The Northern Way is almost two years old. So how is it doing? And where should it go? I’ve just seen the Northern Way up close, after chairing conferences in Bolton and Sheffield. And the Centre for Cities is working closely with a number of cities and towns in the North, so we have a unique perspective.

The Northern Way is all about making the case for investing in the north – in skills, jobs and enterprise. It’s a plan for the north to grow better and faster, to bridge the £30bn output gap between the north and the English average.

After almost two years, it’s time for the Northern Way to move beyond process and focus on delivery. We need to tailor the annual £60bn of central government funding more effectively to the needs of the North. That will involve some difficult choices. Can the north use the Northern Way to target mainstream funding more effectively? Or will it resort to jam-spreading?

Some big issues stand out. Skills are a key part of that output gap. But is the Level 2 target right for all of the north’s cities? How can we give them more flexibility to shape their own labour markets?

Enterprise is also key. But it’s not all about start-ups. We need to focus on growth companies too. Government policy has been too preoccupied with a headcount of start-ups.

Transport features heavily in the business plan. But there are too many bids in there. Manchester Airport is the north’s main airport. So let’s make it easier for all of the north to use it. Inter-city connectivity is key, especially between the cities at the heart of the Northern Way – Liverpool, Manchester and Leeds. So the Northern Way must prioritise improving the M62 corridor.

Governance is vital to delivering all this. But the current arrangements are far from ideal. Big city-regions like Greater Manchester need more financial powers to raise their own revenues, and more flexibility to spend mainstream funding – on transport, skills and regeneration. And local authorities need incentives to work together more effectively, across political boundaries.

The Northern Way should set its sights on the comprehensive spending review in 2007. But the CSR will be tight. So we have to be realistic. Central government cannot fund everything that the North wants. Nor should it. The public sector is already big enough in the North, with public spending around 50 per cent of the total economy. Mainstream public funding needs to attract more private investment.

Finally, Whitehall needs to re-engage with the Northern Way. After lots of early commitment, ministers seem to be focusing on other things. This is a long haul project that requires constant support from the centre. Without that, there’s a risk that the Northern Way will lose direction and confidence.

So I’d like to see ODPM engage properly with other departments, RDAs, local authorities and business about how to promote growth in the north. Let’s have less process, and more action.

Dermot Finch is Director of Centre for Cities.