necessary to research and develop novel graphene products

Regional infrastructure, education, culture and tourism

• approximately £7.9 million is expected to be spent in the financial year 2016/17 as part of flood risk protection programmes in the North East

2017

Transport

• further investment in roads with the A1 Leeming to Barton scheme completing. This involves upgrading the A1 between Leeming and Barton to three-lane motorway standard; connecting together the two sections of the A1(M) in the north of England and completing the motorway link from the Teesside and Tyne and Wear to the rest of England

Science, manufacturing and exports

• superfast broadband will be available to 95% of premises

Regional infrastructure, education, culture and tourism

• Northern Futures UTC in Newcastle sponsored by the University of Sunderland and Accenture, in partnership with HP, Kromek, the Academic Health Science Network and two local NHS Trusts is due to open in 2017. The UTC will specialise in information technology and healthcare science and will have a capacity for 600 students
• approximately £5.6 million is expected to be spent in the financial year 2017/183m as part of flood risk protection programmes in the North East
• 31 schools are due to be rebuilt as part of Phase one of the Priority School Building Programme in the North East by 2017, improving schools buildings for around 21,443 children

2018

Transport

• InterCity Express Programme trains start service on the East Coast Main Line - the Intercity Express Programme represents a £2.7 billion investment into new rolling stock, maintenance depots including a full maintenance regime serving the East Coast Mainline, increasing the number of seats during morning peak into Kings Cross by 18%. Passengers will benefit from more reliable services, more seats, increased luggage space, faster journey times (from 2019), and improved wi-fi and mobile coverage.
• capacity improvements at Leeds, East of Leeds, Huddersfield and Bradford (indicative).
• platform extensions to allow longer trains to operate on a number of routes in West and South Yorkshire into Leeds and Sheffield will be complete.
• introduction of open plan ticketing making staff at visible at stations (including York, Newcastle).

Science, manufacturing and exports * Phase 2 equipment procurement and installation is expected to be complete at the new Graphene Open Access Innovation Centre which will provide SMEs with access to the cutting edge equipment necessary to research and develop novel graphene products.

Regional infrastructure, education, culture and tourism

• approximately £2.4 million is expected to be spent in the financial year 2018/19 as part of flood risk protection programmes in the North East

2019

Transport

• as we near the end of 2019, many of the Roads Investment Strategy schemes will be underway, including the A1 North of Ellingham enhancements, narrow lane widening in Newcastle on the A1 Scotswood to North Brunton and online widening of the A1 south of Gateshead to three lanes. In addition, schemes will begin to enhance capacity on the junction between the A19 and the A1290 in Sunderland and technology enhancements on the A1(M)/A1 and A19.

Regional infrastructure, education, culture and tourism

• approximately £2.9 million is expected to be spent in the financial year 2019/20 as part of flood risk protection programmes in the North East.

2020

Transport

• upgrades will commence on the A1 Morpeth to Ellingham with 13 miles of upgrades to dual the carriageway linking the Morpeth and Alnwick bypasses with the dual carriageway near Ellingham, to create a continuous, high-quality dual carriageway from Newcastle to Ellingham.

Science, manufacturing and exports

• Phase 3 equipment procurement and installation is expected to be complete at the new Graphene Open Access Innovation Centre which will provide SMEs with access to the cutting edge equipment necessary to research and develop novel graphene products.

Regional infrastructure, education, culture and tourism

• approximately £8.2 million is expected to be spent in the financial year 2020/21 as part of flood risk protection programmes in the North East.

2021-2030

Employment and productivity

• LEPs in the North East will receive the last tranche of the funding agreed through Growth Deals. Some of the North East LEP’s allocation since 2015/16 will have been spent on the creation of development commercial land with quay frontage within the Swans site of the North East Enterprise Zone. Road and junction improvements at Ingleby Barwick will have been made by Tees Valley LEP to open up key housing sites.

Transport

• stations (Newcastle, Sunderland, Middlesbrough, York, Leeds) will be served by new high speed Intercity Express Programme trains.
• scheme has been developed to upgrade the A1 to motorway standard between A1(M) junction 38 and junction 40. This will mean that the whole of the A1 in Yorkshire has been upgraded to motorway standard, providing traffic between the North East and the Midlands with an alternative route avoiding Sheffield and Leeds.
• between 2015 and 2021 the North East LEP will have invested at least £38 million of its share of the Local Growth Fund, in transport improvement programmes, including 9 strategic projects such as the refurbishment of Newcastle Central Metro Station and work on the Northern Access Corridor.
• Tees Valley LEP’s Growth Deal includes investments of at least £12.8 million for transport projects, including: remodelling the station in Darlington, improving the A689 Wynyard Road, and creating a new road to open up access to the south side of Durham Tees Valley Airport.

Science, manufacturing and exports

• between 2015/16 and 2020/21, LEPs will have invested all of the money awarded through the Local Growth Fund in priority local projects. The North East LEP chose to invest in Rural Growth Network infrastructure – a project to plug infrastructure gaps in key rural market towns and to grow the innovative, community-led network of rural enterprise hubs to support rural business growth.
• Tees Valley LEP will have spent £5.8 million of the Local Growth Fund on the capital funding element of a Business Growth Hub programme to provide a range of coordinated funding and advice services to business.

Regional infrastructure, education, culture and tourism

• by the end of 2021, LEPs will have received all of the government investment committed through Growth Deals. The North East LEP will have invested £22.4 million of its share of the Local Growth Fund in five projects to increase skills levels in key sectors including a £9.9 million in Newcastle College Low Carbon Tech Centre.
• Growth deal (education): Tees Valley LEP is also focused on skills. Their Growth Deal will have invested £2.4 million in Redcar and Cleveland College for skills initiatives and specialist accommodation for an Oil and Gas academy and will have provided £8.3 million in support to Cleveland College of Art and Design in Hartlepool.
• blocks in 16 schools in this region will have been rebuilt or had their condition needs addressed as part of phase 2 of the Priority School Building Programme.

Treasury analysis of the benefits to the North East’s economy

To calculate the boost in the North East’s economic output if it were to grow at the same rate as the UK as a whole between now and 2030, we used national statistics from the Office of National Statistics (regional gross value added (GVA) and National population data) along with the Office of Budget Responsibility’s economic growth forecasts.

Regional economic output is measured annually by the ONS. The published data estimate the GVA in each region in nominal prices with data available from 1997 to 2013. Therefore this data captures both changes in price and volume over time. The OBR’s forecast period is up to 2019 after which we assume that the North East grows in line with UK trend growth.

Between 1997 and 2013 the North East grew at a slower pace than the UK as a whole. The average annual growth rate of the North East’s GVA was 3.8 per cent which was below the UK’s average annual growth rate of 4.2 per cent over the same period.

If between 2013 and 2030, the North East was to grow in line with the OBR’s forecast for the UK average growth in nominal GDP, its GVA would be £49,065 million higher in 2030 than in 2013.

If over the same period, the North East was to continue to grow at its average rate of growth seen between 1997 and 2013, its nominal GVA would only be £40,494 million higher. The difference between the two – equating to the potential benefit of growing in line with the rest of the UK – is £8,571 million.

To calculate the real, inflation adjusted figures, we undertook the same calculation, but also applied the national GDP deflator across the regions (regional GVA deflators are not published) to give constant prices at 2013 levels).

If by 2030 the North East was to continue to grow at the same rate as between 1997-2013, the North East’s GVA would grow by £15,843 million. If instead it is able to grow at the same rate as the UK as a whole, it would grow by £21,953 million. The difference between these two is £6,110 million.

The ONS’ regional population projections were then applied to estimate the per capita measures. This showed that growing at the same pace as the rest of the UK would be equivalent to an additional £3,007 per person in nominal terms or £2,114 in real terms.

Employment

To illustrate the potential increase in the level of employment if the region maintains its present rate of employment growth, we extrapolated the monthly average growth rate since the election in 2010.

Latest labour market statistics are available to the three months to December 2014 . Employment has grown by 3.9 per cent over this time period, equivalent to a growth rate of 0.07 per cent per month. Extrapolating this growth rate over the 4 months left in the current parliament and the five years (60 months) of the next parliament gives an employment level of 1.19 million, an increase of 52,367 on the current level.

Published 27 February 2015