Examination of witnesses (Questions 100
- 119)
WEDNESDAY 23 OCTOBER 2002
MR NICHOLAS
MACPHERSON, MRS
ROS DUNN,
MR ALLEN
RITCHIE, MR
MARK PARKINSON
AND MR
IAN SCOTTER
Mr Mudie
100. I am still struggling with this because
even if you go off on the Barnett formula, you lose the overall
perspective that Scotland is as depressed as the North East and
so, although there is more money going in, if you look at certain
parts, if you look at the Barnett formula, it is a depressed country
that suffers all the low GDP et cetera, et cetera. I am
just stepping back . . . Why is that amusing? This business of
the Barnett formula is an argument but, if that were resolved,
and we were lining up the country, London is the objective in
terms of good GDP, employment et cetera and the others
all lag behind. I am just amazed that you come before us and it
seems to be a bit of fun. Mr Macpherson, give me three initiatives
that the Treasury are pushing in this review to meet the objectives
in terms of equalising GDP in the regions. There you are. Never
mind the Barnett formula. We will not fall out with the Scots.
London would love us to fall out with the Scots because that would
take it away from the establishment and the grip London has on
GDP and money and resources. You are doing a review you tell us.
Surely the Treasury must have tabled things in the review to say,
"Our objective is to reverse this 300 year trend of inequality."
Come on, put the three big ideas that you must have and you must
be arguing with the DTI about in this review. Mr Cousins is right,
we would like to see a massive change in terms and we are going
to have to do something with skills and we are going to have to
do something with education. Is there an argument behind the scenes
and are the Treasury pushing in that massive investment, additional
investment, going into the regions to help us catch up? Tell me.
It is no joke. Why do you smile at me? (Mr Macpherson)
I do not think it is a joke at all. I would say that London is
a difficult subject in the sense that it is—
101. Step aside from London, the South East
if you wish, but let us just take Yorkshire, there is the North
West, there is Scotland, and they are all areas where the GDP
is low and you have as an objective equalising the GDP. If you
have that objective and the political masses have given you that
objective, I would expect a good civil servant to be working on
a brief that has a series of policies, palatable or non-palatable,
to put before the Minister, "If you really want us to meet
these objectives, these are the things we have to do." Can
you enlighten this Committee. Do we have any policies being argued
in this review that actually starts that move? (Mr Macpherson)
I have mentioned the issue of how money is allocated to local
government and to health. I would just mention in passing that
we had a special cross-cutting review of health inequalities and
the Department of Health has already mentioned that, in revising
its formula for health allocation, inequalities—
102. Can I stop you there. Health is fine but
on the social end in terms of skill and education and actually
dealing with the growth aspect, if we actually want the North
East to start earning brass, to starting having high income, what
is the Treasury's view on how that must be done? (Mr Macpherson)
I can go through a list of measures in the spending review, so
I will try and mention a few.
103. The big ones. (Mr Macpherson)
The first one which comes to mind is the further strengthening
of the RDAs. We have provided for real growth in the RDA budgets
of 4.5 per cent real of the year, so the so-called single pot
rises to £2 billion by 2005-06. In co-operation with the
ODPM and others, we are seeking to actually strengthen the role
of the RDAs.
104. But you are not pushing it into regional
government. In the White Paper, you are keeping it separate from
regional government. The RDAs are going to be independent as will
the learning and skill councils. (Mr Macpherson) Alongside
that, I would also mention how the review committed the Government
to ensuring greater working between the RDAs and learning and
skills councils to give the RDAs greater role in how the money
is allocated to improve skills. Similarly, with regard to the
role of the RDAs, we are piloting measures to strengthen their
role in relation to the provision of local services to business,
small business and so on, so again to give this greater strategic
focus to the RDAs. I would also like to mention housing where
the spending review committed the Government to creating greater
strengthened regional bodies in relation to—
105. Can I just stop you and ask you my last
question. In terms of the RDAs, they have been going three years.
Can you point to any of those areas that we have mentioned where
we can see specific increases—and we can see the difference
between the South East RDA allocation and the North East RDA allocation
- in those three areas, so that we can see that there is a natural
policy of putting in resources in specific areas in greater numbers
than are going in the South East RDA, and will you be able to
back this up with a paper that we can see as part of our deliberations? (Mrs
Dunn) What we can provide you with is details of how the allocative
mechanism for the RDAs' expenditure is calculated. I think it
is worth making the point that although the decision to pool all
the various funding streams together was taken a couple of years
ago at the last spending review, in fact the allocation on the
new basis has only started from this year. So, the funding mechanism
that we use is only in effect from the beginning of this financial
year, but we can let you have a note that explains both what the
factors in the formula are and what impact that has had upon the
allocations.
106. Behind the scenes, the Treasury is arguing
for greater amounts of money going into those to back up this
policy and it will be done and it will be demonstrated in the
figures? (Mr Macpherson) I think the Government are
agreed that the formula should reflect the sort of key factors
which generally are going to result in the North East getting
more money than the South East. (Mr Scotter) I think
that when you see the figures—and I do not have them with
me—you will see that the amounts per head going into regions
like the North East or the North West are substantially greater
than the amounts per head going into the South East of England.
On another point, it is the Government's proposals that regional
development agencies will become a responsibility of elected regional
assemblies when the elected regional assemblies are set up. The
RDA for a region will no longer report to ministers, it will report
to—
107. It will stay independent of the authority? (Mr
Scotter) It will be an executive arm of the elected regional
assembly.
Mr Cousins
108. The regional development agencies are not
to be dismissed or decried, but if we look at Government expenditure
as a whole, taking out social security and looking at it across
the board, not just at RDAs but at trade and industry and all
the employment spends, all those spends are about three per cent
expenditure per head that can be identified. They are a tiny chunk
of expenditure. Even if you look at that sector, there is virtually
no difference in spending between the English regions. The North
East has £3 per head more than the English average across
that sector. That is right, is it not? (Mr Scotter)
You are looking at the line for trade and industry and employment
in the table where the figures are £113 for the North East
and £110 for England?
109. Yes, £110 for the North East and £110
for England. I have to mention that it is £196 in Scotland. (Mr
Macpherson) That is what the table says, yes.
110. So we should not make too much of all this
stuff about RDAs because that is a small component of a sector
of spending which is three per cent of the total spending per
head outside social security and, when we look at that sector,
the North East gets £3 more per head. (Mr Macpherson)
That relates to 2000 and 2001.
111. Exactly. (Mr Macpherson) The
RDAs will have come a long way by the end of the spending review
period.
112. Can you update those figures then? (Mr
Macpherson) We do not at this stage publish plans on a regional
basis because, in many cases, that is not how spending is actually
planned, so you can only work out in retrospect what it was. (Mrs
Dunn) I wonder if I can just add a point about that. I think
it is slightly misleading simply to look at the total budget that
the RDAs have available, which admittedly in terms of public spending
is not great, but the question is what we expect them to do with
that and one of the things that I think would also be quite helpful
for the Committee to see is actually what the RDAs are able to
do in terms of the way in which they are able to exert a strategic
influence in their region and the way in which the decisions that
they make are actually going to improve regional productivity
through, for example, the preparation of regional economic strategies
which then enable all the partners working in the regions to focus
their activities and to focus their delivery. It may be that because
regional development agencies are not large organisations they
do not spend terribly much on themselves, but the impact they
have in a region is not necessarily simply related to, if you
like, input. If you think about the output as opposed to the input,
you may be getting quite significant benefits from that spending.
Chairman: This is a huge subject and I have
to tell you that we are only one-quarter through our agenda, so
we must move on.
Mr Beard
113. Moving to the data and statistics on which
the original policy is based, I have a quotation here from the
Statistics Commission which is charged with ensuring that national
statistics are really up to the job. Let me quote this. This is
a report of 2002. "There is an increasing need for an emphasis
on data below national level. Production of such data is one of
the most important issues for national statistics at the moment.
As well as pointing to production of more disaggregate estimates,
this raises the question about the fitness for purpose of existing
estimates such as regional level gross domestic product whose
original uses may have been less demanding than current needs.
Regional GDP estimates are now used in a wide range of contexts
including allocation of EC structural funds and public service
agreement targets for regional growth as well as being important
for devolved administrations." When you are determining allocations
and working on regional policies, do you have a better basis of
GDP estimates than is being commented on there? (Mr Ritchie)
I think the short answer is "no". Those are national
statistics; those are the official estimates of regional GDP.
The Government produce a lot of regional data and the Office of
National Statistics do, but with the way that regional policy
is, the regional agenda becomes more important. You are quoting
from . . .?
114. I was quoting from the Statistics Commission's
annual report and they are commenting, as they are required to
do, on the adequacy of national statistics. (Mr Ritchie)
I think the Statistics Commission were commenting on the annual
report on national statistics which is produced—
115. They are commenting here on the adequacy
of regional and subnational GDP estimates. (Mr Ritchie)
It is a technical question that I think you are probably best
to—
116. It is not a technical question. (Mr
Ritchie) It is a technical question.
117. My question is about whether you have a
better foundation for regional policy than is being reflected
in the national statistics. The other question that arises is,
if you do not have, what impact do these apparent shortcomings
of the national statistics on GPD at regional level have on your
ability to properly make regional policy? (Mr Ritchie)
I am not sure that I accept that they are inadequate. They are
the best we have.
118. I have quoted to you the opinion of the
Statistics Commission who are charged with judging the adequacy
or otherwise of this sort of information, and they are saying
essentially in the passage which I have just quoted that they
are inadequate. (Mr Macpherson) I would argue that
they are quality assured, but clearly there is always scope for
improving them. The emphasis on regional policy within the Government
means that the quality and quantity of statistics has improved
and we and ODPM are working on a number of projects to facilitate
that. (Mr Parkinson) There has been a delay this year
in the production of the regional GDP figures because the ONS
have been taking on board new data sources. They are actively
improving figures, so that I would imagine that the figures which
will be produced later in the year will be of better quality than
the figures now.
119. But that answer is not consistent with
what is being said here. It says here that the original estimates
for GDP figures were used for purposes quite different to what
they are being used for now and that the present purposes mean
that the accuracy of the present GDP regional estimates are not
up to the job. That is what this quotation means. (Mr Parkinson)
As I say, the ONS are putting more resources in and are improving
the regional GDP figures because they realise—
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