Examination of Witnesses (Questions 1-19)
3 FEBRUARY 2004
MR NICK
MACPHERSON,
MR ROB
SMITH, MR
PHILIP COX,
MR MARK
GIBSON AND
MS ROS
DUNN
Q1 Chairman: Good morning. Could I open
up the meeting and could Mr MacPherson, our trusty friend—could
you introduce your team, please.
Mr MacPherson: On my farthest
left is Mark Gibson who is the Director General of the Business
Group at the DTI. On my left is Rob Smith who is Director General
of the Regional Co-ordination Unit at the Office of the Deputy
Prime Minister. Ros Dunn is Head of Devolved Countries and Regions
Policy in the Treasury. Philip Cox is Head of the Inter-departmental
Regional Policy Team.
Q2 Chairman: Thank you very much and
welcome to the first session in our new inquiry on regional productivity.
We hope to use this session as a scene setter so that we can feel
our way on this particular subject because it is very large and
very diffuse. We have already taken written evidence that the
productivity gap between the UK's best and worst performing regions
is similar to that between West Germany and East Germany. Your
papers indicate that the UK has the greatest variation in regional
prosperity in the EU, with productivity accounting for 60% of
these differences. What benefits are there to the UK economy in
improving the performance of the lagging regions? How big a priority
is this for the Government?
Mr MacPherson: I think there are
huge potential benefits in improving the performance of the lagging
regions. If the lagging regions were to move up to the average
for the UK, GDP per head in the UK would be £1,000 higher.
Or to put it another way, over a twenty year period growth would
have been 0.4% a year higher. This is a big issue. It is obviously
incredibly important for the regions themselves, but it is actually
important from an economic management perspective in that if you
do want to increase the underlying rate of growth of the economy—which
generally everybody does—this is a key component of that
strategy.
Q3 Chairman: The Treasury public sector
performance website does not shed much light on progress towards
the PSA target of reducing regional disparities. Could you up-date
the Committee on the current situation?
Mr MacPherson: I certainly can.
The website was revised yesterday. It is pure coincidence that
we were visiting you, but it is a good example of being held to
account and encouraging us to get a grip. This PSA is long term
and highly aspirational. That does not mean that you should wait
ten years to start putting data up. Yesterday we put up the base
line of the years 1989 to 2001. That is not yet the complete base
line for measuring performance against this PSA because we need
to get the 2002 number for GVA to then understand what the base
line is. Clearly GDP data—in this case it is actually gross
value added data—is produced with a lag. he information
is not perfect and the Allsopp review has made recommendations
around improving that data. In the interim we clearly need to
look at indicators which are more up to date and which can tell
us how things are going. The sort of things we are looking at
are employment, unemployment, business registrations and so on.
That data at the moment is telling—as ever with these things—conflicting
stories, I guess. On the one hand the unemployment and employment
data is quite encouraging. There have been really quite significant
reductions in unemployment in areas like the North East and similarly
there has been quite encouraging growth in employment. In a sense
the gap in relation to those particular variables is declining
and that is a good thing, especially against the background where
employment across the country has been increasing and unemployment
falling. On the wider indicators on issues like VAT registrations
and so on, I think it is fair to say that the data is more mixed
and so at this stage I could not tell you for certain what the
GDP figures will show as they begin to be published over the coming
years. However, coming back to measurement, we are committed to
developing indicators further. This relates to the wider issue
of productivity in the economy. In a sense regional productivity
is a sub-set of that and I know my colleagues in the Treasury
and the DTI are working on indicators which I think they are going
to start publishing fairly soon this year, or certainly they will
publish a paper, which will provide the basis on which you can
track progress on productivity against the five drivers (things
like skills, R&D and so on). I think there are two issues
here. Data is poor; we are trying to improve it and we attach
a big priority to that. We have some indicators which we are monitoring
and our website will have links to those indicators which have
been developed by the ODPM, but longer term we need to develop
better indicators in relation to productivity.
Chairman: At some stage I will be leaving
because I am going to the Liaison Committee and I will be asking
the Prime Minister questions. I think one of the first questions
I will ask him is, is it Government policy to update websites
immediately before appearing before Treasury Select Committees.
However, we will move on now.
Q4 Mr Plaskitt: I would like to begin
by establishing what each of your departments brings to the task.
Perhaps I could ask Ms Dunn first, on behalf of the Treasury,
to state what your contribution to this task is.
Ms Dunn: The key role the Treasury
has to play in delivering the PSA target is in our management
of the public spending review and the budget, both of which are
strategic activities that are co-ordinated across the whole of
government. Our task is to ensure that a proper regional dimension
is brought into those processes.
Q5 Mr Plaskitt: Just expand on what you
mean by "bringing in a regional dimension". What exactly
do you do to do that?
Ms Dunn: To give you an example
for this spending review we have built on a process we used in
the last spending review which was to ask each region to contribute
to the spending review by setting out their views of their priorities.
We are very careful to emphasise that this is not about: "Please
send us a bill and tell us how much money you want"; but
about what was the best and most effective use of public spending
in their regions. The intention is to put that into the system
so that central departments are able to take that into account
in working through their own views about the spending review.
Q6 Mr Plaskitt: Mr Gibson, what does
the DTI bring to the task?
Mr Gibson: We are the lead department
in Whitehall for the regional development agencies; the budgets
for the RDAs flow through the DTI in a single pot. We are a major
department in terms of interventions to support business, some
of which have an explicitly regional basis like regional selective
assistance. We are also a lead department for innovation. A major
part of DTI spending is directed to innovation and science funding.
Q7 Mr Plaskitt: Mr Cox, what does the
ODPM bring to this?
Mr Cox: I have a double-headed
role, if you like. As Nick suggested I am the project manager
for the delivery of the PSA target so I have a team that is drawn
from the three departments that are responsible for the PSA. Our
role has been, over the last twelve months or so, to work through
the key drivers of productivity and employment to try to form
a picture of the key things that are required to improve performance
against those drivers, working very closely with regional stakeholders
and also colleagues in Whitehall. That is the general role. So
far as ODPM is concerned, it has a key role in regional government.
If regions vote for regional assemblies then the regional development
agencies will report to the regional assemblies. There is also
a key role for local government in delivering the targets. I am
sure Nick will say a little bit more about the efforts that are
being made to devolve decision making down to local and regional
government. I think, thirdly and fourthly, the ODPM has a key
role in delivering sustained communities, working very closely
with the core cities. I think there is a big role for ODPM in
helping deliver this target.
Q8 Mr Plaskitt: Mr Smith, do you have
anything you want to add to that?
Mr Smith: I am the OPDM board
champion for this particular PSA and in addition to what Philip
said I think part of my role is to make sure that—particularly
in the re-generation and neighbourhood renewal areas as well as
in the regional and local government and planning areas—my
colleagues are taking account and using their policies to support
this particular PSA. I think the document that was published yesterday—and
I believe that really was a co-incidence—on the Sustainable
Communities Plan, "The Northern Way"—begins
to demonstrate how many of the ODPM programmes are being brought
together to support the outcomes of the PSA.
Q9 Mr Plaskitt: Mr Cox, would I be right
in saying that you are the sort of keystone, you bring all these
things together, you are the co-ordinator?
Mr Cox: Yes. Whether I would describe
myself as the keystone I am not sure, but yes.
Q10 Mr Plaskitt: How do you do that?
How often do you get everyone together? How do you draw the lines
from each department together? How do you then feed back ideas
and make sure departments implement it? Can you paint a quick
picture for us of how you do that co-ordinating?
Mr Cox: As I have indicated, I
have a project team which is drawn from the three government departments
and it does work as a single seamless team, not as a pure piece
of co-ordination. We meet on a weekly basis to plan our work and
take things forward. More generally there is a steering group
for the PSA. That is jointly chaired by Nick, Rob and Mark. That
meets on a monthly basis. In addition, all three departments individually
have steering groups within their departments to ensure that the
delivery of the PSA is being taken forward across those departments.
We are also engaged quite intensely with other government departments
across Whitehall; obviously skills, transport, employment are
key components of the delivery of this PSA.
Q11 Mr Plaskitt: I want to come to that.
How was it decided that three departments should have the lead
on this, namely Treasury, DTI and OPDM? Arguably there are other
departments, such as Education and Skills, whose role is possibly
more important—certainly as important—so how was the
decision reached to have these three departments take the lead
on it?
Mr MacPherson: I will try to answer
this question because I think I was there when this PSA was agreed
in the 2002 spending review. It is a very good question.
Q12 Mr Plaskitt: That is why I am asking
it.
Mr MacPherson: In a sense, with
PSA's—and this could be one of the most cross-cutting PSA's
there is in terms of how it cuts across traditional departmental
boundaries—there is a trade-off. Either you can maximise
the number of owners in which case I think there is a risk that
you dilute responsibility. For example, if there were ten Whitehall
senior officials sitting here you might get increasingly irritated
as they passed the buck to the one next to them. Against that,
you clearly want to bind departments in and we did think long
and hard about this. There is a case for getting the DFES or Transport
on board, but it is difficult to know precisely where to end and
in the end we went for an approach whereby we would, in a sense,
hold the ring on this and then we would bring Education in when
we needed to talk to them about what they were doing, and we would
bring in DEFRA and so on. I think it is also worth talking about
the ministerial angle to this. We are obviously working as officials
to support the PSA and in many ways this is fairly cutting edge
in terms of joint ownership and organisation within Whitehall,
but also the ministers—Lord Rooker, Paul Boeteng and Jackie
Smith—are meeting regularly. They will have bi-laterals
with their opposite numbers in DFES and so on. Clearly we will
come back to this in the context of the next spending review when
we will need to decide what happens to the PSA, how it is rolled
forward and who is going to be responsible.
Q13 Mr Plaskitt: Is there not a slight
risk of the status of this issue with departments? If some are
seen to be inside the tent, as it were, taking lead responsibility
and others are outside, is there not the risk that the issue is
downgraded in the departments that are not part of the central
club whereas they feel they should be playing a central role in
it.
Mr MacPherson: I think it is something
we need to keep an eye on. I think we have made quite a lot of
progress on this using the instruments and levers we have at our
disposal. A good example is the spending review. We have made
it very clear to departments that we expect a regional dimension
to their proposals. In a sense that sort of carries both a carrot
and a stick. Departments which have a better grip on their regional
contribution will possibly be looked at more favourably than those
that do not. There is an incentive there. As I say, we do have
various ministerial networks where we can apply some pressure,
but I think it is something we need to continue to look at.
Q14 Mr Plaskitt: Did you consider the
option of just one department taking the lead responsibility,
most probably ODPM, and then all the rest of you being on an equal
relationship to that?
Mr MacPherson: That is a good
point. This PSA was new as part of 2002 and in a sense was designed
to emphasise the Government's commitment to the regional growth
agenda. It was the first time the Treasury got involved. I think
in 2000 and 1998 it was just DTI and the ODPM. There is an institutional
issue that DTI sponsors the RDAs; the RDAs are the main institution
in terms of economic policies in the regions; it is a key delivery
arm. I think you have to have the DTI involved. ODPM clearly,
for the reasons Rob set out, ditto. Whether the Treasury needs
to be there or not I do not know. I see some advantage in the
Treasury being there because we have quite good levers and as
a central department we may be able to carry more weight in certain
debates than the DTI and ODPM on their own.
Q15 Mr Plaskitt: Can you assure us that
you are overcoming departmentalitis and this really is a cross-cutting
mission?
Mr MacPherson: We are very serious.
The reason why the Chancellor wanted the Treasury to get involved
in this in 2002 was a reflection of his commitment to support
this agenda. We are pushing very hard; there are encouraging signs.
However, if, over the course of the coming months, it becomes
clear that the current institutional arrangements are failing,
then we would want to change them.
Mr Gibson: There is genuine commitment
across departments. I think we are working well together. It has
certainly helped inside the DTI the fact that there is a PSA against
this particular one. I think you have an absolutely valid point.
There is a trade-off as Nick said. We started with three departments
and it is not ruled out that we would move it wider, but there
is a genuine debate to be had. There are trade-offs between the
bureaucracy involving everyone across Whitehall and your entirely
correct point about departmental ownership.
Mr Smith: We are in no doubt that
we have to overcome any silo thinking in order to make this happen
so we are absolutely clear about that. I just want to say that
this part of the discussion has been focussed at the national
level. Of course the regional level is very important as well.
The government offices do represent most of the departments involved
and have links with the regional capacities of the others. Making
sure that we get that same cross department buy-in at regional
level is equally important.
Q16 Mr Mudie: I just want to press this
further. I can see the DTI, I can see the Treasury; as to the
Office of the Deputy Prime Minister, which of the five drivers
falls within that department's responsibility? There are five
productivity drivers set out, which one is it? I can see competition,
enterprise, innovation, investment being DTI and the Treasury,
which one do you look after?
Mr Cox: I think ODPM actually
covers the whole waterfront.
Q17 Mr Mudie: I am sure it does, but
tell me specifically which one because they are well represented
in the DTI. Is it, without being funny, the fact that the Deputy
Prime Minister set up the RDAs and has an affinity for them. Is
that it?
Mr Cox: I think the ODPM's role
is that it is very much the department for the regions. As I have
said already, the RDAs are the key drivers of economic performance
in the regions.
Q18 Mr Mudie: Mr MacPherson, going back
to what James Plaskitt said, what possible reason do you have
for not having the Department for Education at that top table?
Who picks up skills?
Mr MacPherson: I think the Department
for Education are fully plugged in.
Q19 Mr Mudie: They are not at the top
table.
Mr MacPherson: The Learning and
Skills Council, for example, is clearly a key partner in this
although it may not be at this table today.
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