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Summer Budget 2015: George Osborne adds more detail to Northern Powerhouse plans

5 min read

08 July 2015

Chancellor George Osborne has promised to put the “power into the Northern Powerhouse”, by devolving further powers to Manchester and investing in transport.

Summer Budget 2015: A 500-word summary for the UK business community

With the UK lagging behind international rivals when it comes to spending on research and development (R&D), Osborne has gone into more detail on how the government will be tackling the issue. Compared to the 2.8 per cent of GDP spent on R&D in the US and Germany, and 2.2 per cent in France, the UK maintains a mere 1.6 per cent – which doesn’t meet the agreed European target of three per cent.

These figures come off the back of a Nesta report, which claimed that it would take more than £20bn of additional investment to close the gap. This was echoed by BIS economist Tera Allas who, in a report benchmarking the UK’s Innovation system, said Britain had “a sustained, long-term pattern of under-investment in public and private R&D.

According to Nesta, to generate a Northern Powerhouse Osborne will need to focus that investment on the sort of development and commercialisation spending that is most closely linked to business investment; and look beyond R&D to areas like design and digital skills that are critical for innovation in UK strengths like creative industries.

How to make a Northern Powerhouse

Osborne’s plan to boost the economy by linking northern cities has been touched upon in recent Budgets, where he acknowledged that fuelling science and innovation would be key.

“Durham, Lancaster, Leeds, Liverpool, Manchester, Newcastle, Sheffield and York and more – the north is blessed with world class universities,” he said. “These universities have been at the forefront of the urban renaissance here over the last three decades.”

Furthermore, in his 2014 speech he announced the National Biologics Industrial Innovation Centre in Teeside will make it one of the best locations for life sciences. And the new Materials Innovation Factory at Liverpool University puts Britain at the cutting edge in manufacturing the materials of the future.

“We’re determined to cure the British disease of inventing things but letting others get the commercial benefit from them, with our new Catapult technology centres,” Osborne said. 

He added: “But that is just the start.”

His latest move involves giving train travel a “seamless Oyster-style” ticketing system, as well as setting £30m aside to further boost the project.

Read more from our summer Budget commentary:

The government will be devolving further powers to Manchester, including fire services, children services and employment programmes. Similar devolution is also in the works for Liverpool, Sheffield, Leeds and West Yorkshire. Local authorities will also be given power over Sunday trading hours and allow them to decide how long shops stay open for on that day.

Osborne called this “historic” levels of devolution, and commented that devolution within England has only just begun. He said: “I can also tell the house we are working towards deals with the Sheffield and Liverpool City Regions and Leeds, West Yorkshire and partner authorities on far reaching devolution of power in return for the creation of directly elected mayors.”

The city region centred on Leeds is seeking the most wide-ranging English devolution deal yet, in return for accepting an elected mayor. It is asking for 27 measures, including the right to raise council tax by more than two per cent to fund a new public transport network.

Greater Manchester struck a £1bn devolution deal last year and was handed part control of £6bn of annual health and social care spending.

Osborne promised to boost the economic growth rate across northern England to the national average, which would add £79bn a year to the economy by 2030.