A DEVOLUTION deal for the North-East is now “off the table” after the Government said it was shelving legislation to transfer powers to the region.

Communities Secretary Sajid Javid confirmed a Commons debate paving the way for the election of a North-East Mayor had been cancelled and the legislation withdrawn.

It follows a meeting earlier this week at which the seven councils which make up the North East Combined Authority voted 4-3 against signing up to the devolution deal on offer.

Council leaders have repeatedly expressed reservations about the detail of the Government’s offer, particularly over the issue of funding for the region in the wake of the Brexit referendum vote.

Mr Javid said he was “very disappointed” at the vote against the deal, but would respect the decision and added that the Government “stands ready to work with those local councils in the North-East that share its aim to boost jobs and opportunities”.

Work is continuing on a separate devolution deal for the Tees Valley.

The proposed deal for the North-East would have given the region devolved powers over transport, regeneration, planning and skills as well as £30m in extra funding each year.

Controversially, it would have also seen historic elections in 2017 for the region’s first directly-elected mayor.

The region’s council leaders agreed in principal to proposals from the then Chancellor George Osborne in October 2015, signing an agreement at Gateshead in a blaze of publicity.

After protracted negotiations with Whitehall over the detail, councils were set a Government deadline to sign up to the deal but, during a meeting in Sunderland on Tuesday, voted by a narrow majority not to accept the terms of the offer.

The vote produced a North-South split within the region, with Durham, Gateshead, Sunderland, and South Tyneside all voting against the deal, while Newcastle, Northumberland and North Tyneside were in favour.

Mr Javid said: “Local leaders in the North East Combined Authority have made a clear decision not to proceed with this ambitious and far-reaching devolution deal for their region – while I am disappointed, it is a decision I respect and so that deal is now off the table.

“It is with regret that we have therefore withdrawn the legislation that would have brought this deal to life, which means local people will miss out on over £1bn of investment, and new powers on transport, planning, and skills.

“Handing power back to Northerners is a key part of our plans to build a Northern Powerhouse and our focus now will be on working to secure a new agreement for residents in those areas committed to progressing with devolution.”

Cllr Paul Watson, leader of Sunderland City Council and chair of the North East Combined Authority, said: “It is very disappointing that the Government has chosen to end current discussions over North-East devolution in this way.

“Throughout this process, all of the seven council leaders in the North-East have repeatedly and clearly stated their commitment to devolution and to creating a stronger regional economy.

“And, although we were not able to reach a majority agreement to proceed to public consultation at this present time, we have reaffirmed our commitment to working together with the Government to achieve the right devolution deal for our region.

“Leaders in the North-East will continue to fight for our region, to build our economy and create jobs and investment.”

Businessman Jeremy Middleton, who was the only declared candidate to be the North-East’s first mayor, laid the blame for the breakdown at the door of the region’s council leaders.

He said: “This is devastating news for the North-East, our local authority leaders have let us down.

“They have turned down billions of pounds in investment for the sake of their own careers.

“After so many delays it is no surprise that the Government has finally called their bluff."

Graham Robb, Chairman of the Institute of Directors in the North-East, said: “Labour council leaders in the North-East appear to have perfected the art of looking a gift horse in the mouth.

“At least council leaders in Tees Valley got their act together and we will have a devolution deal for the south of the North-East region.”

Ross Smith, Director of Policy, North East England Chamber of Commerce said: “We’re at a loss to understand why, after a year of negotiations, it has not been possible to strike a deal. 

"It’s extremely disappointing and bad news for the North-East and UK economy. We sincerely hope something can be salvaged and will play whatever part we can to help. 

"It’s positive that a deal is going forward in Tees Valley though and we look forward to continuing our constructive relationship with the combined authority there as that’s implemented.”

Simon Hanson, North East Development Manager, Federation of Small Businesses, said: “It is hugely disappointing that the North-East has missed out on the opportunity to get more powers and funding to grow our economy. After a year of negotiating smaller businesses will be at a loss to understand why a deal hasn’t been possible.

“This decision will hold back the North-East and have a detrimental impact on future regional and national economic growth especially with Scotland getting more powers through its devolution deal and a deal progressing in the Tees Valley.

"The North-East has lost the chance to deliver some real clout in growing our economy through tailored solutions like Scotland and the Tees Valley on skills, transport and investment putting it at a huge disadvantage.

“Hopefully something can be salvaged from this for smaller businesses and we’ll continue to work with local Council Leaders and other business representatives in any way we can.”