Sue Stirling, Director of ippr north, said:

“The report is firm but fair. The critique of existing strategies is well made and rightly declares that an integrated strategic framework with clear priorities is overdue.”

Dermot Finch, Director of the Centre for Cities at ippr, said:

“We agree with this Review. The North East's governance arrangements are not fit for purpose. We are pleased that the Review backs our own recommendations for financial devolution to city-regions and elected city-regional mayors.”

Notes to Editors:

This Territorial Review of Newcastle and the North East was carried out by the Organisation for Economic Co-operation and Development (OECD) over the past year. It was commissioned by Newcastle City Council, One North East and the Government Office for the North East. It is being launched in Newcastle on 21 July.

Summary

1. On the economy of Newcastle and the North East, the Review says:

Lagging economy: The city of Newcastle performs relatively well. And the Newcastle city-region is the growth centre of the North East, with 65 per cent of total regional employment. But the city-region lags behind many other UK and European comparators – on GDP per capita, employment growth, qualification levels and activity rates.

Diverse economy: The city-region has a diversified economy, but without any particularly strong sectors. Manufacturing is still important (14 per cent of employment), with automotives the largest sector. But high tech manufacturing is limited. The services sector has increased: knowledge intensive business services and creative industries have grown considerably, but from a low base.

The Regional Economic Strategy is overly optimistic, not consistent with the Regional Spatial Strategy and contains little strategic prioritisation. There is a high risk it will fail to deliver.

Future investment: The city-region should build on its key assets – its universities, and good natural and cultural amenities. Innovation performance is weak, so investment in radical new technologies should not be a top priority – improving the productivity of incumbent firms through cultivating best practice is more important. It should continue to focus on foreign direct investment and the growth of indigenous firms, job rich sectors and business start-ups. The needs of deprived communities are not well served by current policy and need new approaches.

Transport and skills: Improved connectivity is crucial for the region's competitiveness. Better urban-rural links are essential, and public transport access to Newcastle must be a priority. The region needs a more ambitious migration policy to attract and retain skilled workers while addressing the needs of the low skilled and those not in work.

2. On governance, the Review says:

Regional structures are weak: There is a regional democratic deficit and weak regional leadership. The governance structure is fragmented, for example with 12 organisations responsible for transport. The result is the lack of a clear strategic framework driving investment decisions and interventions.

Regional institutions lack power: The Regional Assembly, One North East and Government Office have limited levers and resources available to them, and lack influence and autonomy. Sub-national governance needs to be strengthened.

Identity problems: there is rivalry between localities and organisations, and current partnership arrangements fail to overcome these divisions.

3. The Review calls for city-regional devolution and elected mayors:

City-region: Strengthening governance capacity at the city-region level is recommended. The city-region level makes sense for housing, transport, economic development and planning.

Executive board: Co-operation arrangements may improve coherence, but are unlikely to result in fundamental improvements.

Elected mayors: An elected city-region mayor is recommended. New strong city-regional governance arrangements should be developed progressively, starting with certain key functions such as transport or housing.

Financial devolution: Reform of the regional/local financial system could be an active lever for change. Financial incentives for horizontal and vertical collaboration may be useful tools in encouraging local authority reform and city-region governance.

The Centre for Cities is an independent urban research unit, based at the Institute for Public Policy Research (ippr). Launched in March 2005, it is taking a fresh look at how UK cities function.