Funding doubts cast shadow on £15bn push for northern revival

A £15bn plan by five of Britain’s northern cities to bury longstanding rivalries and forge an economic revival with new road and rail links has received cross-party political support.

The cities of Liverpool, Manchester, Leeds, Sheffield and Newcastle said their proposals for investment in road capacity, a new high-speed rail link across the Pennines and better access to Manchester airport would create a “connected region” that would challenge London.

But although the One North report received broad support from chancellor George Osborne and the opposition Labour party, infrastructure experts questioned how the £15bn projects over 15 years would be funded. They also said the plan raised serious questions over the balance of spending between Whitehall and the regions.

Asked if he would back the proposals on a radio programme earlier in the day the chancellor said “yes”. But the Treasury later clarified that although this would “inform our thinking . . . it should not be read as a commitment to fund £15bn”.

The plan comes just months before a general election in which the Conservatives are worried about losing key northern seats to Labour. Mr Osborne said the public expenditure choice facing the UK was between investment in big infrastructure projects and “continuing to spend money on welfare payments that are not generating a real economic return”.

Labour endorsed the report but said Mr Osborne would be judged by “actions not words”. Although the government launched a National Infrastructure Plan soon after coming to power in 2010, output for the sector fell 5.2 per cent in the first quarter of this year and was 3.3 per cent lower than two years ago.

London and the southeast have received the lion’s share of infrastructure spending in past decades. This has been exacerbated by significant new investments in London such as Crossrail, the new £16bn east-west railway line that is the largest construction project in Europe. According to KPMG, the capital spends as much on infrastructure every two days as Manchester does in a year.

Richard Threlfall, infrastructure partner at KPMG, said: “The amount of money local government has under its control is pointlessly low in Britain so those cities can’t keep up in the UK, much less compete on an international scale.”

The report mentions some projects that have already been commissioned, as well as new ones. The northern hub – an upgrade of heavy rail infrastructure – is due to be completed in 2018 while motorway improvements commissioned by the Highways Agency have also been approved. Proposals for a new high speed Trans-Pennine railway link – dubbed HS3 – are unlikely to reach the drawing board for several years. They were priced at around £7bn.

Jon Hart, infrastructure partner at Pinsent Mason, said: “At the risk of repeating the same old, same old, where is the funding coming from for this? If we are talking new road or rail links there will need to be committed funding.”

He added that the planning process could be lengthy, particularly for the proposed Trans-Pennine rail route, which passes through an area of outstanding natural beauty and could raise concerns on a par with those being seen over HS2 in the Chilterns.

Despite this, business warmed to the idea. Michael Luger, director of the centre for infrastructure development at University of Manchester, said: “The politics are substantial; it’s about creating a political force in the north. It would make it so much more attractive for businesses to locate in the north if they could draw from this wider skills pool of Leeds, Manchester and Liverpool.”

KPMG’s Mr Threlfall said the project had required the “burying of long-held hatchets” between the five cities. “It’s a huge step forward,” he said. “No one should underestimate the longstanding rivalries that have existed but this is a recognition that their future lies together and that they need to be a counterweight to London.”

The proposals revived calls for more powers to be given to England’s regions and follow a plea last week by Boris Johnson, mayor of London, for £1.3tn to be invested in the capital’s infrastructure.

Local taxes in Britain are equal to just 2 per cent of GDP, compared with 10 per cent in the US, 15 per cent in Canada and 20 per cent in Germany. The Rhein-Ruhr region in Germany has 10 million people spread between five large cities with much faster and more frequent rail connections than northern England, the One North report pointed out.