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Session 2001- 02
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Regional Affairs Committee Debates

Regional Development Agencies

Standing Committee on Regional Affairs

Thursday 21 March 2002


[Mr. Edward O'Hara in the Chair]

Regional Development Agencies

2 pm

Mr. Anthony Steen (Totnes): On a point of order, Mr. O'Hara. I seek your guidance. Given that a regional White Paper will be issued in the next few months that will deal with the Government's position on the regions, it seems that this Committee has jumped the gun by being set up before that time. Has a locus been established in which to discuss the White Paper? If so, the Minister and members of the Committee can be released now and reconvene after it has been produced. Will that be acceptable?

Mr. Nigel Waterson (Eastbourne): Further to that point of order, Mr. O'Hara. It would assist you and my hon. Friend the Member for Totnes (Mr. Steen) to know that the White Paper is secondary. If my hon. Friend reads the recent speech of the right hon. Member for Hartlepool (Mr. Mandelson), he will see set out in admirable detail precisely how matters are to proceed.

Mr. Steen: Further to that point of order, Mr. O'Hara. Can you elucidate on what the right hon. Member for Hartlepool said?

The Chairman: I am not in a position to elucidate on what the right hon. Member said. As for the first matter, points of order are to do with the business of the Committee. Arranging debates in Standing Committee is a matter for the House authorities. My business is to conduct such debates, therefore the point about arranging when the Committee sits is not a point of order for me.

2.1 pm

The Minister for Employment and the Regions (Alan Johnson): I am glad to be in Committee to discuss the role of the regional development agencies. This is an important debate. RDAs are responsible for £1.5 billion of public spending a year. The timing of our discussions is excellent given that new budget arrangements will, in 10 days' time, give the RDAs freedom to spend the money according to the priorities that they agree with their regional stakeholders.

RDAs are a key element of our national economic strategy. They are a crucial mechanism for ensuring that each region can take a strategic view of what needs to be done best to promote economic development and to engage partners, be they business, voluntary bodies or local authorities, to get on and do it. I look forward to an interesting debate.

In our design of the RDAs, we are building on the general model of Scottish Enterprise and the Welsh Development Agency, while ensuring that the new institutions have the flexibility to respond to the special needs of their regions. I pay tribute to

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Conservative Ministers who developed the models, and hope that we can leave party political posturing to one side for a couple of hours while discussing such an important issue. That could be a vain hope, nevertheless I nurture it.

It is worth reflecting on why we set up RDAs. In 1996, Bruce Millan, the former European Commissioner, examined the successes and failures of regional policy and found a piecemeal, fragmented picture. There was a lot of useful activity, but different elements of it were not connected with each other and regions lacked ownership of various activities. Disparities between regions had widened and no region's performance was as good as it could have been. He recommended that a network of regional development agencies be set up to ensure real regional ownership of development activities.

After the 1997 election, a White Paper entitled ''Building Partnerships for Prosperity'' was published in December that year. It built on the Millan report by making clearer the roles and functions of RDAs. It also separated the RDA for London, which was to form part of the structure beneath the elected Mayor and Assembly, from the RDAs in the eight remaining English regions. RDAs outside London were given legal status by the Regional Development Agencies Act 1998 and became fully operational in April 1999. The London Development Agency came into being a year later.

We have followed a consistent policy on RDAs. They are intended to be powerful bodies that understand their region and have real roots in it. Our appointments process has ensured that regional interests are properly reflected on the boards that drive their activities. The agencies' primary focus is economic development, which is why we have ensured strong business representation on RDA boards. At least half the board members in most regions have current or very recent business experience.

Each RDA has drawn up regional economic strategies with regional partners that will guide their activities. Their close engagement with local partners means that they can direct resources to the real priorities of their regions. If Hon. Members believe that an RDA has not identified those needs correctly, they should engage with it closely as it revises and refines its strategies. Reasonable discussion between people of good will is the right way to resolve disputes over priorities, and I urge hon. Members to play a full role in the work of their RDAs.

If the RDAs are to succeed in providing strategic economic leadership in their regions, it is essential that they have a clear mission. Each RDA has five statutory purposes: to further the economic development and regeneration of its area; to promote innovation, investment and business efficiency; to promote employment; to enhance the development and application of skills; and to contribute to the achievement of sustainable development.

We are clear that RDAs should act as the strategic drivers of economic development in their regions, which should provide the overall direction and focus

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for their work. That does not mean that RDAs are barred from supporting projects with social or community content, if they judge them to be appropriate to their role. Their statutory purposes permit that. We do not, therefore, seek to be prescriptive about which projects the RDAs should and should not fund, as long as what is proposed matches their statutory purposes and fits coherently within an overall strategy that has a clear focus on the economic development of their region.

I expect RDAs to work with their partners to see that a holistic approach to economic-regeneration initiatives is taken. We recognise that a variety of activities can support economic development, and we have no wish to micro-manage their activities, but when we assess the effectiveness of their performance, we will consider how well they have involved the private sector in their activities. We will also consider how well they have leveraged private sector funds, as their own funds are fairly small compared with the total economies of their regions.

We already have good examples of private sector engagement. The East Midlands Development Agency has recruited 500 business people to work voluntarily to help start-ups and voluntary and community organisations, and generally to champion the needs of business. Last year, the South East England Development Agency secured more than £220 million of private match funding for projects in which it was involved. That sum is nearly three times its own contribution to those projects.

I turn to our views on the performance so far of RDAs, and to how the new single pot budget arrangements will enable them to carry out their mission more innovatively. I will also show how increasing resources and greater scope to set priorities are giving the RDAs new opportunities to meet the needs of their communities. I agree with those commentators who have remarked that the new RDAs have done little in their early years that is radical. We did not want them to make a big initial splash, only to disappear without leaving a ripple behind.

To start with, the RDAs were given two primary tasks. The first was to run a series of programmes—11 projects in all—in land and property, regeneration and skills planning which central Government had administered. The second was to develop their economic strategies and, more importantly, to get regional buy-in into those strategies.

We wanted the RDAs to become part of the economic structure of their regions by forging links with companies, employees, universities and community bodies in their areas. That would not have happened without the process of building the economic strategies from the ground up. Writing those strategies was a substantial task; getting buy-in from partners was even more so. That excellent work helped to establish a firm jumping-off point that enabled us to make progress.

The RDAs made it clear to us that they needed resources and flexibility to do their task properly. Last year, we ensured that both were in place. In the current

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financial review period, the RDAs will see their resources increasing from £1.5 billion this year to £1.7 billion in 2003–04.

Perhaps more significantly, next year will see the introduction of the single pot budget for the RDAs. It is easy to forget how radical a departure that is. In place of separate schemes, each with its own objectives and metrics, we will have a single pot measured against a set of agreed outcomes. Although it is important for the Government to direct the outcomes at national level, the RDAs are best placed to judge how those outcomes should be achieved in their regions. The RDAs now have the flexibility to use increased sums of money from five Government Departments to meet the aims of their economic strategies with much less bureaucracy. It is what they do rather than how they do it that interests the Government.

Another key advantage of the new single pot arrangements is that they enable money to be devoted quickly and flexibly to new priorities. For example, the London Development Agency devoted £3 million in emergency aid to the hospitality and tourism industries after the terrorist outrages of 11 September. The North West Development Agency, following the foot and mouth crisis, produced a rural recovery plan that contains £62 million of extra agency spending to promote economic development in rural areas. Indeed, the response to foot and mouth has shown the strengths of the RDA structure. We have seen how agencies have been able to identify regional needs, make a strong case to Government that they should be met and then ensure that the funds could be efficiently allocated to the firms that need them. In the south-west, for example, 1,200 businesses have received grant support totalling more than £8.5 million.

I remind the Committee of one particular example of when an RDA made a key impact at a time of major change. When there was a real threat in late 1999 that the Rover plant at Longbridge would shut down, with a devastating effect on small and large suppliers across the west midlands and on the local community, Advantage West Midlands promptly set up the Rover taskforce. It was a high-powered group of regional partners who worked extremely well together to identify the likely impact of such a closure and to come up with some innovative solutions. Although the threat receded, we are continuing to put funding into the group's proposals to modernise and diversify the automotive industry in the west midlands.

We are also working to ensure that the services that the Government provide through other means are joined up with the RDAs. For example, regional operations of the Small Business Service and Trade Partners UK are being co-located with the RDAs. RDAs will also work with local learning and skills councils, the Employment Service, firms, colleges, unions and others to agree regional frameworks for employment and skills.

Moreover, following the 2001 election, primary responsibility for the RDAs was transferred to the Department of Trade and Industry. The move recognised that the driver of the RDAs' purposes—regeneration, skills, employment, sustainable development and innovation—is economic

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prosperity. We now expect to see the RDAs helping to move the regional agenda forward. We have given them the resources that they said they needed and the flexibility that they said they wanted. We are now looking to them to deliver for their communities.

We have set an overall framework of targets for the RDAs to achieve, which will ensure that they contribute to addressing national priorities for economic development. Those include targets relating to the regeneration of market towns, skills in the regional work force, and the reduction of social exclusion in the poorest wards in the region. In addition, each RDA has been asked to set output targets in four key areas: the number of hectares of land that will be regenerated through their efforts; the number of learning opportunities that they will support; the number of new businesses that their activities will either attract or support; and the number of jobs whose creation or safeguarding will result from their activities.

We have given the RDAs the flexibility and discretion to decide how they propose to meet their targets, including through region-specific outputs that they have now put to us for agreement in their corporate plans. In drawing up and implementing those plans and their regional strategies, we expect the RDAs to work closely with regional and local partners. That should include taking into account the role of other partners, the effect of the availability or otherwise of other resources in an area, and how that will impact on their overall strategy for the economic development of the region.

Regional assemblies will also work with RDAs to ensure that their activities mesh with their agreed regional economic strategies. We have given each regional assembly £5,000 to help with that. We expect shortly to approve the corporate plans for next year, which will show great variety and innovation in how RDAs are dealing with the particular issues for their regions.

We are also introducing a rigorous monitoring system across RDAs that will examine their achievement of the four output targets and their contribution towards regional achievement of national priorities. It will also take into account their broader contribution to improving regional economic performance. Some of the RDAs' funding for 2003–04 will be allocated on the basis of their performance next year.

When talking about large sums, it is easy to get lost in the generality; it is only when we look at specifics that activities come alive. I will give some concrete examples of RDA achievements, which all relate to support for the manufacturing industry—a vital part of the RDAs' role and one that the Department of Trade and Industry takes very seriously. With my Department's help, each RDA will set up a regional manufacturing centre of excellence to provide tailored advice to manufacturing firms in its region.

One NorthEast has set up a new science and industry council, headed by the respected industrialist

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Sir Ian Gibson, which brings together representatives of industry and academic institutions to ensure that the providers meet the needs of firms in the region.

In south Yorkshire, Yorkshire Forward is supporting a new 100-acre advanced manufacturing park. The site will include the aerospace manufacturing research centre—an exciting joint venture between Boeing and Sheffield university. Other key tenants will include the new national metals centre of excellence, Corus and Castings Technology International.

The South West of England RDA is providing vital support to the world-leading Campden and Chorleywood Food Research Association, providing more than £270,000 of support, which will fund work in baking and cereals technology in support of the regional economy in the key priority sector of food and drink.

Advantage West Midlands and its partners intend to make the west midlands into a manufacturing beacon. Three weeks ago, it held a ''Manufacturing Matters'' summit attended by 180 companies. Workshops helped participants learn about and share best practice in a variety of subject areas. Advantage West Midlands is also establishing a think tank, building on the work of the Rover taskforce.

The East of England Development Agency is giving funding to the east of England better regulation group to study the impact of regulation on small and medium enterprises in the manufacturing sector in that region in order to determine what support small firms want from regulators, to identify good regulatory practice, and to develop information and support material for manufacturing companies.

I am struck by the variety of those examples. RDAs increasingly develop activities and solutions to problems that make sense in the context of their regions. We should applaud such diversity. It is exactly what we expected when we devised the single pot, and I will look keenly for evidence of further excellence and innovation.

I shall draw this somewhat Castroesque speech to a close.


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