[Relevant documents: Reducing Regional Disparities in ProsperityNinth Report from the Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Committee, Session 200203, HC 492-I; and the Government's response thereto, Cm 5958.]
Andrew Bennett (Denton and Reddish): I am grateful for the opportunity to debate the ninth report of the Select Committee on the Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions, "Reducing Regional Disparities in Prosperity". I am pleased to see the Under-Secretary of State, Office of the Deputy Prime Minister, my hon. Friend the Member for Corby (Phil Hope), and I congratulate him on his well-deserved promotion. I am not quite sure whether in his new role he will be able to sort out the station at Corby, but I wish him well.
I pay tribute to Claire O'Shaughnessy, who worked as an assistant researcher for the Select Committee for two and a half years. She did an excellent job and the quality of our reports often depended on her skill in drafting. I also thank David Coats, Adrian Healey and Kevin Morgan, who advised the Committee. We were fortunate in having good advisers who disagreed with each other on the whole, and who therefore made the Committee think a little harder. I also appreciate all those who submitted evidence to the Committee and those who set up visits.
I believe that the report is a good one. When I went to the Vote Office to pick up a copy, I was heartened to find that it had been reprinted. The cynic in me says that only a few copies were printed to start with, but, given that one sometimes sees reports stacked up behind the person giving them out in the Vote Office, it was nice to be on a reprint.
The report has been well received on the whole, although I notice that since it came out various people have been keen to produce their own figures, some of them suggesting that great amounts of wealth really are produced in London, and that the regions should be thankful for the few crumbs and sops that are thrown to them. I have two points to make about that: first, when people seek the places where wealth is created, there is a danger that they will actually look at the places where it is accounted for. That may well be the City of London, when in fact the wealth is created in other parts of the country. However, that is not the crucial issue. As someone who is still pleased to call himself a socialist, it seems to me that people should contribute as they can and draw back according to their needs. Ken Livingstone should remember that when he trumpets the amount of wealth that London creates. It may create a lot of wealth, but he should be happier to share it with other parts of the country.
The English regions have lost substantially in the past 50 years, and they have not received the compensation that they should have had. Throughout the time in question, whichever political party has been in charge, and when the Bank of England has set interest rates, the United Kingdom economy has, on the whole, been dominated by the problems of London and the south-east. Whenever the economy starts to overheat, interest and exchange rates move to take that dominant part of the economy into account. I do not have a difficulty with that, except that often it means that interest rates have often been one, two or sometimes many points higher than they needed to be for the English regions.
A company in my constituency, Cravens, was one of the leaders in manufacturing machine tools in the 1970s. The interest rates that it had to pay were considerably higher than those that Japanese businesses had to pay. Eventually, Cravens went out of business and the great Stockport tradition of manufacturing machine tools was lost. It was lost because the interests of London and the south-east were taken into account when running the economy.
Mr. Philip Hammond (Runnymede and Weybridge): No doubt the hon. Gentleman has anticipated the point that I am going to make. If it is that difficult to manage an interest rate for the disparate regions of a single national economy, will it not be impossible to manage one for the vastly disparate regions of the whole of the European Union?
Andrew Bennett : I have considerable sympathy with that point. I am not one of those who are greatly enthusiastic about the euro, but whether we are talking abut the economy of the UK or Europe, we may have to have one interest rateand one exchange ratethat covers the whole area, because we must take into account the largest unit in that area. If we have that, however, we must ensure that compensation for the disadvantaged parts, whether in Europe or the UK, is commensurate with the damage that is being done.
Mr. Edward Davey (Kingston and Surbiton): I am tempted to join in this little debate. Will the hon. Gentleman admit that the differences in wealth and income between the different regions in Great Britain are often greater than the differences between some of the regions of the EU? The argument advanced by the hon. Member forI ought to know
Mr. Davey : The Conservative spokesman's argument is invalidated by the empirical evidence. One could argue that a single interest rate throughout the EU would help the English regions that have suffered from the interest rates set from London.
Andrew Bennett : It might have been a mistake on my part to get too far into this argument. All I wanted to do was place on the record my belief that the English regions have lost out because, on most occasions, interest rates have been set at a level that was not in their interestscertainly not in the interests of the manufacturing industryand that the compensation awarded by successive Governments has not been adequate.
We start the debate by talking about Government policy. I praise the Government for coming up with the public service agreement, which states that they want there to be growth in all regions but that they also want to reduce the gap. That is a very attractive target. I am not fantastically enthusiastic about targets: if one fails by a narrow margin, it is considered to be a disaster, whereas if one succeeds, it is considered to be because the target was set too low. As an aspiration, the idea is a good one, but as the evidence is gathered, we see words such as "challenging" and "ambitious", which are really saying that the target is too difficult or impossible to achieve. The central issue is whether the Government will will the means to get anywhere close to that target. Many people question that.
Another issue of considerable concern is that we call ourselves a democracy and we build up an edifice of information, but in some cases the quality of the information on which we base our decisions is very poor indeed. The Office for National Statistics has failed this country terribly. It has totally failed to produce lasting figures for things such as gross value added, and has failed to produce a regional deflator for GDP. It revises the figures almost before it has published them.
The most worrying disaster for the country is the ONS's census figures and the mid-year predictions that it produced from them. People in this country have traditionally accepted the census figures. They may have been a bit dodgy before 1831, but since then they have almost always been believedthey may have been wrong, but people believed them. Following the issue with the 1991 figures, we have been told that either the mid-year predictions were wrong or that the 2001 census was badly wrong. We are trying to take democratic decisions, but we are in deep difficulty because of the quality of the information.
I sympathise with the Ministers who tried to get to grips with the standard spending assessment last year. They came up with a new system just before Christmas, but the ONS used the census figures to shoot at it. That meant that a series of places, mostly bigger cities, suddenly found that, according to the census office, they had many fewer residents, which had significant implications for their finances.
Mr. Chris Mole (Ipswich): Does my hon. Friend agree that the ONS's evidence to the Select Committee was interesting? It did not say that it lacked confidence in the 2001 data and the collection processes; instead, it put its hands up to the fact that the 1991 data were clearly awry. Many of the large changes occurred because things that were wrong in 1991 were put right this time.
Andrew Bennett : I understand that that was the ONS's defence, but I am unsure whether it still holds up. Last week, it suddenly announced that it had accepted the lobbying from places such as Manchester that the figures were wrong. The ONS has conceded that it got the numbers for Manchester wrong by about 7,000; the same point also applies to Westminster and Chelsea. The ONS has started to concede that the way in which it counted the 2001 figures was wrong. Dialogue with Manchester is ongoing, and I think that there will be some changes. It is worrying that we are being asked to make decisions based on poor information.
When my hon. Friend the Financial Secretary to the Treasury came before the Select Committee, she robustly defended Mr. Cook and the ONS. I understand the principle that Ministers should defend their civil servants, but it seemed to me that she was living in fairyland. The view in the Tea Room is that the ONS cannot count anything and that Mr. Cook should go back to Australia to count sheep rather than try to run that department.
I want to press the Minister on one little pointthe Select Committee can suggest spending without taking responsibility for it. We firmly pressed the Government on the point that if the figures for the metropolitan areas were wrong, those areas should be compensated. I am delighted by page 5 of the Government's response, which states:
Turning to the target for growth, it is important that we achieve growth within the English regions and that a challenging target is set. However, the target must be sustainable. It is not only a question of the Office of the Deputy Prime Minister recognising the problem with the regions; the recognition must be seamless across the Government. It was worrying that the Department for Work and Pensions and one or two other Departments did not realise that their activities should have a regional dimension. For example, the money going to the north-east does not look too bad if we consider all Government expenditure, but if we take out the amount that is being paid by the DWP, we find that the position in the north-east is that much worse, because almost all the money that makes the north-east look not too bad is paid as benefits and compensation for lack of jobs, rather than in other ways. I hope that there will be a regional dimension to the forthcoming spending round and that English regionsparticularly the northern regionswill get more money.
Mr. Hammond : Will the hon. Gentleman clarify one point? Is he prepared to see a trade-off involving more equitable growth patterns across the regions if the cost is a lower growth of UK GDP? I fear that that is where the Committee's report and recommendations are taking us.
Andrew Bennett : It is not where the Government are taking us. The Government are quite clear that they want to grow the whole cake, and ensure that the shares are more equitable. Doing a good job for the English regions does not mean that we will grow the whole cake more slowly. It is possible to do what the Government want to do. However, the Government are not willing the means to achieve that general growth and a fairer share of resources.
There is evidence that some of the growth in London, which might lead to overheating of the economy, creates more problems for people in London than it solves. It is not totally an issue of us and them.
Andrew Bennett : I am reluctant to give way. I will give way to the two Members who have intervened, but many people want to take part in the debate so it is my duty to be reasonably concise when opening it.
Mr. Beith : The hon. Gentleman was talking about targets and the north-east. The Journal in Newcastle reported the serious difficulty that the targets themselves represent. They average a batch of the poorest regions and compare that average with the richest regions, which is likely to produce a meaningless figure that will not reflect the true difference between the growth rate in the north-east and that in the south-east. Other regions, too, will find that their figures are concealed in a set of targets that do not inform us very well.
Mr. Deputy Speaker : To enable the Chair to follow the debate it would help if the hon. Gentleman, who chairs the Select Committee with great distinction, dealt with the first intervention before accepting another.
Higher education is obviously one of the drivers of local economies. The north-east appears to do quite well in terms of Government spending on higher education. The north-east obviously has some impressive HE institutions, such as Newcastle and DurhamI will not go through the entire listand a significant amount of money is spent on those institutions. What is worrying and disappointing is that the north-east does not seem to be able to retain graduates in the region and does not appear to get a good deal from the research and development that should be going on beyond that level.
Why does the north-east not do particularly well? Is it because of structural problems, or because it does not have the critical mass to offer opportunities to two-career households? One of the problems that the Government must consider relates to the way in which money is allocated for research and development. They must ensure that a fair proportion of the money goes to some of the most disadvantaged English regions, of which the north-east is one.
Another area concerns me. The Government's idea to hold the Olympics in London is totally wrong. There was a great opportunity for the Government to promote the English regions. The Commonwealth games were outstandingly successful in promoting Manchester, and although I was not particularly enthusiastic about them, they at least had a regional dimension. If the Government had had the idea of holding the Olympics in Stoke, it might not have got past the Olympic committee, but a lot of preparation must be done for the London bid. It may fail, but the preparatory work has some continuing value. A failed bid from the English regions might be of more value to the whole nation than a successful London bid, which would simply increase London's problems. Another Department, the "Department for Fun", should look very carefully at the regional dimension.
Sir Michael Lyons's review considered moving civil servants out of London. Such reviews have been going on for most of my lifetime, and they have almost always turned out to be a disappointment. The Ministry of Defence had a choice of moving its new procurement division either somewhere between Coventry and Birminghamnot one of the most depressed regions, but at least it is in the regionsor between Bristol and Swindon. The division ended up between Bristol and Swindon, which is one of the areas where the English economy is most overheated.
If the Lyons review is going to work, we must ensure that significant groups of civil servants are moved out of London. They do not have to be civil servants on the margins. It would be great if the Prime Minister were to say, "The No. 10 policy unit is moving," and we could fill in whether we wanted it in Corby or further afield in the English regions. That would start to turn the whole apparatus of government around. We must carefully consider how to get extra resources into the regions. Part of that consideration is to say, "London and the south-east are overheated." If we set an example by moving out significant groups of civil servants, there is a reasonable chance of other people following suit.
Transport policy must strike a balance between solving the problems of overheating in the south-east and ensuring that the English regions have a transport infrastructure. If the north-east does not have that critical mass, we must ensure that the rail and road links between the north-east and Edinburgh are really good. People up there have been lobbying very hard for their road link.
Often, it appears that the Government are spending quite a lot of money on the English regions. We must ensure that the money is spent there and does not drain away to consultants in Cheltenham or any other prosperous place. Often, development consultants do not live in the area, and they come from a long way away. The Select Committee recently visited Oldham,
We must make certain that UK regions do not lose out in the next allocation of structural funds. That applies in particular to the allocation of transitional provisions, and to the allocation of EU structural funds, which will no doubt please the Conservatives.
One or two Members in the Chamber are not particularly keen on devolution to the English regions. I am firmly in favour of it, but we must be clear that devolution alone will not deliver an extra penny to those regions. In a sense, it is a separate argument and we must recognise that, although it may well be that strong regional elected assemblies will have a stronger voice than some Members have had in the House of Commons for their region.
After we published the report, I saw some comments from Ministers and Departments that were not very complimentary, but the Government's response was rather more encouraging. I leave the Chamber simply with this thought: it is time that we got justice for the English regions.
Mr. A. J. Beith (Berwick-upon-Tweed): I warmly welcome both the Committee's decision to work on the report, and the report itself. The Committee has done a great service to the regions of this country, and I hope that the report will result in a lot of thinking in many Government Departments. It is not just the Office of the Deputy Prime Minister that must heed the recommendations of the report, but virtually every Government Department that has an influence on the shape of public spending and where it is distributed, and the infrastructure that enables regions to prosper.
I am very glad that the hon. Member for Denton and Reddish (Andrew Bennett) steered through this important report and that my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) will speak later in the debate on behalf of the Liberal Democrats. He takes a great interest in my region, and he is going there again this weekend to keep his knowledge of the north-east up to date.
The north-east is a region that suffers from low output, low employment, low qualification levels, high rates of mortality, low rates of business start-ups and high rates of business failure, poor transport infrastructure, high incidence of crime and, of course, a very high incidence of social security payments, as the hon. Member for Denton and Reddish pointed out. That is not the kind of financial assistance that the region wants. It wants people to be in jobs rather than depending on benefit.
The region has some very good features, such as wonderful scenery and countryside and excellent universities and research institutions. It has made huge strides in the development of its artistic and cultural
The Committee is right to identify that action right across Government will be necessary if the advantages that I have just described are to be effective in the face of the problems that I mentioned. One issue that the Committee rightly addresses is the overall public funding of the regions. That brings us to the Barnett formula. The report states in paragraph 75:
Representing as I do a constituency on the border, it is apparent to me that public funding is much higher in Scotland than in England. One only has to drive along the roads or consider the funding of schools and other public services to recognise that. One reason why Scotland gained particular levels of public expenditure was that it was seen to have precisely the problems that the north-east currently has, including those resulting from the decline of the traditional heavy industries that had been the major employers in much of Scotland as they were in much of the north-east. However, the north-east never got the public expenditure boost that a required percentage of public expenditure gave to Scotland.
The Barnett formula will not always work in Scotland's favour. Many in Scotland point out that it will cause them difficulties in future years. It is out of date from their point of view, as well as from that of the English regions. The Committee's recommendation of a proper review is justified. We needI hope that my hon. Friend the Member for Kingston and Surbiton will refer to this latera mechanism to examine the allocation of public expenditure throughout the United Kingdom and to build into that a recognition of needs, which, if satisfied, will lead to a reduction in the disparity and in the need for such a formula. Once a region has the necessary infrastructure, education facilities and kick start to becoming more prosperous, its natural growth rate deals with the sort of problems that I have described.
There is a danger in the way in which the Government look at figures when assessing how we are getting on. I intervened on the hon. Member for Denton and Reddish to draw his attention to a problem about the target for reducing the disparity in growth rates between the richest and poorest regions by 2012. The Journal in Newcastle today identified and quoted a paper, which is now in the Library. It states that:
Burying the most deprived regions of the country in such a large package of other regions will not give a true picture of the disparity. If that target is achieved, it will not be possible to tell whether it has made a significant difference to the disparity between the north-east and south-east in terms of growth.
To make matters worse, the baseline for the target is taken as the period 1989 to 2002. That period includes the 1990s recession, which hit hardest in London and the south-east. We have a target with a baseline set during a period when the south-east was at its least prosperous, relatively speaking. Furthermore, packaging regions together will conceal continuing serious disparity, if that exists in 2012. The process will not be much use in guiding the Government and gives the impression that they have searched for figures to produce an achievable target under the present policy. That is pretty depressing.
The Government must face the facts of the disparity between poorer and richer regions if polices are to be developed to deal with those problems. It is not to the Government's benefitexcept in the narrowest PR and spin termsif they select targets that they can meet, but that demonstrably will not reveal continuing disparity. They must face facts, devise targets that relate to the real problems that we all know about, then set about devising policies to meet those much more serious targets.
I do not want to detain hon. Members for long and many issues in the report could be raised, but I shall mention only two. One is rural areas. In any deprived region there are rural as well as urban areas, and I have both within the compass of my constituency. If we are to achieve significant improvement in the rural economy of areas such as the north-east, we need tools and infrastructure. An obvious one is broadband, and I am glad that that was mentioned in the report and in the Government's response.
One way to encourage the creation, development and retention of jobs in remote communities is for people to work from home and to run small businesses from rural locations at home or in small village workshops and offices, but that depends on internet connection. If such areas cannot get broadbandat the moment they certainly do not have itthey cannot face the competition from businesses in areas where internet access is immediate and continuous. They will be at such a competitive disadvantage that the whole strategy of regional development agencies to foster small rural businesses will be ineffective.
The Government have made various statements about how to get broadband into every doctor's surgery and every school. That should create a platform to assist in ensuring that we have broadband in every village and access to it for remote communities. However, I simply cannot obtain from the Government any explanation of how they will deliver broadband to rural institutions such as schools and doctors' surgeries when it is still not available to others in rural areas. If they devise a mechanism that achieves thatconnection only to those public institutionsthey will have missed a tremendous opportunity because a critical mass can be created by bringing together existing Government policy on broadband and those businesses that desperately need it in rural areas. I ask for more Government attention to that.
I have had many discussions with BT about broadband and it is trying hard to achieve that critical mass in larger communitiesthe centres in rural areas, such as market towns. That is good, and I want to see that process completed, but it will not solve the problem. In the really rural communities, such as villages and hamlets, the job strategy is based on modern technology enabling work to continue there that in the past would have had to go to some more urban centre.
My final point relates to regional assemblies. I believe that regions will prosper better if decisions can be made democratically at regional level that shift resources and generate initiatives, but for that to be effective the power must be there. The Committee delivered a warning against the dangers of delivering responsibility to regions without giving them the power to fulfil that responsibility. That is why the process of creating regional assemblies and giving people of a region the opportunity to vote for a regional assembly is one in which the issue of power must be kept to the fore.
The electors of the north-east will want to know whether the regional assembly will be able to make decisions that will make the north-east more prosperous. Sometimes those will be difficult decisions, which shift resources from one thing to another because that is where the opportunity is perceived to lie. The Government's proposals are weak in that respect, but I am persuaded none the less that it is better to put a regional assembly in place and allow its powers to develop.
The Government would be in a better position to win their argument that elected assemblies would benefit the regions if they could hold out the prospect of bringing more and more power of decision to the regional assemblies, as well as the power to hold to account the massive existing apparatus of regional government, such as the Government office for the north-east and the regional development agency. We already have regional government in this country and no one should try to deny that. The regional assemblies would make that government democratic. The more powerful an assembly can be in its ability to use resources effectively and productively, the more chance there is that it can get a region moving through a strategy that tackles the problems that we have been discussing today, which are so well identified in the Committee's report.
Mr. Graham Stringer (Manchester, Blackley): I congratulate my hon. Friend the Member for Denton and Reddish (Andrew Bennett) and the members of the Select Committee on producing an excellent report. I found a lot that was of interest in it, and information that had not previously all been available in one place. I genuinely congratulate them on that.
Given that I am known to have strong views on investment in the regions, one of the more difficult things that happened to me when I was at the Cabinet Office was being asked to reply in the north-south debate that went on after my right hon. Friend the Prime Minister had made some statements suggesting that the north-south divide was not as important as some of us think. It was an uncomfortable debate, and it would have been more uncomfortable had my hon. Friend's report then been available for people to discuss. It shows
The situation is almost the exact opposite of what the hon. Member for Runnymede and Weybridge (Mr. Hammond) thinks it is. If parts of the economy are underutilised, and other parts are overheated, it is more likely that GDP as a whole will grow less quickly. The recent warnings from the Bank of England are that the most powerful parts of the economy are at full capacity and that we may be in for more difficult economic times.
Mr. Hammond : The hon. Gentleman and I have had this exchange before, and I understand what he is saying, but my concern is that the Select Committee's report appears to suggest that public funding should be skewed to the regions that have performed less well economically, precisely at a time when the locomotive regions, if I may use that phrase, are facing constraints as a result of underfunding in public services and infrastructure. I am afraid that the assumption that investment can be diverted from those regions to other UK regions is demonstrably false. The danger is that too often the investment will go abroad.
Mr. Stringer : What the report is talking about, which I support, is changing the spatial distribution of public expenditure. Relieving some of the congestion in the south-east might lead to more investment there and give a firmer base to the other regions. We have indeed had this debate before, and it never seems right to me that per capita public expenditure is 40 per cent. higher in London and the south-east than elsewhere in England.
Having given that introduction, I take issue with one item that runs through the report. It is very important to be clear about our objectives, even if they are very difficult to achieve, which they are. You may have been an absolute whiz at differential calculus when you were at school, Mr. Deputy Speaker, but I suspect that most politicians were not. If you were, you will know that there is a real and important difference between closing the gapthe differencebetween the economies and GDPs of the regions and the south-east, and changing the rate of growth. My hon. Friend the Member for Denton and Reddish used the two phrases interchangeably and they are used interchangeably in the report, but they are not interchangeable.
The Government's position is very clear: to reduce the persistent gap in growth rates. If a region is growing at 2.2 per cent. a year compared with London growing at, say, 3 per cent., and our objective is gradually to increase the region's growth to 2.3, 2.4 or 2.5 per cent. a yearwhich is very tough and not being donewe will, if we succeed, make London even wealthier in comparison with the region than it was at the start of the process. I do not think that that is right. That is the objective, but I think that the objective should be to narrow the gap so that we have greater economic efficiency and social justice across the country. Even if we achieve that objective, we will end up with greater imbalance than we have at present. That is simply wrong. I very much doubt that most Ministers know that when they
I shall touch on some other aspects that my hon. Friend the Member for Denton and Reddish discussed, such as the census and recommendations 11 and 12 of the report. We have had debates in this Chamber on the census results, and I have asked questions on the Floor of the House. I have no doubt whatever that for Manchester, and probably for Derby, Plymouth and Westminster, Mr. Len Cook got his figures wrong. Since the census, the evidence that houses were not counted, that forms were not returned and that there was no checking on whether they had been returned, has been overwhelming. As that has been looked into further, more and more such evidence has emerged.
I was disappointed by the Government's response that they would consider amending the revenue support grant for authorities that had missed out. They should be absolutely straightforward on that. If authorities can show that they have missed outin Manchester's case that might be by as much as £20 million or £30 million in revenue support grant termsthat money should be given to them. We should have a commitment that, if the ONS and the authorities can agree on a figure and the Government accept it, the money should be paid over. Although the report does not mention it, the Government should consider the effect of the miscalculations on health spending. The biggest determinant of health expenditure is population, but in some of the most deprived parts of Manchester and Plymouth the population has been miscounted. I ask the Minister for some reassurances.
I had to smile when I read recommendation 12. As my hon. Friend the Member for Denton and Reddish pointed out, we have an innumerate national statistician. I should have thought that that was a disqualification for the job. The Committee says that there should be confidence in the office; the Government reply that they are giving confidence to the officethey have extended Mr. Cook's contract by three years. People in industry and commerce, who, like those in local government, health and almost every other area that Mr. Cook has touched, have suffered from Mr. Cook's inaccurate figures, will cringe. A man who can pretend without any evidence that 1 million young men have disappeared to Ibiza, then announceas Mr. Cook did six or seven weeks agothat 800,000 of them have come back and that his counting was wrong, should not be in the job. It is as simple as that. The man is not up to it and we need to have confidence in the office. Extending his contract was a mistake.
Two other reports have or should have been mentioned. One is the Nuffield report. I do not want to stir the pot too much where Europe is concerned, but it was not known before the report was produced by the Office of the Deputy Prime Minister that, although the European Union and the Government claim that there is great regional assistance from Europe, every region in this country is a net contributor to Europe and receives negative assistance. In the context of seeking solutions to regional disparities, Europe is a problem, not part of the solution.
The other report is the Lyons report. I am glad that Sir Michael Lyons is drawing up a report on how to move civil servants out to the regions, as that is one of the more straightforward ways of evening up public expenditure across the country. The tables in "Your Region, Your Choice" show that during the first two years of the Labour Government, the number of civil servants employed in the regions decreased, because we were following a flat spending regime. Then their number in London increased, but the number in the regions continued to decrease. That might have changedthe Cabinet Office has not been forthcoming with the figuresbut if we did not need a report to put more civil servants into London and to reduce their numbers in the regions in 200001, why do we need a report to move civil servants out of London to the regions now? It seems that, as is the case in other policy matters, things happen if there is a benefit to London; if not, there is a delay and a report.
I have one minor criticism of the report, although I realise that it was probably difficult to reach a consensus in the Committee. The report is slightly cavalier about the contributions that cities in the regions can make to regional economies. The figures for the north-west, which is the area I know best, show that the vast majority of GDP is produced within two or three miles of the city centres of Manchester, Liverpool and one or two other major centres in the region. Those cities have to be supported, because that wealth spreads out throughout the north of England, not just the north-west, as people travel in and out of those cities. Basically, regional economies are damaged more greatly if cities do not work than in any other way, and the Committee underplayed that.
Some people regard elected regional assemblies as the solution to the problem, but I am strongly opposed to them, because I see them as a diversion. The Deputy Prime Minister has said that we need to make government in the regions accountable. Well, yes, but the Government do not propose to do that, and in their response to the report they say specifically and explicitly that the elected regional assemblies will not have the job of looking after the Government offices. We are facing a huge and costly local government reorganisation that will take power upwards and divert a lot of attention from important economic and social problems. Although it is, I suppose, a paradox, the problems of regional disparities are so strong that they can be dealt with only at the centre.
Quite apart from the decisions that the Government take, there are natural forces at work in the economy that tend to push resources to the centre. London has many advantages, such as its geographical location, the City of London and its unique architectural heritage and history, which naturally drag a lot of investment into the south-east. The same thing happens on a smaller scale in other urban areas. We cannot deal with that by telling regions to pull themselves up by their bootstraps. Instead, we must change the pattern of public expenditure. It is not sensible to build 1.1 million new houses in the south-east of England when half the country could easily provide space for those houses. If those houses are built, regional differences will be intensified because the investment that would be needed to support them in terms of sewers, roads and transport will be enormous.
Mr. Hammond : Does the hon. Gentleman propose that the constituents of Members who represent south-east constituencies should have no nurses in their hospitals, no teachers in their schools and no policemen on their streets? The investment in infrastructure in the south-east is required to meet the demands of the economy, to relieve the pressures and to allow key public sector workers to live in the region now, not in some imaginary future when there is even greater investment in the south-east.
Mr. Stringer : Of course I am not saying that, but the Government must break a vicious cycle of over-investment in the south-east that leads to under-investment elsewhere. Although it is a well used cliché, not doing so is like pouring petrol on a fire. If the economy is overheated, one should try to take things out and make them work elsewhere, not increase them. Putting more and more economically useful expenditure into the south-east will not make it easier for teachers and nurses to afford to live there. There must be a different solution than simply building 1.1 million houses, although I use that only as an example.
The biggest thing that central Government can do is change the spatial distribution of their expenditure. Some expenditure would be useful to have in the regions, whereas other expenditure, on research and development, which is concentrated in the south-east and eastern regions, or on defence, which is concentrated in the south-west, would not only be useful, but would lead to direct investment and skills in the regions.
I like the report, although it should have been more critical of the Government's objectives, because they are the wrong objectives and people do not understand what they mean. In paragraph 23 of their response, the Government say:
Let us consider not only the 1.1 million new houses, but the decisions on the Olympics, which was taken without competition, and on the national stadium. As it happens, I support a third runway at Heathrow, which will not make me popular in some parts of the country. However, counterbalancing investment will be needed elsewhere in the country. Both the regions and the country need a third runway at Heathrow. It was not a sensible decision to close the synchrotron at Daresbury and move the project to the eastern region. One can go on and on considering symbolic issues. For example, the fastest track in the country will now be the route to Paris, not the busiest rail route along the west coast. All such issues are symbols. In practice, and whatever the Government say, the investment will not be going to the right parts of the country and will not create greater social and economic benefits.
I speak for one of the more prosperous regions. However, even in prosperous regions such as the east, including in my Luton constituency, there are pockets of poverty, deprivation and low economic growth. That is an important point: there is inequality within regions as well as between regions.
Mr. Hammond : Does not that suggest to the hon. Gentleman that conducting this debate in terms of regions is a somewhat bogus distinction? The issue is about different levels of economic growth in different areas. Regions are an entirely artificial construct, are they not?
Mr. Hopkins : No. We are dealing with two parallel problems, inter-local and inter-regional. The deprivation in some of the regions is rather worse than it is in Luton and worse even than the worst parts of the eastern region. Such problems are persistent and long term, as the report points out. They have been with us for decades, and we have not had much success in addressing them.
However, I want to dispel the idea that we have not had any success and that we can do nothing except leave it to the market to solve the problems. In the 1970s, I had the pleasure of working at the economic department of the Trades Union Congress. I was responsible for regional policy. One simple exercise that I did there was to compare two consecutive economic cycles of unemployment rates in the regions of Britain. We found that over the second of the cycles, there was a convergence of unemployment rates in the regions as a result of the implementation of regional policies by the then Labour Government. Those policies worked. They were not enough, but they went in the right direction and they made a difference. I have not got the paper to hand, but I could dig up the figures if needed.
That conclusion is confirmed in a table contained in the submission to the Committee by the Yorkshire and Humber assembly. The memorandum of the Committee's report contains two tables, which can be found on page 69. One shows the trends in the regional share of the national GDP, showing that through the 1990s the divergence got worse. The other, on long-term growth comparisons between Yorkshire and Humber and the south-east between the 1970s, 1980s and 1990s, shows marked differences. In the 1970s, the annual rate of growth between those two regions showed a difference of 0.1 per cent. The difference went the wrong way; they were still diverging, although only marginally, rather than converging as my hon. Friend the Member for Denton and Reddish suggests they should. However, at least they were not diverging as a result of the implementation of regional policies during that decade. When the Conservatives came to power in 1979 they abandoned all those policies, preferring market forces and a period of extreme monetarism. The divergence in growth rates became extreme: 0.9 per cent. a year. Over a decade, that meant a 10 per cent. divergenceor getting on for itwhich continued in the 1990s.
The problem is not that regional policies do not workclearly, some dobut that we have not had enough of them. My main point is that the Government must have an active role in substantially redistributing economic activity between regions to ensure that our economy is not only just, but that it works better.
Mr. Hammond : The hon. Gentleman has a rose-tinted view of 1970s regional policy. Does not he think that part of the problem in some regions is the industrial monoculture that regional policy promoted and fostered in the 1960s and 1970s, which left those regions incredibly vulnerable when the shape of the international economy moved away from such industries?
Mr. Hopkins : There were major factors in the regions' decline, such as the decline in shipbuilding and steel, which is ongoing. International economic changes, particularly in industrial production, have affected the regions. Despite those problems, there was some redistribution, which helped the poorer regions. We have to go further in that direction, and the Government must take a major, interventionist role in doing so.
Mr. Mole : Does my hon. Friend agree that there have been significant changes since the eras to which he referred in his earlier statistical analysis, such as the shift from manufacturing to services and the strengthening of dependence on knowledge in the economy? Using in particular the evidence gleaned from the south-west and from Cornwall county council about their development of a university for that region, the Committee report refers to the importance of higher education, saying that it is critical to ensure that businesses in those regions have the knowledge and skills to compete globally. Therefore, the critical target for us is through the next comprehensive spending review to increase higher education funding so that we get enough university places, not a reduction in them, to ensure that all parts of all regions can ensure that their citizens have the skills to compete in the global knowledge economy.
Mr. Hopkins : I broadly agree with my hon. Friend. I intended to make precisely those points towards the end of my speech. We have to develop the regions in many ways. The economy has evolved and we are moving on. I will not say that manufacturing will not be a substantial part of our economy in the future, because it must be. I want to defend manufacturing, but clearly the economy has developed and other parts of the economy are growing in relative terms.
As my hon. Friend the Member for Manchester, Blackley said, we want to shift all sorts of economic activity, such as cultural and Government activity, away from the centre and to redistribute it. I refer hon. Members to a recent report by a splendid organisation called Catalyst, a recently established Labour movement think-tank chaired by Lord Hattersley of which I happen to be a member. It produced a report, "Decentering the Nation: A radical approach to regional inequality," in which it suggests shifting great chunks of every type of central organisationGovernment, cultural, and economicto the regions in an effort to develop large regional centres and to even up
We must secure a shift from the centre to the regions. When that happens, the economy will grow faster. In the post-war era, when redistribution was greater in every sensetax rates for the rich were higher and the gulf between the rich and the poor was narrowerour economy grew more quickly. We had full employment and relatively low levels of inflation, demonstrating that it is possible to have full employment and high growth without high inflation. I constantly draw attention to that successful era and contrast it with more recent decades in which western Governments have made serious mistakes in the running of their economies.
I want to touch on other factors, such as transport links, but I do not want to take too long as other hon. Members want to speak. Transport links are vital now that we are part of a larger economy, yet Britain is almost peripheral to the European economy. I take a sceptical view of the euro, but it is important that we are linked closely to the European economy and that we grow with it, so that we can engage in export and import trade with our European neighbours. In order to achieve that, we need good transport links, especially as we are an island that is geographically peripheral to Europe. The northern and Celtic areas of the United Kingdom are even more peripheral, and they have great difficulty in linking to the golden triangle in the centre of Europe. We need better transport links. In particular, we need a dedicated freight railway from the northideally from Scotlandto the channel tunnel that skirts London. That would give us a direct roll-on, roll-off railway link between the economies of the north and those of Europe. If we do not have such a link, our peripherality will continue to damage the economies of the north, Wales and the south-west. We must have better transport links.
My hon. Friend the Member for Manchester, Blackley spoke about European regional funding. I hope that no one thinks that the rather small amounts of money that come from Europe will make much differenceas my hon. Friend said, we are net contributors to the European budget, even on a regional level. We have to talk big when talking about redistributing economic activity to the regions. We must put to one side the rather minor sums that come from Europemoney that is paid more for propaganda reasons than because it would be a major benefit to the economy. If we wanted to do so, we could stop contributing to the European budget and spend the money on regional policies.
There is also the question whether such money is really additional. The coalfields had a problem because the Conservative Government took away the money paid for coalfield support simply because money was coming from Europe. The European money was not additional. The additionality problem probably persists. I want the present Government to take steps to ensure that all citizens of Britain have an equal crack of the whipwherever they live.
Mr. Deputy Speaker : Before I call the hon. and learned Member for Redcar (Vera Baird), may I tell the House that it is the normal practice for wind-up speeches to start at 5 o'clockthat is 10 minutes each.
Vera Baird (Redcar): I, too, congratulate the Select Committee on producing a report that is both penetrating and comprehensivea difficult combination to achieve. As my hon. Friend the Member for Denton and Reddish (Andrew Bennett), the Committee Chairman, said, it is important to note that the Treasury has accepted since 2000 that the national economy will not flourish as well as it might unless there is growth in all regions. That is crucial, because it would make regional policy a lever of and a part of national economic policy. Hitherto, regional regeneration and aid have been seen as quasi-charitable, and the amount of money handed out has fluctuated with the Government's view of what can be afforded. That approach should now be over. A commitment to national growth should now also be a commitment to regional growth. However, that needs to be emphasised again and again.
I first referred to what I called a conceptual change in my selection speech in Redcar in 2000. Redcar is in the north-east, an area that has already been fully described by the right hon. Member for Berwick-upon-Tweed (Mr. Beith). I shall not repeat what he said about the levels of deprivation that are to be found in the north-east, but they are found particularly in Redcar.
Although I referred to a conceptual change in late 2000, I must say that it has not yet permeatedI shall put this as delicately as I canto all the public servants involved in the relevant policies. Indeed, the north-east is still treated by the Government's public servants as though it were a supplicant. It seems to me that the 2002 spending review established two different ingredients to this new concept: the need to grow all the regions, and the need to reduce the gaps between them. I appreciate what has already been said about this, but there is clearly no commitment to close the gap absolutely in any spending review that I have seen.
There have been persistent regional differentials for more than 50 years. There are serious and entrenched market failures in drivers such as skills, innovation, investment and competition and in levels of employment. To someone from a constituency such as mine, however, it is cheering that the Treasury believes that market failures in regions such as mine can be tackled by raising the trend growth by 0.5 per cent. for the worst performing regions. Such a rise would increase our national GDP by more than £15 billion, which connotes the importance of encouraging regions such as mine.
I accept up to a point the Government's general view that the successful solution to regional problems must usually be rooted in the regions themselves. They have evidence of the efficacy of that approach in the success of the regional development agencies. My region's RDAOne NorthEastwas the first further to devolve substantial resources to a sub-regional partnership, the Tees Valley partnership. That move brought great flexibility and provided much greater access to
Essential though regional action is, however, it is imperative to mainstream regional development policies across all Departments. A regional impact assessment process should be undertaken on all policies with a significant spend and with the ability to have an impact on the regions. That would ensure that the aim of growing the regions and reducing the gaps becomes a reality. It would also clarify the impact of policies.
Some policies do, of course, have an adverse regional impact. The North East Assembly identifies two fundamental ways in which current Government policy benefits the south-east at the expense of the regions. The first is by accommodating housing pressure in the south rather than by using that pressure to invest in the north. The second is by concentrating transport spending in the south-east. The Office of the Deputy Prime Minister's policy of investment in affordable housing in the south-east will lead for a long time to investing approximately £9.60 per head in housing in the south-east compared with £7.60 in the north-east. That is likely to draw more people to London, which will increase the pressure there. That does not greatly assist London's economy and will pull more people away from regions such as the north-east, thus increasing regional disparities.
The criteria used in transport decision making are weighted towards reducing congestion. That means that resources are being used to deal with the consequences of success, not to lay the foundations for economic growth to generate success in less prosperous areas. The Federal Republic of Germany allocates a proportion of its transport budget to regional development. It is hard to read that approach into the Government's 10-year plan for transport. In their response to the report, they said that they could read the runes of this plan to find a reflection of that, but I cannot.
Mr. Hammond : What the hon. and learned Lady is saying is all perfectly coherent. The trouble is that it ignores some inconvenient facts about the real world. My constituents in an area close to Heathrow suffer enormous infrastructure congestion. However, companies in west London, Surrey and Berkshire say that when deciding location, the single most important determinant is the proximity of Heathrow airport. We might not like itmany of my constituents are extremely irritated by itbut it is there. We cannot wish it away without enormously damaging our economic prosperity as a nation, and we cannot just redistribute that infrastructure investment without causing collateral damage.
Vera Baird : I am grateful to the hon. Gentleman for complimenting me on my coherence. I fear that he is re-running something that he has already run before in a very specific form, and that has already had an adequate answer from some of my colleagues.
I turn to an occasional mismatch in policy provision. The regional impact assessment is needed to guard against such a mismatch. The Government have a strong supply-side approach to unemployment in programmes such as the new deal, which, in some regions, work very well because deprived communities are located very close to jobs and the obstacles are likely to be poor transport, lack of skills and probably some race discrimination, for example in some London boroughs. However, in the north-east, particularly in the Tees valley, the opportunities just do not exist. As my constituents all too frequently make me aware, new deal-type programmes alone are inadequate. In Hackney, where the barriers to employment are likely to be lack of skills and discrimination, that kind of supply-side approach can be wholly efficacious, but in Hartlepool there simply are not the jobs in a reasonable travel-to-work area to make it effective on its own. I quickly point out that I am not the Member of Parliament for Hartlepool, which is probably clear even to the most casual observer, but I could not find any London borough that was alliterative with Redcar.
I turn briefly to European structural funding post 2006. We are an objective 2 area. Assuming that the Commission will agree common principles for regional policy but that delivery will be devolved to national Governmentsthat is, structural funds will be renationalisedit is crucial, as my hon. Friend the Member for Denton and Reddish said, for there to be an additional sum of transitional funding over and above extant UK regional policy transfers; otherwise, regions such as mine will lose out very badly.
When that change comes, there is much hope and much need for less bureaucracy. At present, although those funds are hugely important to a region such as mine, the very curious structure of some of the priorities in our objective 2 programme straitjackets that programme. There are odd terms attached to some of the grant funding. I cannot really comment on this myself, but one member of the regional development board has suggested that the complicated straitjacketing restrictions come from the Department of Trade and Industry, not from Europe. At the moment, only 33 per cent. of the European structural funding available to the Tees valley has been committed, although this is the fourth year of a seven-year programme. That is simply inadequate. There are a number of reasons, including the perceived high levels of bureaucracy, but also the very queer rules. Priority 2 of the financingI am indebted to the Tees valley joint strategy unit for thisprescribes high levels of support to 20,000 businesses. The unit tells me, which I accept, that there are only just 20,000 VAT-registered three-year-old businesses in that area. Extremely high levels of take-up of supportpractically everyone in business thereare envisaged, which is wholly unrealistic. The levels of support for businesses younger than three years are quite different. That pretty random example shows that it is not surprising that Euro-programmes have a long history of underspend. They are difficult to find their way through, and we hope for and need simpler, more appropriately directed structural funding, if it is renationalised.
I, too, shall mention the Lyons inquiry, perhaps with more optimism than others have. The interim report on 9 September detailed a plan to locate various Government agencies in deprived areas on the basis of a
As the Chairman of the Select Committee said, it is crucial for the moves to be to poorer locations where costs are low, not to overheated locations. The Tees valley presents an example. The rent there for commercial property is 15 quid per square foot, as opposed to £65 in central London. The total cost per square foot in London, including services and rates, is £90, whereas it is £22.50 in the Tees valley. There is a 404 per cent. difference between the Tees valley and London figures, and my fifth-form mathsthat is as far as it ever extendedhas none the less enabled me to calculate that the savings on a 10-year lease on a typical 50,000 sq ft block of office space would amount to £34 million.
Constituency patriotism prompts me to say that further analysis shows that a move to the Tees valley would save £7.5 million more than relocating to Manchester over the same period of time. It would involve some saving in comparison to anywhere else. It is clearly important that relocations are to the right place. Huge decreases in unemployment benefit costs can result, because more jobs are created. There is not really displacement, because those left jobless in the London area fill other vacancies there. In addition, the influx of people on average salaries would stimulate Tees valley regeneration and local markets.
Unemployment is twice the national average and in three wards in my constituency it is at 17 per cent., but the working population enjoy a higher standard of living than the national average, because of the relatively low cost of property and houses. The introduction of other people with similar levels of disposable income will generate more demand for amenities. The joint strategy unit, to which I could not be more indebted, has calculated that for every 500 jobs moved to Teesside an additional 95 to 125 would be likely to be created locally. That glimpse makes it clear that much is to be gained.
I was very pleased when, after I asked this very day in Treasury questions whether the Chancellor's promise of the dispersal of 20,000 civil service jobs was a maximum, I received the answer that because the decisions are based on a business case there may be scope for treating the figure as a minimum.
Regional devolution will not, on the face of it, make much difference unless it is accompanied by reallocation of resources. Democratically elected bodies should make better use of resources that they are given. However, not only will they not be responsible for Government offices, but they will not be responsible for learning and skills councils either. The move to regional control of the levers of regeneration is very partial, in a democratic sense.
Will things change but stay the same? I think not. The change can be seen as a first step. At the root of the question of regional equality is the issue of the centre of power being in London and the south-east, both historically and now. I, too, am impressed by the Catalyst publication, "Decentering the Nation", although I cannot afford a subscription as my hon. Friend the Member for Luton, North (Mr. Hopkins) can.
The geography of British power is seen from the pretty small and introspective space that we occupy, which one might see as a modern version of a royal court. As a result, significant elements of national policy function effectively as an unacknowledged regional policy for the south-east. The frequent implication that London and the south-east "succeed" through their intrinsic qualities, while other regions fail, ignores that. The only serious way to tackle the issue of regional inequality is not to adopt post hoc policies of compensating, but to intervene in the dynamic that produces it.
I look forward to regional devolution, but I accept that it is only a first step in its current form and assert that once some power has been devolved it should be used to ensure that more of the levers of regeneration are wielded from where they will be most effective: a nodal centre of power in each of the regions.
I congratulate the Committee once again on what I have found a very thought-provoking and well-thought-out report. I congratulate the Government on their twin-track approach in their new integration of regional development with central economic development, and their policy of devolution of power. As an MP from a very deprived constituency in a very deprived sub-region of a very deprived region, I darealthough it is a sunny Thursday, which may be having an impactto feel optimistic.
Ms Karen Buck (Regent's Park and Kensington, North): I fear that by the time I sit down I may not be able to guarantee my personal safety on leaving the Chamber, nor that of my hon. Friend the Member for Hammersmith and Fulham (Mr. Coleman), if he is able to catch your eye, Mr. Deputy Speaker. Although I start by welcoming the debate and much of what is in the report, and I shall spell out a few areas on which we might have common agreement, the thrust of what I am going to say will go to the heart of the question of whether regional disparity is what we should be most worried about.
I welcome the report and the chance to debate it. It contains rigorous analysis and it spells out several real problems that cannot be denied. Of course there should be strong economic growth across all of the regions; of course this country will prosper most if all of the regions are able to prosper and if the very real social and economic problems that blight some regions and areas within them are tackled. Areas that have suffered from a collapse of manufacturing industry and the former coalfield communities have had decades of devastation imposed upon them, and generations have grown up in unemployment and poverty as a consequence. Some of the reasons behind that have been touched upon in relation to problems of inward investment and the recent strength of the pound. They are economic problems that UK plc needs to address.
Of course it is absolutely right that major infrastructure projects that deal with some of those regional imbalances should be supported. My hon. Friend the Member for Luton, North (Mr. Hopkins) talked about a particular railway link that I totally support. For decades, the sort of major capital infrastructure that we need to benefit the whole country and all its regions has simply not been forthcoming. Ratcheting up our investment in research and development and capital infrastructure to deal with some of those problems is long overdue.
I totally agree that strong and accountable regional government, and accountability of existing regional institutions, are good thingsI hope that there is consensus on that. Local government has consistently been underappreciated as part of the engine of economic growth at local and regional level, and it should be supported.
As an aside, before I come to the core of my remarks, I very much welcome the references in the report, and by other speakers today, about the census. If we cannot rely on accurate information about our population and its characteristics, we will not get right the measures that are needed. The massive undercounting of the population in central London has left us with a serious problem, and the recent adjustment to the census statistics for boroughs such as Westminster still leaves us below the funding floor. We need to set aside our prejudices against the London borough of Westminster for a minute, even though some of them are absolutely justified. The fact is that when the population is growing, as it is in central London, and there is a failure to provide the necessary investment to support that growth, a large problem is being stored up. That is a problem that we will have to grapple with. I endorse the remarks made in the report and elsewhere about the Office for National Statistics and the need to take a more imaginative approach to how we obtain accurate population counts.
The report refers to the relationship between neighbourhood renewal and regional economic growth, which the Government have not got right. The central point is that the regional argument misses more issues than it addresses. We must get beneath the issue of regional imbalance to examine the real problems.
I am speaking as a London MP. London is a driver of the UK economy and should be supported in that role. I appreciate that we should not hold back other regions, as the Government have recognised, but neither should we hold back London's economic progress, because that would be bad news for the rest of the country. In regarding London as a prosperous region, we are missing the real problem of redistribution. My hon. Friends would all say that redistribution is at the heart of their politics.
London is indisputably the driver of the UK economy. Depending on which statistics one uses, London contributes £10 billion to £20 billion to the UK economy. It also contributes significantly more in terms of taxes of all kinds than its population warrants. It contributes 21 per cent. of UK GDP and contains 12 per cent. of the UK population. The financial and business sector has been the major growth area in the London
When discussing overheating, other Members have fairly cited the example of investment in transport and housing infrastructure. The failure to invest in housing infrastructure over the decades has contributed to some of the problems in London and the south-east. Successive Governmentsunfortunately, the Labour Government do not have a blameless recordhave not built houses. We have failed to build houses, in particular affordable housesthe luxury end of the market seems to be doing okayand that has caused problems.
The lower end of the economy, the entry-level job sector, is hoovering up jobs from the rest of the world, particularly from Europe. I am not talking about asylum seekers, but about students and workers who come into this country on legitimate work visas. They often live in appalling and dreadfully overcrowded conditions in order to fill the jobs that Londoners cannot take because Londoners cannot get over the cost of housing and other hurdles. That is not an overheating problem, but the result of a lack of investment over the decades. Had we been building affordable homes at the sort of rate at which we were building them in the 1960s and 1970s, we would not have the current problem with the London economy, where the jobs that are pulled in stoke up the difficulties.
Mr. Hopkins : My hon. Friend is right about the housing problem. Does she agree that it would not be as great if we had not sold millions of council houses and subsidised those sales from the historical equity in the public housing sector?
Ms Buck : I agree that there was a rush to right to buy. If anyone were to get their hands on right to buy in the housing association sector, there would be a fresh disaster. The right to buy led to the decline in affordable housing opportunities in the areas where people need to live in order to go to work, and houses to replace the stock sold were not built. The situation was complicated because the need was to build alternative accommodation close to that which was being sold, which was in the most popular areas. It is no longer possible for either key workers or people in entry-level jobs to live in such areas. As it was a populist measure and not a housing measure, the right-to-buy policy created many of the problems with which we are now grappling. Had we built replacement houses in the right places over the past two decades, we would not have the problems that we do.
We cannot build affordable housing in London and the south-east to support the economy and to deal with our crisis of homelessness and overcrowding without a transport infrastructure, including Crossrail, because without that infrastructure people will not move there. It might sound perverse, but the only way to deal with the overheating of the economy of London and the south-east is to tackle the causes of the pressure that brings the difficulties. By making such investment, we shall release the brakes on the London economy, which
My second point centres on the argument in the report about neighbourhood renewal. We have to go beyond the concept of regions, because regions do not tell us the whole story. London has some of the highest wages and property prices, and rates of population growth and job growth in the country; that is a success story that is good for the whole country. However, alongside those successes, London has the worst problems. I do not exaggeratepeople from Liverpool, Newcastle and elsewhere can tell valid stories of deprivation, but London has the worst problems. Four in 10 London wards are among the 20 per cent. most deprived in the country, and it has the highest level of economic activity anywhere in the country outside Merseyside, despite a strong labour market. London has the highest unemployment of any region in the UK, at 7.1 per cent. compared with a 5.1 per cent average in the UK as a whole. There are more unemployed in London than in Scotland and Wales put together. London has well above the national average long-term unemployment rate, at 19.3 per cent.
The impression that economic inactivity is worse in some of the regions is not justified by the figures. My constituency, Regent's Park and Kensington, North, that lovely, leafy prosperous-sounding constituency, has the 11th highest entitlement to free school dinners in the country and unemployment higher than that of Middlesbrough, Jarrow, Easington, Knowsley and Liverpool, Garston. All of the images of central London, Westminster and Kensington being incredibly prosperous are blown apart by the facts. If we do not appreciate that that is the case, and do not allow for the investment to tackle the problems, London's economy will be held back, the United Kingdom economy will suffer and we will not meet any of the targets that matter to my colleagues and me, such as those on child poverty, education and employment.
In practice, resources are being shifted. Housing maintenance is shifting, but we lost a share of regeneration cash the last time that the index of deprivation was updated and we have a declining share of public expenditure. If the share of public expenditure declines in London, our ability to provide a safe, well policed, healthy and well educated city will go out of the window. We are already on the edge in many respects, despite the general economic prosperity and the overall investment by the Government. London has the needs to justify investment. It is a mistake not to air those needs and I appreciate the opportunity to do so.
In the final analysis, we cannot kill the goose that lays the golden egg. We need to increase investment and employment opportunity in all sectors. We must tackle the chronic, desperate problems of Liverpool, Newcastle, the north-east and the regions, but we cannot afford to do that at the expense of the capital city.
Mr. Iain Coleman (Hammersmith and Fulham): I welcome the opportunity to speak very briefly in this important debate on the Select Committee report. What I wish to do in my brief commentsalthough after the
I note that at present the Select Committee has no members drawn from London constituencies. I hasten to add that I draw no conclusion from that. With your indulgence, Mr. Deputy SpeakerI am aware that my hon. Friend has already done this much better than I canI wish to give some facts that will show that London suffers from very high levels of poverty and deprivation.
In London, 23 per cent. of households with dependent children have no adult in employmentthe highest percentage of any region. In inner London, that rises to 34 per cent. Inner London also continues easily to have the highest level of child poverty in the UK: a staggering and shameful 48 per cent. Nearly 25 per cent. of working-age Londoners are without a job. In inner London, 35 per cent. of pensioners live in poverty. That figure is massively higher than the English average of 21 per cent. More than 50,000 homeless families live in generally very unsatisfactory temporary accommodation in London70 per cent. of the total for the UK. In April 2001, 80,000 asylum seekers were being supported by London boroughs. The vast majority were living in substandard, unsatisfactory temporary accommodation and suffering from the inevitable high levels of poverty and deprivation that they brought with them.
However, I am pleased that the Select Committee acknowledged that London has some of the most deprived communities in the country. It recognised, for instance, the high number of jobless and the substantial deprivation, and it noticed that the housing market, which will come under increasing pressure as the population grows, was under considerable strain. A recent report projects a rise in population of 700,000 by 2011. London also has a transport infrastructure that simply has not kept pace with the city's changing needs over the past 30 years.
Many of us in London have known all that for a long time. It came as no surprise when in July the Downing street strategy unit published its independent report, which confirmed the depressing position in considerable detail. The London study proves beyond dispute that London, although it has pockets of considerable wealth and affluence, also suffers badly from deprivation and a poor public service infrastructure, which would be made much worse if further public funds were to be diverted from the capital.
London Labour MPs recognise that many regions of the country suffer from long-term poverty and economic decline. For example, many old coalfield communities have been through deeply traumatic times in recent decades and desperately need financial assistance and investment from the Government. No sensible person would query that view or argue that such regions should
I am horrified by an example that came to my attention in the past few weeks of money being taken out of London. It is the so-called consultation announcement by the Office of the Deputy Prime Minister about the management and maintenance allowances allocated to local authorities and housing departments in the capital city. I wonder whether the Minister in his closing remarks might comment on that. I am reliably advised that as a result of the new formulae that the Government seek to introduce in 200607the first year after the transitional relief arrangements taper offLondon will lose £170 million. The inevitable effect of the loss of that money will be that tenants in Londonthe vast majority of whom support the Labour party and put it in governmentwill face swingeing cuts in the management and repair service that they currently receive from their landlords. As London tenants also face rent increases way above the rate of inflation every year for the next seven years as a consequence of the Government's ill-thought-out rent restructuring arrangements, that new effect on resources to London will come as a double whammy to our tenants.
I am told that the money will be reallocated to other regions of the country, but I fail to understand how the Government will explain that betrayal to tenants in London, many of whom are already living in poverty in very poor quality housing that is in desperate need of renewal and proper maintenance and repair. London scores far too high on unemployment, housing and a range of other agreed measures of deprivation, as I have shown.
We are suffering from deprivation and poverty, and the misery and human tragedy that inevitably accompany poverty. Any policy to remove yet more public funding from London would lead to a further increase in poverty and deprivation.
Although I note that the Select Committee report is an important contribution to the debate on the economies of the English regions, its conclusions do not stand up to serious and vigorous scrutiny and analysis.
My experience amounts to having had the opportunity and the honour to serve as a deputy chair of a regional development agency for three years. At the East of England Development Agency, we always acknowledged that the spend that we had was important but that it would never be a determining factor in the overall direction of the economy of our region. Our spend was about £25 million, and had increased to about £50 million by the time that I left, against the background of a regional economy that is now worth about £80 billion.
We were not bothered about being first, second oras we startedthird in terms of GDP per capita; we were concerned about being 44th on the list of European regions. The critical issue for us was not competition with the rest of Britain, but with Baden-Württemberg and Catalunya, and those other places to which our inward investors said that they would contemplate changing location, if they could not get the right quality of life and transport infrastructure. The more obvious aspects of direct public expenditure were not critical to changing the performance of the majority of the private sector spend in our region, which, as mentioned, is now about £80 billion.
No one has yet mentioned the Government's response to the Committee's criticism about the allocation of some departmental resources. My hon. Friend the Member for Denton and Reddish (Andrew Bennett) referred to research and development but he did not touch on Ministry of Defence spending, which is enormous and has a significant impact in the regions. The Government's response was inadequate because of their temptation to hide yet again behind the argument that there is a security or military argument for defence investment at particular locations. Those arguments are not transparent to the Committee, or anyone else. Previous speakers made the point about the development of a little political will in the Government to tackle such things. I suspect that this is one area where significant progress could be made for some regions.
As my hon. Friend the Member for Manchester, Blackley (Mr. Stringer) pointed out, some regions have to run faster than others to make the progress called for by the Government targets, which we all support. Some regions will have to make considerably more progress in their economic growth than regions in the south, the east and in London.
I return to a point made by my right hon. Friend the Prime Minister that was rather unfairly dismissedas my hon. Friend the Member for Manchester, Blackley, who spoke about the matter, returns. I did not feel that the Prime Minister sought to dismiss the disparities between our regions. Like my hon. Friend the Member for Luton, North (Mr. Hopkins), the Prime Minister was reinforcing the point about intraregional disparities. The case has just been made in relation to London. Such disparities are very much present in a region such as the east of England. Luton, Great Yarmouth, Waveney, Harwich, pieces of inner-city Norwich and parts of my own town, Ipswich, are in need of continuing investment and action.
To tease my hon. Friend the Member for Luton, North, perhaps he should not argue for freight to be transported through congested Londonblocking up paths that are important for Crossrailon its way to the channel tunnel, but should in fact support the proposals for upgrading the Felixstowe to Nuneaton route to take freight out through Felixstowe, which is one of Britain's major ports. Felixstowe is where many of my constituents work, but it is important for the nation as a whole that that cost-economic option, which was the
The Committee produced a good piece of work and the Government made some good points in response, but no one should underestimate the challenges that lie in meeting the targets for economic development in some regions.
Mr. Deputy Speaker : Before I call the Liberal Democrat Front-Bench spokesman, I just want to say that we have a little more time than I had anticipated, so Front Benchers can stretch the 10 minutes a little. However, I want the Minister to have adequate time to reply to this important debate. If we have a moment or two after he has sat down, it is appropriate for the Chairman of the Committee to have the final word.
The debate has been good, because of the quality of the report. The Select Committee is getting a reputation for being one of the best in the House and is putting new information into the public domain through its work. It is worth placing on the record our thanks to its members.
I found some specific points useful, such as the recognition of the difference between inter and intra-regional problems. Although there has been some debate on the different merits of London and the English regions, the report tries to deal with that issue. Indeed, it states specifically that they have different problemsfor example, with respect to unemployment. The unemployment problems in London may be about supply-side issues, but as the hon. and learned Member for Redcar (Vera Baird) suggested, the unemployment problems in her constituency and region may be on the demand side. Those inter and intraregional problems can be addressed only if the policy agenda is sufficiently flexible.
The Committee did a good job in criticising the PSA targets. My right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) helpfully added to those criticisms with his point about the tyranny of averages. The Government must be rather more intelligent in their approach to such targets. The Committee's proposal for a scorecard of targets is good, particularly as it includes quality of life. I shall explore further the options for quality of life and sustainability, because our debate is marred by the fact that we too often measure things in accounting terms and do not look at the quality of life on a wider level. Londoners who visit other regions can sometimes find their quality of life to be quite pleasant, but the figures often take no account of that. We have some quality-of-life problems in London that may not be found in other parts of the country.
Some of the thrust of the policy recommendations is right, particularly the idea that we must try to make conditions in less prosperous regions more conducive to business. That was a powerful proposal, but it has not been mentioned much in today's debate. The argument about the need to put sustainability at the heart of the regional economic agenda was also well made in the report.
I wanted to focus on two things that have either been criticised or not mentioned todaythe private sector and its role in supporting regional prosperity, and the political dynamic coming from regional devolution. Some have criticised proposals for regional devolution, saying that it will not deal with the problem; but those who make such criticisms misunderstand the power that will come from full-bodied regional devolution.
We have heard that regional devolution will not change the way in which money is allocatedthat it will divert money, but that the cake will not be split in any other way. There have been calls to keep the centre strong, and to reallocate the cash in different ways. I think that people misunderstand how regional devolution will help.
Mr. Hopkins : I am interested in the hon. Gentleman's enthusiasm for regional devolution. However, my hon. Friend the Member for Manchester, Blackley spoke about the need for massive fiscal transfers from the centre. It is already the case, is it not, that since devolution to Scotland and Wales, big fiscal transfers, particularly to Wales, are now inappropriate, and that in time Wales should become self-sustaining? Would the hon. Gentleman not agree that such independence might lead to fewer or smaller fiscal transfers to the regions, not more?
Mr. Davey : I think that that is highly unlikely. Of course, some people will always say that an areaWales in this caseshould not get more money, but that is not likely to happen. The experience of devolution in Scotland and Wales is that the political leaders have much greater power; they can ensure that the money is spent more efficiently and effectively, and can better champion their area.
Mr. Stringer : Has the hon. Gentleman had time to read the memorandum submitted in evidence by Andrés Rodrigues-Pose? That gentleman has studied devolution across Europe and has reached the opposite conclusion. He says that devolution is fashionable, and concludes:
Mr. Davey : I have not read that memorandum, but I will certainly do so. However, I have read works by other economists who reached the opposite conclusion, so I do not rest my analysis on one memorandum to the Committee. There is a lot of important international
Mr. Hopkins : I apologise for intervening yet again, but is it not the case that some of the poorer states in the United States of America exist only because of massive federal fiscal transfers? Defence bases and so on are set up to ensure that such states do not suffer, so the centre solves the problem of regional inequality, not devolution.
Mr. Davey : No one who is pushing the devolution or decentralist agenda has ever suggested that there will remain no fiscal transfers through either tax or benefits; no one, to my knowledge, argues that. Also, America has a much greater spread of wealth between different regions and cities, and has much less intrastate equality, and we would not want to adopt the American model in other respects. Wealth is spread out across the cities there in a way that we do not see in the UK.
I want to argue for regional devolution. One must look at it from a dynamic point of view. The reason why there have been such regional imbalances over such a long period50 years according to the report, although it is probably longer than thatis that we have a centralised system of government. Everything is decided in the capital, and with political power so rooted in centre, business and finance are of course attracted there. Once power is devolved, and assemblies and politicians in the local government areas are given real power, we shall see not only the public sector but the private sector responding. The process involves a dynamic. One of the the greatest reasons for regional devolution is the failure of centralism to tackle the problems that many hon. Members have been concerned about today.
The challenge for the Government is that their regional devolution agenda is so weak. "Your Region, Your Choice" is a disappointing document, as we have argued on many occasions. The hon. Member for Manchester, Blackley (Mr. Stringer) is right that it does not present the agenda that those of us who believe in devolution want to see enacted. We want to see much more ambitious agendas, and perhaps we would have a different view if the Government adopted one.
I should like to focus on three subjects, and I urge colleagues to knock on Department doors in Whitehall to ask that the relevant powers in relation to those subjects be devolved to the Office of the Deputy Prime Minister, so that they will be included in the Bill on the future regional assemblies. The three areas are transport, skills and the environment, which are particularly important if we are to deal with the regional differences. Transport is important because we must ensure that people, goods and services can flow. Skills are important because we live in a high-skill, knowledge economy, which is crucial. We should also focus on the
I am pretty clear from my discussions with Ministers that before the powers Bill is drafted the Office of the Deputy Prime Minister has no intention of unpicking the deal that was in "Your Region, Your Choice". The Office of the Deputy Prime Minister therefore has no will to knock on any other doors in Whitehall to add more powers. That is the problem that we face. Those of us who want bolder, stronger devolution must go out and persuade Ministers in the Departments for Transport, for Education and Skills and for Environment, Food and Rural Affairs that they should be giving up power and knocking on the door of the Office of the Deputy Prime Minister, asking for some of their powers to be included in the future Bill. If we as Members of Parliament can rise to that challenge and campaign for more powers to be included in that Bill, that will be significantnot least, as my right hon. Friend the Member for Berwick-upon-Tweed said, because it will then be much more likely that we will win the referendums in the three northern regions next autumn.
Mr. Jim Cousins (Newcastle upon Tyne, Central): Does the hon. Gentleman think that our efforts to promote those additional powers would be helped or hindered by the prospect of much more revenue being raised at local council or regional level by a local or regional income tax?
Mr. Davey : I think that they would be helped. I certainly see a local income tax as key to the devolving and decentralising of powers. Those countries that have local income tax tend to be the ones that have decentralised power very effectively. It was in the three fields of transport, skills and the environment that the White Paper was very lucid. It made a strong case for those powers to be decentralised, but it did not follow that up. Some of those areas already have the organisation for that, through regional government. The RDAs will go into the regional assemblies, but the learning and skills councils, too, have a regional dimension. It is absolutely bizarre that they are not put together with the RDAs to make elected regional assemblies very powerful in the skills agenda.
On transport, the Highways Agency has regional committees. Even the SRA operates on a regional basis. There is no reason on God's earth why those transport powers and functions cannot be given to elected regional assemblies. County councillors get very annoyed that the Highways Agency can come along and decide that it wants to do something or, in the case of some road projects, not do it, which can get in the way of the county council's strategic plans. Surely, now we are to have regional assemblies it would make real sense for the Highways Agency to be broken up and to be accountable to the regions in which it is spending important money. On the environment, there are so many quangos such as the Environment Agency, the Countryside Agency, the Forestry Commission and no doubt many others. They should all be accountable to the people whom they are supposed to serve.
Other hon. Members have quoted examples that show that we are going in the opposite direction. In my constituency, we had a big Ministry of Agriculture, Fisheries and Foodas it was thensite at Tolworth. That was closed down and the civil servants moved, but they were not moved to the regions. They were moved to Page street, in central London. I questioned the permanent secretary and other civil servants at the time on the financing of that, and they could not really make a case. The only real reason was that they wanted the chief vet next door, so that they did not have to wait for him to travel up from Tolworth. That is how such matters work. Departments want their civil servants right by them, so that they can keep an eye on them, because in this centralised political culture, the Departments must be kept close by in order to do their job. If power is pushed down to the regions so that people have to be accountable in those regions, the civil servants will go with the political leadership. Jobs will follow. That is why regionalism is so important.
Mr. Hammond : The hon. Gentleman said that Ministers want their civil servants close by so that they can keep an eye on them. Has it occurred to him that it might be the civil servants who want to keep an eye on their Ministers, and that that might actually be for the good of the country?
Other points have arisen during this debate and, as a London Member, I want to refer to the London regions. The hon. Member for Regent's Park and Kensington, North (Ms Buck) put the matter very well. There is real poverty in areas that are usually perceived to be wealthy and prosperous. My constituency of Kingston and Surbiton is perceived to be homogenously prosperous, but nothing could be further from the truth. Some people, I am delighted to say, are very wealthy with high incomes and that is good, but they distort the average. People look at the average of wealth and income in my constituency and think that that applies to everyone, but it is only because some people are incredibly wealthy that they mask a long tail of people on modest incomes and some on very low incomes. There are some shocking housing conditions in my constituency and real poverty, and that point has been well made by other London Members. It is important that the Government have a multi-faceted approach because it is not just a question of dividing the cake of public expenditure in different ways.
Mr. Philip Hammond (Runnymede and Weybridge): This has been an interesting debate. We have heard some heartfelt speeches, all of which will play extremely well in hon. Members' local and regional press during the next few days. At one stage I feared that I would be isolated in my views, but the hon. Members for Hammersmith and Fulham (Mr. Coleman), for Regent's Park and Kensington, North (Ms Buck) and for Ipswich (Mr. Mole) changed the geometry of the debate a little towards the end. I should hate this to end up as a north-south division in the debate.
I represent a south-east constituency, but I have lived in the north-west and the east midlands and I recognise people's concern and anger about the waste of human resources in regions where economic growth is inadequate to ensure full employment of all the resources available. My concern is that in trying to address that problem, we must not, to use the phrase of the hon. Member for Regent's Park and Kensington, North, kill the golden goose. That is the issue at stake.
The Select Committee's report is detailed and thorough with some useful analysis, but I must tell the hon. Member for Denton and Reddish (Andrew Bennett) that I found it depressingly old fashioned in its focus in its conclusions on public spending solutions to all the problems that it identified. I would be critical in isolation of the focus of the Committee's report on relative measures to reduce disparities rather than absolute measures, because I suspect that to our constituents absolutely prosperity is more important than relative prosperity. The Committee is effectively absolved from that criticism because it was addressing the Government's focus through the PSA target.
The hon. Member for Manchester, Blackley (Mr. Stringer) and the hon. and learned Member for Redcar (Vera Baird) have already identified the aspect about which I was somewhat disturbed: the disjunction between the Government's target and that addressed by the Select Committee. The report reads as though the Committee was addressing a set of Government policies designed to reduce disparities in regional prosperity, but that is not what the Government's target does. It sets out to reduce the disparity in growth ratesin other words, to slow down the growth of that disparity in regional prosperity, but certainly not to reverse it. I wonder why the Select Committee did not challenge the PSA target more forthrightly or consider whether the Government should put different targets in place.
I understand the concerns that have been expressed about disparities in regional growth and prosperity. However, I must warn hon. Members who have spoken today and members of the Committee that they are looking the wrong way. Their eyes are off the ball. The relative growth about which we need to be worried is between ourselves and our competitors overseas, especially in places such as Asia. Even the Prime Minister has recognised that. I believe that the hon. Member for Ipswich made that point.
Someone who used to work in a factory in the north-west or the north-east that is no longer there and who goes to a shop that sells items that they used to make will not see the words, "Made in the greater south-east" on the bottom of those items but99 times out of 100"Made in China." If a call centre in Hartlepool or
The Committee made it clear, and I am glad that it did, that it advocates raising the game of the weaker performers, not seeking to achieve the target of reduced disparity by limiting the game of the stronger performers. Fortunately, the Government's response strongly supports that view. No one disputes the need to encourage growth in under-performing areas, but it must never be at the expense of what I would call, at the risk of raising the ire of certain members of the Committee, the locomotive areas of the economy.
Mr. Mole : Will the hon. Gentleman tell me how he squares what he has just said with the views of the Conservative majority involved in the south-east regional planning processes on Professor Stephen Crow's report on housing demand in the south-east and, indeed, with their continuing opposition to the communities plan, which is very much about ensuring that the locomotive of the nationI believe that is how the hon. Gentleman described itstays at full speed?
Mr. Hammond : It is a question of balance. I am sure that we do not want to turn this debate into a debate about the communities plan, but the concern about the plan is whether it is a sustainable solution and whether the concreting over of large areas of the south-east to make stand-alone communities in the Thames gateway and in Ashford will really relieve the pressures felt by those of us who represent constituencies in the south-east.
The Local Government Association was quoted in the report as saying that a single locomotive of the economy is an unsustainable solution. I have not seen any evidence of that, and given that the UK's relative economic performance in Europe is good, it would be a very dangerous experiment to risk derailing that locomotive. The point that hon. Members with London constituencies could have made, which I will make now, is that London is a world city. We did not ask for it to be a world citywe probably did not even intend it to become onebut it is, and it is rapidly becoming the world city. That is a national asset. It attracts wealth, prosperity and many other things to Britain because of its international status. I really do believe that we should back our champions, not seek to undermine them, because that is good for the whole of Britain.
Even in the regions, the message is the same. I was disappointed to see that the Committee was wary of the core cities conceptof backing cities that might act as beacons within each region and give them their sense of identityand instead suggested that the focus should be spread more widely in each region. Of course, we need to ensure that prosperity is distributed more widely, but I firmly believe that we will achieve that in a more enduring and sustainable way by promoting the core cities within the regions.
Mr. Hopkins : Would not the hon. Gentleman accept that more equal societies grow more quickly economically, and that some of the most successful economies in Europegeographically, not the European Unionsuch as Norway are among the most equal societies? If we deal with inequality within communities and across the country we are likely to be a more successful economy and to grow more quickly.
Mr. Hammond : I am not sure that the evidence is clear. It is interesting that the hon. Gentleman cited Norway. I should not have thought that it was a good example. The Norwegian economy is peculiarly skewed by natural resources and not comparable to ours. That can be debated, but I have made my view clear. The promotion of championscore cities in the regions and the Greater London region within the UKfor the national good will ensure the greatest benefit for all of our people. I agree that we need to make supply-side improvements throughout the country. In the south-east, that is largely to address bottlenecks in the economy. In some of the regions further north, it is about improving their attractiveness as places in which to do business. In addition, as several hon. Members have mentioned, there is a clear need to stimulate demand in areas in which there is no demand within the relevant economic area.
Underused resources are a cost to the economy. It benefits us all to try to employ those that are not currently being used, but not if that involves taking out of use more productive resources. I liken it to decommissioning a machine in a factory in order to provide more jobs. It might seem like a good idea in the short term, but it is not the way to prosperity in the long term, as we all know in our heart of hearts.
The Committee believes that the Government are ignoring, or giving a low priority to, their public service agreement targets. It is probably right. The Chancellor understands that UK GDP growth is the driver of the feel-good factor and of regional well-being. National growth rates are a greater determinant of economic well-being than relative regional variations, and it is the national growth rate that defines our ability to fund public services and to expend money on public investment.
The Committee wants to argue about the distribution of the cake. I am more anxious that we do not undermine the production of the largest possible cake. If the Committee had its way, the cake would become smaller. I have asked the hon. Member for Denton and Reddish, and will do so again, whether he would care about that. Would he trade greater regional equity for lower UK economic growth? I suspect that he might, and that would alarm me very much.
I thought that the Committee's conclusions on funding in paragraph 75 would be very dangerous for the United Kingdom. There is already a squeeze in the fastest growing regions, and I am pleased to say that the Government have rejected the list of proposals that the Committee made for reallocating public spending. If the Committee's views were to prevail, I would suggest that there would be economic damage as business relocates out of the UK in response to poor infrastructure and poor services in those parts of the country in which internationally footloose business is interested in locating, which would be a loss to the UK. If one has captured growth and GDP generation in the UK, one can always redistribute the wealth that that growth generates through fiscal systems and public investment. If it is lost to France, Germany, India or China, it is lost for ever and that is a dead loss to the UK.
The hon. Member for Denton and Reddish can take some comfort from the fact that his policy prescription has been adopted by at least one Department: the Office of the Deputy Prime Minister. The Deputy Prime Minister is the king of the regions and in his local authority funding formula, which drives the council tax, he has done precisely what the hon. Gentleman is looking for. He has diverted huge amounts of resources from the most prosperous and fastest growing areas of the country, which are not the areas of the country with no problems to resolve and are areas that do face cost pressures and delivery problems in public services. That has created a real stress in delivering public services that business requires if it is to locate in those areas.
When I talk to foreign-owned businesses in my part of the country, there are issues that they always raise. They are there because of Heathrowmake no mistake about that. If Heathrow airport closed tomorrow, in 30 years Surrey's economy would be on its back. That is why they are there, but having got there they are deeply concerned about the relative lack of infrastructure investment to support the burdens that they and their employees place on the area, and the poor quality of public services caused by pressure of funding, which creates pressures on their employees such as health and education pressures. That makes it more difficult for them to hire and retain the people who they want in those regions.
Government policy is important, and it can be very negative. One of the things that has not been mentioned so far in the debate is relative pay between the regions. We should be focusing on the comparative advantage of the different regions. The Treasury has already accepted the need to introduce regional variations in public sector pay. The Select Committee says that before that can happen, there would need to be better statistics. The Committee's report speculates on what "very difficult" means in the jargon of Government reports. I know what "need better statistics before progressing down this route" means in the jargon of Government reports: it means kick it into the long grass.
Mr. Hammond : I certainly would not do that on the basis of regions at all. My point is that there must be flexibility across the country to reflect local labour market conditions. If one is trying to exploit comparative advantages, many of the regions outside the south-east, the east and London have significant comparative advantages, one of which is a lower cost of living. In some regions, one in three employees works in the public sector. Public sector pay tends to be determined nationally with limited regional variations, and the Government should not act to dampen what should be a comparative advantage. Public sector pay feeds through into general market pay conditions in a region and raises the local level, which is a negative effect.
The other area in which Government policy is significant and political agendas come into play is regional government. I do not know what lies behind the Deputy Prime Minister's long-running obsession with elected regional assemblies. However, if the answer to the question is an extra tier of bureaucrats and an extra phalanx of politicians, the question was certainly not, "What can I do to stimulate regional economic growth?"
Paragraph 170, which we have already touched on, is curious. In it, the Select Committee pleads for scrutiny of the Government offices for the regions. The hon. Member for Denton and Reddish will have read "Your Region, Your Choice" and must know that the proposed structure is somewhat different from that suggested in paragraph 170. Effectively, the Government offices for the regions will be perched just
There is no example of an extra tier of government being a positive factor in stimulating economic growth. Rather, it is a recipe for more political interference, bureaucracy, and red tape and for more cost to the hard-pressed council tax payer. It will not deliver a single extra nurse, teacher or policeman. Whatever elected regional assemblies may or may not dowe could debate thatthey will not stimulate regional economic growth.
I share the Select Committee's concerns and objectives on the continued waste of human resources in the less dynamically growing regions. However, I am slightly depressed by its old-fashioned focus on equality over quality. That is to say, it wants to even things out rather than trying to ensure that we promote the best. In absolute terms, national prosperity allows our investment in public services and infrastructure, and it enables us to hold our own against our international rivals. That must be the focus of the Government's attention because that is what will deliver for all the people of the United Kingdom, wherever they live.
I urge hon. Members to back our champions, whether they are regional cities or London, and to ensure that we do not allow a mistaken obsession with trying to even out inequalities in growth to undermine the relatively impressive economic growth that we have been achieving in this country, and which underpins all the investment in public services that we all wish to continue.
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Phil Hope) : This has been a good debate, and I congratulate my hon. Friend the Member for Denton and Reddish (Andrew Bennett) on his report and presentation, and the other members of the Select Committee on their work. I echo his thanks to the staff and the people behind the scenes who put so much effort into producing such reports.
The hon. Member for Kingston and Surbiton (Mr. Davey) described the need to get political devolution right down. If I read his party's political strategy rightly, he wants to reduce the number of MPs in Parliament as a result. I can tell him that at the next general election we are hoping to achieve something similar for the Liberal Democrats, but through a slightly different mechanism.
I start by saying how much, with the debate and the report, the Government's direction is to try to promote a very positive attitude to regional economic development. I was disappointed to hear the hon. Member for Runnymede and Weybridge (Mr. Hammond) describe the whole project as a dangerous exercise in navel gazing and to repeat the usual scaremongering that we expect from the Conservatives about concreting over the countryside, when it is really a community plan designed to create sustainable communities in both north and south. We experienced that counsel of despair from his party for 18 years with its failure to invest, and it is the problems caused across the country that the Labour Government are now endeavouring to respond to and successfully overcome.
One of the key messages is that reducing disparities in regional economic performance is a vital part of creating a more prosperous and inclusive society. If we are to maximise growth in the UK as a whole, unlike in the view of the hon. Member for Runnymede and Weybridge, so that everyone benefits from prosperity, we must ensure that all the UK's regions are fulfilling their potential. That is why we have set ourselves a PSA target to make sustainable improvements in the economic performance of all English regions and to reduce in the long term the persistent gap in growth rates between the regions. We will define measures to improve performance, and report progress against those measures by 2006. The objective is to develop policy, on a time scale for the spending review 2004, that will identify key drivers of regional economic growth and the changes and enhancements to policy required to deliver that challenging target in the longer run.
Mr. Hammond : May I ask the Minister the same question that I asked the hon. Member for Denton and Reddish? If it comes to a conflict between the two objectives of achieving the maximum possible sustainable growth in all regions and reducing disparity between the regions, is the Minister prepared to forgo some economic growth in order to increase the equity of that economic growth?
Phil Hope : Once again the hon. Gentleman fails to understand that this is not about "either/or"; it is about "both, and". We must ensure that we have economic performance in all regions. We are not simply trying to redistribute economic activity from the south to the north because we know that when that fails, businesses making choices to invest will simply go elsewhere in Europe. We must stimulate growth for the country as a whole by stimulating growth in every region rather than trading off one region against another. The hon. Gentleman seems to be implying that that is not the case, but that is exactly our policy: to create successful regions in all regions.
Mr. Cousins : May I remind the Minister of a point that cropped up in the debate? The Government's target does not consider every region. It smooths regions and bunches them together and, according to the form in which the Government have expressed their target, we will not even know the outcome until 2010 or 2014. On that basis, we will not know in this Government's lifetime how we are getting on. That simply cannot be right.
Phil Hope : We are trying to use targets as mechanisms to drive Government policy. They help us to focus our activities to ensure that we achieve the type of economic growth in every region that we failed to achieve in the past. The total of economic growth in the regions gives the UK national growthit is bottom up. That combined growth creates a successful UK economy. Targets create the policy driver that enables us to consider a range of measures that we can then apply to the regions to achieve our goals. I am happy to give way again to my hon. Friend if I have not answered his question.
I would press the Minister on that point. If there is not a target for every region but for regions smoothed together, and if we do not know the outcome of the measure until 2010 or 2014, is it not a meaningless exercise?
Phil Hope : No, it is not a meaningless exercise. Let me explain that at present we are reviewing what indicators we use and how we go about doing that. The PSA project team is supported by a consultancy group called Frontier Economics. It is conducting a wide-ranging review of the scale and causes of regional disparities in growth rates. That review, of course, has involved officials from Whitehall. Frontier Economics has been employed to assist in the review of six to 10 existing Government policies that might affect regional growth. The target is driving an analysis, which will create the kind of information to which my hon. Friend alludes. We can then use that evidence and analysis to assess whether existing policies on regional growth are succeeding.
The initial conclusions that have been drawn from the work of the project team are already being discussed in Government Departments, and policies are being fed into the 2004 spending review. We are using an analysis of data that we have commissioned, and information is being fed in. That in turn will feed into an assessment of the success or otherwise of achieving a very challenging PSA target.
Andrew Bennett : But as far as the general public are concerned, when will we see a thermometer on the wall outside the Department that shows how we are moving upthe level of contributions, so to speak? The point of my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) is that we do not want to wait until 2012 to learn that Ministers failed at this point. I suspect that my hon. Friend the Minister expects to be somewhere else in the ministerial ranks by then.
I understand the point, but we shall gather regional economic data and make assessments every year. It is not a case of having just one set of outcomes that we measure in 10 or 12 years' time. We shall monitor the impact of our policies in every region.
The Government have pursued an active regional policy since 1997. Hon. Members will be aware of it. We set up regional development agencies and facilitated regional chambers. We developed the role of the Government offices referred to in the White Paper, "Your Region, Your Choice", and set out proposals for directly elected regional assemblies. We already have
Mr. Stringer : Will the Minister explain why RDAs were set up with a previously determined constant budget for the first two years? New regions in the south-east meant that money was transferred from the regions to the south-east. Can he explain how transferring money to the south-east helped the regions?
Phil Hope : I understand my hon. Friend's concern, but the fact is that we are putting in a lot more money. I believe that it was the hon. Member for Kingston and Surbiton who mentioned the differences in investment between the different regions. The RDAs in the north-east, the north-west and the south-west have had significant new sums of money poured into single regional pots. That has provided them with real resources to promote economic development in their areas, and they are doing so very successfully.
We can argue over differences between particular projects at particular times, as that will always be the case. The fundamental point, however, is that RDAs are making a substantial and important contribution by driving forward the economic development, growth and activity in their regions as never before, because, as my hon. Friend the Member for Luton, North (Mr. Hopkins) said, it was abandoned by the Conservatives when they were in government. So, the RDAs, which the Conservatives are still opposed to and would abolish were they to return to power, are having a significant impact on their regions.
Mr. Hammond : Shaking my head does not usually require very much clarification. The hon. Member for Kingston and Surbiton knows very well, because we have had the same exchange before, that we realise that business communities in many regions recognise that RDAs do a worthwhile job. I have talked to representatives of RDAs and told them that we would expect a Conservative Government to engage with them to consider how to address the issue of democratic deficit. We are not committed, as we were previously, to their outright abolition. We will engage with them.
Phil Hope : In pursuing the debate, we are pursuing the policy of the future Government, the Labour Government, who have been pursuing a very positive regional and economic strategy with increasing success.
RDAs have a particular role to play by building links with universities and industry. The Lambert review stressed the importance of linking up to identify opportunities for the future delivery of better knowledge transfer. That point was raised earlier in the debate about the new economics of the 21st century. It is about the RDAs finding, supporting and developing the new higher-skilled and higher-waged industries through their links with universities and industries, which will generate the new wealth that the regions outside London and the south-east desperately need.
Phil Hope : Let me say a few things first. We understand the concerns raised by the Committee. The 2001 census achieved a 94 per cent. response rate despite the foot and mouth epidemic, and there was extensive consultation with key stakeholders about the census. We appreciate the difficulties that people have raised.
Phil Hope : My hon. Friends the Members for Manchester, Blackley (Mr. Stringer), for Hammersmith and Fulham (Mr. Coleman) and for Regent's Park and Kensington, North (Ms Buck) raised two points about Manchester and Westminster. They know that address-matching studies of those two places are currently under way. Members know that the ONS and the local authorities are comparing the address base and examining the population figures of both places to determine whether there is a discrepancy and, if so, how it will be handled.
Those exercises will provide important evidence to judge whether further revisions to local estimates are needed. They will also inform an assessment as to whether any additional research is required for other areas. We are researching the future census straight away.
Regarding the question that I have just been asked, if the 2001 census figures are proved inaccurate in some way and are amended and fed into the Office of the Deputy Prime Minister, the amendments to the 200304 settlement will take place at the same time as the subsequent year's settlement is made. In that case, changes will be reflected in the grant received by local authorities during that financial year.
Mr. Stringer : I am grateful for my hon. Friend's statement. I would just like him to clarify it. Is he saying that if we show that the figures are wrong, we will get the money that should have been paid to Manchester, Plymouth and other authorities in next year's settlement plus an adjusted settlement for that year? In other words, will we get two dollops of money next year?
Phil Hope : My hon. Friend may put it as colloquially as that, but I am not able to put it in quite those terms. I can only refer him to what I said earlier, and what I placed on the record. I hope that that will satisfy my hon. Friend. If I go any further, I will possibly find myself getting into deep water.
Many points have been raised by other hon. Members. My hon. and learned Friend the Member for Redcar (Vera Baird), who has been a real champion for her constituency, made a very powerful contribution. She raised the question of the Lyons review in particular. It is an important review, and other hon. Members have referred to it as well. We are concerned to ensure that the interim report from Sir Michael Lyons will inform Government thinking.
The report that has come out is an interim report and the final version will come out later this year. We will take its considerations seriously. As has been said, the Chancellor indicated in the House this afternoon that the Government have a real interest in seeing how we can pursue the Lyons review in a more purposeful way. I think that the relocation of a figure of 20,000 staff is mentioned in the interim report. Until we get the final report it is not possible to say, but the Government are certainly committed to looking at such policies and ensuring that we see the changes that we wish to see.
In my constituency, the Department for Work and Pensions has recently transferred 200 members of staff to locations in and around Corby. I think that there are many other such anecdotal stories, but I can only use the example from my own constituency. The Government are committed to considering the proposals in the Lyons review. It is important that we pursue such policies wherever possible, as they will make an important difference.
I know that my hon. Friend the Member for Denton and Reddish wishes to make some final remarks, so I will make only a few. Comments have been made about rural areas. I do not think that the right hon. Member for Berwick-upon-Tweed (Mr. Beith) is able to be present to hear my reply, but we are keen to ensure that rural areas are seen as a part of the regional development process. There will be regional proofing through the regional chambers. That is an important
I take the opportunity to comment on points made by other hon. Members about differences not only between regionsthe PSA target is about reducing economic regional disparitiesbut within regions. It is right that the solution is not either/or. We must tackle both. As my hon. Friends know, we are developing targeting of specific areas within regions as well as trying to tackle broad economic regional differences with the neighbourhood renewal fund and housing policy.
Our housing policy has been subject to clear opposition from the Conservative party. The sustainable communities plan is all about thriving, sustainable, inclusive communities and tackles two different problems. The first is the lack of affordable housing in London and the south-east, which is a problem that has been overlooked by successive Governments, but we owned up to that. Now, the sustainable communities plan is making real inroads in ensuring that local authorities start to bring empty properties back into use and live up to their planning obligations to provide affordable housing, and also in the four growth areas in London and the south-east ensuring that we have a planned approach in which the infrastructure, as well as housing, is provided for those communities. Whether it is the Thames gateway, Milton Keynes and the south midlands, Stansted or Cambridge, we see sustainable growth that, far from concreting over the countryside in the way that the Conservatives continue to stereotype and characterise as our policy, is about building sustainable communities and recognising the need for affordable housing in those areas of London and the south-east.
As well as that expenditure and support, we have support in the north also. The pathfinder scheme deals with the failure of housing marketsmarket collapse in some areasand we are putting £500 million into renewing key areas in the north.
Finally, I want to emphasise the importance of devolution and support for the elected regional assemblies. It is a shame that the Conservatives have turned their back on providing and creating a stronger regional voice throughout the country. Regional assemblies are crucial to the success of the economic regional strategies that we are developing, and I hope that when the campaigns get under way next year hon. Members will be in the forefront of championing their constituencies not only here, but out there when regional assemblies are elected in the future.
Andrew Bennett : I thank all those who have contributed to this useful debate. I also thank the Minister for giving us the news about the census and the money that goes with it. I wish that he had also been able to assure us that we shall have those national statistics on a more reliable basis. Will it be possible to follow up those targets, so that not only those in the Government machinery but the Select Committee and the general public can look at those areas?
Core cities are also important, but what is the relationship between the city of Manchester and Disley, for example? Which is freeloading on which? It seems to me that, certainly in the north-west, existing local government boundaries do not correspond to core cities. One could argue that Liverpool and Manchester would make one city instead of two[Interruption.] I shall not go into the question of the railways, which are also trouble, but whether we have a new central railway, a line to Felixstowe through Ipswich or a good line to Immingham, it is important to have one good freight line that enables manufacturing areas of the country to export to Europe effectively.