Devolution deal for North East scrapped by Government after councils vote against plans

Mr Javid said he was disappointed that four of the seven councils to form a planned North East Combined Authority - Durham, Gateshead, Sunderland, and South Tyneside - voted against the deal.

He insisted they would have received guaranteed investment of more than £1 billion and powers over transport, skills and regeneration.

Legislation to devolve the powers and enable 2017 elections for a North East mayor has now been shelved.

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"It is with regret that we have therefore withdrawn the legislation that would have brought this deal to life, which means local people will miss out on over £1 billion of investment, and new powers on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

In response to the news, Coun Paul Watson, chair of the North East Combined Authority and leader of Sunderland City Council, 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.”

Simon Hanson, North East Development Manager of the 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.”