NORTH-East devolution was in tatters tonight (Tuesday, March 22), after Gateshead Council rejected Chancellor George Osborne’s flagship proposals.

It was last October when Mr Osborne offered to hand powers over economic development and skills, transport, planning and housing, plus a £30m-a-year investment fund, to a new North-East mayor covering County Durham, Northumberland and Tyne and Wear and to be elected in May 2017.

Newcastle, North Tyneside and Northumberland councils have all accepted the offer.

But this morning (Tuesday) Gateshead Council’s Labour cabinet delivered a unanimous thumbs-down to the under-pressure Chancellor.

Leader Mick Henry accused the Government of failing to meet its promises, including fair funding for hard-up North-East councils, and trying to water down the deal, including by rowing back from guaranteeing the £30m fund for 30 years, as originally announced.

“At the moment, nearly everyone has questions,” he said.

“If the Government is serious about devolution, they need to be open minded and to put some effort into it.”

The vote leaves North-East devolution in limbo. Durham and Sunderland will discuss the package tomorrow (Wednesday), followed by South Tyneside on Thursday – before the North East Combined Authority (Neca), which brings together all seven, takes a final decision on Thursday afternoon.

Councillor Simon Henig, leader of Durham County Council and chair of Neca, refused to comment before those meetings.

A Neca spokeswoman said: “Each council and the combined authority is required to reach a decision on whether to sign up to the proposed devolution agreement for the North-East.

“No final decisions will be made until all council cabinets and the Neca leadership board have met.

“It would not be appropriate to speculate on the final outcome until all decisions have been reached.”

A Government spokesman said devolution was a “bottom up” process and it would continue to work with councils that wanted to be part of it “in order to make this historic opportunity for the North-East a reality”.

Political opponents and devolution supporters seized on Gateshead’s decision.

James Ramsbotham, chief executive of the North East Chamber of Commerce, said it was very concerned at the development, which risked leaving a “hole in the middle of the map”, and hoped the process could get “back on track” quickly.

“We are very concerned by this development. Our members have backed devolution because it gives us the opportunity to take control of policy areas where a single national approach has failed to meet the needs of this region.

“The current proposals aren’t everything we ultimately want, but we believe there is much greater chance to get the right powers in place by doing a deal and then building on it – as is happening in Manchester.”

Mr Ramsbotham said the North East should act as a leader to show that devolution could work. 

He said: “With Tees Valley also pressing ahead with devolution, we have a chance to establish this region as the first fully devolved part of England and show how we can take a lead.

“If instead we end up with a hole in the middle of the map, that risks sending a very different message to the rest of the world.”

Conservative businessman Jeremy Middleton, the only person to publicly declare his candidacy for mayor, said he was disappointed but not shocked and Labour had put political self-interest ahead of the needs of the region.

Cllr Jonathan Wallace, leader of Gateshead’s Liberal Democrats, called the decision “completely the wrong one” and “utterly mad”.