Regional Economic Performance and Imbalances

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Ms Hughes: I am sure that the right hon. Gentleman knows from previous statements by other Ministers that no plans exist at present to review the workings of the Barnett formula. The Government believe that that formula is the best available means of fairly distributing public spending throughout the United Kingdom. It simply determines changes in existing block budgets on the basis of population in the different countries; it does not determine the total allocation for each devolved Administration. Over time—I accept that it may take some time—the formula should lead to relative convergence of spending per head between England and the rest of the United Kingdom. The Barnett formula began when there existed historically different patterns of expenditure, representing the different issues in terms of delivering public services in the different countries.

The Government have allocated sums of money to deal with the relative deprivations and inequalities and the need to regenerate communities to which the right hon. Gentleman referred. That money comes from outside the mainstream public spending blocks. In many instances, the most disadvantaged communities in all the English regions have received that additional money through the neighbourhood renewal fund, the new deal for communities grants and those other special grants specifically targeted at our most deprived localities.

Mrs. Louise Ellman (Liverpool, Riverside): I, too, welcome the Minister's statement, and especially the comment that the great achievements of the Government are only first steps.

I have several specific questions. What Government machinery exists to ensure that all Departments are working towards a regional agenda? Is the Minister satisfied that the Department for Education and Employment is a convert to regionalism and that the budgets of the learning and skills councils are sufficiently devolved to allow regional skills and training needs to be taken into account and fully developed? How does she reconcile the Government's commitment to devolution to the regions with the Arts Council's apparent decision to centralise and abolish its regional arts boards? Does she agree that the powers given to regional chambers, whose increased budgets are to be welcomed, would have greater legitimacy if those assemblies were directly elected, allowing for the retention of voluntary and private sector involvement?

Ms Hughes: My hon. Friend, who has been a strong supporter of and protagonist in the regional agenda, asks several questions. I know that she wants further progress to be made towards directly elected regional governments and that she has been active in supporting that process in her region and in Parliament.

On my hon. Friend's first question, all Departments are expected and, I believe, are striving to ensure that all their policies include a strong regional perspective. One testimony to that is the role of the new regional co-ordination unit, which will pull together regional Government offices. As all Departments are moving towards having representation in those Government offices, that will be a mechanism whereby we can ensure that all Departments at Whitehall level have a strong regional presence, and that, through the RCU, there is a strong regional connection with the RDAs and assemblies. The tripartite structure of assemblies, RDAs and Government offices is important in ensuring that the feedback to Whitehall has a strong regional perspective.

On budgets and learning and skills councils, I accept that the relative responsibilities of RDAs and the councils must be worked out. Clearly, RDAs have a strong role in identifying the skills deficits and needs of businesses in terms of different skills in their areas. The LSCs focus on ensuring that those skills gaps, so identified, are delivered on, and that will be reflected in budget allocation. Currently, I have no reason to suspect that the budgets of LSCs have not been devolved sufficiently. The picture is evolving, however, and we must undertake close consideration to ensure that there is a connection between the identification of skills gaps and delivery in that respect.

I acknowledge my hon. Friend's point about the Arts Council decision not to have regional arts boards. Our focus on regional perspectives and structures requires us to examine the implications of that focus and the link with regional structures. Such linkage has been important—for example, in relation to the tourism industry during the recent foot and mouth crisis—and the role of regional arts boards has been significant in terms of raising some relevant issues.

On regional government, I can tell my hon. Friend that, as she will be aware, the Deputy Prime Minister has reaffirmed our position. I cannot pre-empt our manifesto, which I understand will be published next week, but I am fully aware that the national policy forum document endorses our position, which is that, as soon as is practicable, we shall move to directly elected regional government, when and where there is a clear demand for it.

Our policy document suggested requesting regional chambers to develop proposals in their respective regions—those proposals might be different—and publishing a Green or White Paper on regional government, which would set out how we propose to take the matter forward. That remains our position.

Ms Karen Buck (Regents Park and Kensington, North): I warmly welcome not only the general thrust of the Minister's statement, but her reference to the impact of sub-regional patterns of deprivation, which, as she knows, is a subject dear to my heart. As a London Member, I know that, alongside a strong and successful economy in London, there are serious problems. My leafy-sounding constituency of Regents Park and Kensington, North has the 14th highest claimant count in England, and the seventh highest eligibility for free school dinners. Indeed, London is the region with the largest number of constituencies ranked in the top 50 in terms of percentage unemployment.

Does the Minister agree that the existence of those pockets of deprivation will not only have a deleterious social effect, but will undermine economic performance and could act as brake on London's ability to be one of the economic engines of the country? Can she assure me that future allocations via the single pot regeneration budget will recognise those complex patterns of sub-regional deprivation? Will she be open to further representations on refinements to the multiple deprivation index, so that we can ensure that resources are directed where they are most needed, not only to provide a social benefit for residents, but to enable them to take part in our economy and to contribute to further economic success?

Ms Hughes: Yes, we are moving towards flexibility in the single pot budget. The allocation in this year's budget will be made on the basis of 80 per cent. formula and 20 per cent. discretion. The formula is largely driven by indices of unemployment and deprivation, which will continue to pertain.

I know that my hon. Friend has strong feelings about the index of deprivation, but she and her colleagues will accept that, in revising it, we recognised that deprivation is not always urban centred. We need a definition that recognises the serious problems in many other areas, such as ex-coal mining, rural and coastal areas, and seaside towns. The constellation of problems and the particular manner in which deprivation manifests itself in such areas were not acknowledged in the previous index. However, the index continues to represent the kinds of urban deprivation that are evident in her constituency and about which she is concerned.

Mr. Derek Wyatt (Sittingbourne and Sheppey): My question to the Minister is about venture capital. At national level, one of the most successful venture capital groups is the Prince's Trust, which has been very effective in assisting start-up companies. It has an expertise that does not exist at RDA level. What discussions has she had with the trust to tap its expertise? My community has a vibrant chamber of commerce. We continually wonder why most of the successful business men and women in the chamber are not part of discussions at RDA level and are not tied into that economic presence. They, too, could help with venture capital.

Ms Hughes: I cannot answer my hon. Friend's question about the discussions that have taken place with the Prince's Trust. However, I am confident that officials in my Department or the Department of Trade and Industry have been involved in such discussions, and I commit myself to writing to him with precise information.

On the general point, the White Paper on enterprise, skills and innovation published recently by the Department of Trade and Industry and the Department for Education and Employment discussed a key role for RDAs as channels for venture capital funding to encourage business formation and growth in all the regions. The Small Business Services operates a £75 million incubator fund in conjunction with the RDAs, for example, and there are other important measures to promote new businesses.

My hon. Friend mentioned business women. A significant number of women start new businesses and do well, but we still lag far behind other parts of the world, particularly North America. With other groups, RDAs could target sectors of the community that we do not traditionally think of in connection with business start-ups—for example, women and minority ethnic groups—and provide specific assistance with venture capital. We must provide resources to help with start-ups for such businesses.

Mr. Jim Cousins (Newcastle upon Tyne, Central): I am grateful to you, Mr. McWilliam, for allowing me to ask a question. I am not a full member of the Committee, but I want to place it on record that this is an important moment for some of us. You, my hon. Friend the Member for Blyth Valley and I count ourselves among a group of north-east Labour Members who pressed for the revival of the Committee. We thank the Government for arranging that, albeit at the end of this Parliament, and for the promise of much more to come in the next.

The Opposition, who, in the form of the hon. Member for Totnes, have left the Committee, have announced that they seek the abolition of regional development agencies. How much would that mean in respect of spending in the north-east of England? Regional development agencies were carefully and painstakingly built up and they have a body of experience and expenditure behind them. I am worried that they might simply be wiped out, and the problem would be not only lack of money, but the opening up of a gap in the delivery of important regeneration and improvement programmes.

In answering my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), the Minister suggested that legislation to permit referendums in regions, which could trigger a move to democratically elected regional government, might be considered early in the next Parliament. Will she advise us about that possibility?

The right hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to the Barnett formula. I recommend an equivalent formula for England—the Hughes formula, perhaps—so the Minister's name might live for ever. Long after the Prime Minister and Chancellor are forgotten, debates would take place on the Hughes formula, which, I hope, might commend itself to her. The Barnett formula, however, is structured around the territorial block allocation.

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