Our new friends in the north would like to declare an interest

THE NORTH has run up a flag. Last week, 238 individuals and 52 organisations from the north-east of England - including 11 MPs and 4 MEPs - signed a "Declaration for the North". (You can find it on a full page in the current New Statesman.)

The Declaration complains that the region's "massive potential" has been hindered by "neglect and isolation from over-centralised government in London". It welcomes Scottish and Welsh devolution. It demands a Regional Development Agency for the North-east, and "a directly elected Assembly representing the people of the North".

It's the last bit which is new. The call for a development agency is very old. But now, after decades of reluctance, the great and good of the North-east have gone on to call for regional democracy as well. The new Campaign for a Northern Assembly, which issued the Declaration, asks for a referendum "at the earliest opportunity" in the lifetime of this Parliament.

This is a big moment in the transformation of the British state, and in English history. For the first time, an English region has demanded self-government. Those who said that Tony Blair's dream of a decentralised England had no support have been confounded. But the sheer urgency and radicalism of the Declaration may be more than the Government bargained for.

The North-east was not always so idealistic. The old Labour power cliques of Tyneside, the soil in which T Dan Smith and John Poulson once flourished, wanted more room and money to do as they pleased - but no nonsense about democracy. Exactly 20 years ago, I went to a mighty gathering of bigwigs in Newcastle which had met to condemn Labour's proposals for devolution for Scotland and Wales. The Scottish and Welsh people were "tourist gimmicks", proclaimed one local councillor, and devolution would give them an unfair share of resources.

Afterwards, I talked to James Gardner, the tough and likeable chief executive of Tyne & Wear. I asked him if he really hated Scottish devolution - or secretly wanted it for the North-east as well. "What we'd like, " he answered, "is a development agency and a block grant with about 10 per cent for me to play with and allocate how I like."

And an elected assembly?He didn't want that, he said; nobody wanted that. Instead, the agency and the block grant could be put under a strengthened version of the unofficial North-East Development Council. (The NEDC consisted mostly of nominees from the beefiest lobbies in the region.)

Full of virtuous outrage (those were the high-minded Seventies, after all), I wrote in my diary: "What does the North-east (or its ruling clique) really want? It wants power without democracy. It wants to mass together all the nominated boards and quangos under one executive - as long as that executive isn't elected! Then it would demand a block grant for this body and a full-blown development agency under its own direct control but funded from London. The unaccountability of the Scottish Office, which at least is responsible to Parliament and manned by civil servants, pales before this grand vision. I believe it is the most naively dictatorial concept north of Idi Amin's Uganda ... All they really mean [by opposing devolution] is that in the miserable struggle of foundlings round the gruel pot, Scotland has been given a tin spoon while they still have a bone one."

Many of the Labour MPs at that meeting went on to sabotage their own government's project for Scottish and Welsh Assemblies. By doing so, they helped to bring down James Callaghan's administration. And - unwittingly - they opened the door to 18 years of Thatcherite government which, by abolishing regional development grants and killing off most of the coal and steel industries, did more human and economic damage to the North- east than to almost any other region of Britain.

People learn from their mistakes reluctantly - but they do sometimes learn. The new north-eastern spirit, as revealed by the Campaign for a Northern Assembly, is utterly different. They can no longer imagine regional power without regional democracy. The advance of Scotland and Wales towards self-government within the United Kingdom is no longer a threat but an opportunity and model for the North-east to follow. And the signatures on the 1997 Declaration for the North, though still overwhelmingly from Labour or trade-union sources, are punctuated with Liberal-Democrat and Green names. The old one-party fortress overshadowing the banks of the Tyne and the Wear is beginning to open its doors.

The sudden upsurge of the campaign gives the government two kinds of problem. The first is political. Authentic enthusiasm for "English regions" is welcome, confirming Labour's broad constitutional strategy. But the Government has put its regional assembly plans on the back burner since the election, and is concentrating instead on setting up less ambitious Development Agencies.

And it's awkward that enthusiasm for elected assemblies is so patchy. Greater London and the North-east are, so far, the only petitioners. Where is the Campaign for Wessex, or East Anglia? Cities with civic memories can be roused to demand more autonomy. But territorial England, especially south of the Trent, has lived for hundreds of years under tightly centralised government from London, and regional senses of identity are weak. Could England exist as incoherently as Russia, with most of it under "direct rule" but a few regions running themselves as "autonomous republics"?

The second problem is about money. Last week, the Treasury Select Committee prised open one of the gear-boxes of state finance and peered in. It was studying the "Barnett Formula", the system - last overhauled in 1979 - which decides the proportion of UK public spending that goes to Scotland, Wales and Northern Ireland on the basis of "need".

Most of the argument was about Scotland, and familiar enough. Scotland's relative "need" has diminished since 1979; on the other hand, the Scots assume higher standards in education, health care and so on, and it can be argued that they have a right to maintain them. The Government has "kicked into the long grass" suggestions that the formula should be changed. But this is not only to butter up the Scots. It is also because a revision would demonstrate that public spending within England itself is grossly unfair.

The opulent south-east of England is heavily subsidised, at the expense of regions such as the North-east. Everyone knows that the official figures for "identifiable public spending" show only part of the picture. Hidden spending - including the location of defence establishments, state research stations and laboratories, the salaries of the central bureaucracy, even mortgage relief - is concentrated in the South-east, the region which is the true "subsidy junkie" of Britain.

London, although it also contains some of the worst poverty and urban decay in the land, is the core of the problem. Back in 1704, the Scottish thinker and politician Andrew Fletcher of Saltoun asked: " Do you not think the remoter parts of England injured by being obliged to have recourse to London for almost every thing, and particularly for justice? Do you not think them wronged, in that almost all the treasure of England is yearly laid out in this place, and by that means the substance of the other parts exhausted and their rents and revenues diminished?" The Campaign for a Northern Assembly would agree with every word of that.