Examination of Witnesses (Questions 240-259)
6 JULY 2004
MR MARTIN
HAVENHAND, MR
TOM RIORDAN
AND MR
MARTIN BRIGGS
Q240 Chairman: I mentioned earlier about
the productivity gap. One of the aims of the Chancellor is to
narrow the productivity gap between London and the South East
and other areas. Anecdotal evidence that has been provided at
the moment indicates that, whilst we may be having increasing
prosperity in the regions, the relative gap remains the same.
How can you narrow and bridge that gap between your area and London
and the South-East?
Mr Briggs: I think the fundamental
secret is that is the role of skills in a knowledge economy. That
has to be unpacked. But I think when you look at differentials
within regions in relation to productivity, increasingly they
are coming to be seen as less around different patterns of capital
investment, though that does still play a significant part. We
have to disaggregate the data and look at industrial structures
which do determine different levels of productivity, but more
and more—and I particularly talk in terms of the East Midlands'
experience here—it is about the profile of skills and qualifications
of those in your workforce who are in work. The East Midlands,
for example, does not have an unemployment problem. There is what
I call an "economic inclusion" problem. You had a discussion
with Steve Fothergill and Peter Tyler about people who are outside
of the workforce altogether, but we have practically full employment.
Q241 Chairman: You mentioned Steve Fothergill.
When he came here he said to us, " . . . it is simply unrealistic
to expect a combination of training, motivation and the removal
of financial disincentives to do the trick in the economically
weakest regions. In these areas it is hard to see how, outside
a few limited occupations in short supply, additional labour supply
will create its own demand. It is also legitimate to ask where
in the absence of substantial new job creation all this surplus
labour could be absorbed."
Mr Briggs: There is a chicken
and egg here. There is a virtuous circle and a vicious circle.
If you do not have the skills in your workforce—for example,
the East Midlands is a substantial net exporter of graduate skills—if
you do not retain those skills, you find that businesses shape
what they do around the fact that the skills are not there in
the workforce. If they do that, you then do not attract people
with those skills to stay. It is very clear from my point of view
in terms of the East Midlands that the problem I have is not a
problem of an ineffectively functioning labour market, because
people who want jobs can get them, but we do not have the skills
and the qualifications, partly because of the industrial history,
to encourage or to attract those new knowledge economy jobs. I
would agree with Steve in the short-term, but I think that in
other than the short-term you have to work very hard on the supply
side, the skills and qualifications issue, if you are to stand
a hope of attracting the activity that will raise levels of productivity.
Mr Riordan: I agree with that.
I think there is an additional factor in the North—which
we have been looking at with the initiative with the Deputy Prime
Minister, the so-called Northern Way—which is the issue
of what people have called worklessness: the people who do not
appear on the unemployment register but who are on incapacity
benefit or benefit of some sort or who do not even appear on any
of the benefit registers. The North has very large pockets of
people, geographically concentrated, who are just outside the
economy. The civil servants are telling us from their work that
that may account for a large amount of the difference in productivity.
I think we need to do more of what we are starting to do, working
very closely with industry, which is planning for job losses that
are just going to happen in the economy, particularly in manufacturing.
If you take the Selby closures as an example, the work we have
done with JobCentre Plus, the learning and skills councils, the
local authority and the unions, has allowed us to make sure that
miners who might otherwise have gone out of the economy have gone
straight back in, into the construction industry and other industries.
That has had a very beneficial effect on the local economy, rather
than where, if you did not intervene at all, there is a big risk
that these people would either go on to incapacity benefit or
retire.
Q242 Mr Mudie: If I may just probe that
a bit further in terms of what both you and Martin have said.
If you take Leeds and Bradford, there is a straightforward thing
going to unemployed people in Leeds, saying, "You must skill
yourselves because you are in a city with more jobs than people,
so clearly you are going to get employment if you skill yourself."
Bradford you would have a different situation—it is back
to Martin. I agree, it used to be the argument about why skill
ourselves if there are no jobs? It is a leap of faith, is it not?
Skill yourself and the jobs will come. Do you have anything more
than a leap of faith, if the lad in Bradford actually goes on
a training course and gets a skill—apart from leaving Bradford—that
the jobs will come to Bradford? Do you have anything that will
deliver jobs to that type of area?
Mr Riordan: I have a couple of
examples. One is the URC that I mentioned in Bradford. We are
working with partners to make sure that the construction jobs
which come through that are linked into the local economy, so
it is working with the construction firms to make sure that jobs
come through there. The second, you would know better than me,
is things like the Tesco Seacroft initiative, where you have a
sort of job guarantee arrangement with some larger employers.
Mr Briggs: I think this gets to
the heart of the question that was asked earlier on: Why have
regions at all. I think RDAs would argue that the reason for having
bodies like RDAs is a pragmatic one, that we are able to connect
up the different elements of this picture. So you are absolutely
right that if you have a programme to raise levels of skills but
that is not associated with an inward investment promotion agenda,
it is not associated with an enterprise agenda, it is not associated
with a physical regeneration agenda, it will be a recipe for disappointment.
That is not to say that these all homogenise into one big single
project but you have to have the interconnections right, so RDAs
pay a great deal of attention to making sure that their inward
investment activity and their work with universities fits together
with the work they are doing with learning and skills councils
and regional skills partnerships, because you have to be delivering
on all of those fronts at the same time. If I may give you one
brief illustration: We had to work hard on a particular dilemma
with the coalfields just to the south of Mansfield, where they
have an enterprise zone from the 1990s, Sherwood Park, which has
attracted a lot of good new jobs for an area that lost a lot of
mining jobs. We discovered that one of the fundamental problems
was simply linking up people in those communities who had lost
jobs with Sherwood Park, which is only two or three miles down
the road but there was no public transport infrastructure to make
the connection work. They are the sort of things that are all
too often missed if you are trying to do it from a great distance;
working through local partnerships you can make sure you solve
those problems rather than have one more disappointing national
scheme.
Mr Havenhand: May I make a comment
on the question of what kind of guarantee we can have for people
when they are being trained. We have adopted the cluster approach,
which has very much been looking at the areas where there is the
greatest growth, and we would be very much looking through our
investments, through our learning and skills councils to make
sure that the training is directed to those job growth opportunities
that we have identified through the planning process.
Q243 Mr Mudie: One of the things in Bradford,
for example, would be to train someone in work for the higher
skill areas you are expecting, because it would be easier, and
train someone out of work for the lower skilled job which is subsequently
replaced. But that needs a degree of co-ordination with learning
and skills councils and the colleges, etcetera. Do you find that
you get that?
Mr Havenhand: They are fairly
new on the ground, the learning and skills councils. Their more
recent reviews of their corporate plan have been about getting
that integration better than it was before. So there are small
pockets of improvements. I would not be able to say that across
the board that was perfect but there have been some good improvements
in local areas.
Mr Briggs: There is also a huge
degree of sensitivity of course with individual businesses around
this. You can run the sort of thing that Tom described, a rapid
response fund when people can see the train crash coming, so to
speak, but there is a real sensitivity on the business point of
view in up-skilling their people when they are already in work.
I think the best approach to that—and Martin mentioned the
cluster policy earlier on—is the amount of work we have
been doing through, for example, supply chains. We worked hard
with Rolls Royce after 9/11, when Rolls Royce had to shed more
than 2,000 workers. One of the things we had not really thought
of at the beginning but that we have now put in place as a very
effective programme, is to work with businesses throughout their
supply chain to concentrate not so much on what they need to do
now but on what they need to do in terms of skills and other elements
if they want to stay front-line suppliers to Rolls Royce and other
major players in three or five years time. I think it is a pragmatic
approach through that sort of route.
Q244 Mr Beard: There seem to be a plethora
of different organisations: business support organisations,
the learning and skills councils, RDAs, higher and further education
institutions, health and transport and so on. It all looks a bit
like a jigsaw puzzle that has just been tipped out of the box
and nobody has put the bits together yet. What is the theme that
runs through all these different organisations? We have very benevolent
intentions. Are there too many of them? You, Mr Briggs, have mentioned
that in the East Midlands there are something like 400 potential
organisations that have business support in their title and you
have said that is crackers. I could not agree more. The whole
scene is that, is it not?
Mr Briggs: I did not mention it
but I would not deny it. In some ways, I think one of the challenges
from our point of view is working out whether all the pieces that
are there on the table are from the same jigsaw or not, frankly.
But, as I said earlier on, one of the things that the RDAs can
bring is not a sort of imperialism that says we are trying to
do everything but that which recognises this is a complicated
world nationally and regionally. Sometimes it is over-complicated
by the good intentions and the reluctance to wind up activity,
and I mentioned that earlier on, but I do not think in reality
we can get away from the fact that when you are dealing with the
health service, an enormously complicated and huge tranche of
public investment, when you are dealing with learning and skills
councils, whether you are dealing with transport interests, you
are going to have quite a complicated infrastructure there. I
would argue very strongly that, traditionally, nationally those
areas of public policy have tended to operate as independent baronies
or fiefdoms, which are corralled into line on occasions by the
Treasury. At a regional level, the purpose and power of regional
economic strategies needs to be to identify the contribution that
each of those elements makes, put to government what freedoms
we need in order to bring those interconnections to life, and
then work in practice with all of those local partners to make
sure they deliver against the targets that have been set. We are
not the sole answer there. It is a very complicated world, but
I think the track record so far in the English regions over the
last five years shows that we can make good progress and that
this story needs to evolve further.
Q245 Mr Beard: What is the track record
over the last five years that you are speaking of there? As far
as I see it, the Institute of Public Policy Research has estimated
that there is something between £13 and £14 billion
being pumped through this contraption. What is coming out at the
other end?
Mr Briggs: I think you can answer
that in a number of ways. There is a large amount of evidence
about the outputs that RDAs themselves have generated—and
we have our new round of annual reports about to be submitted
to Parliament within the next few weeks—but, as important
as that, are the changes that are occurring in the regional economies
of England and the UK. The work that we have done in the East
Midlands—and I know other RDAs will have done that as well—does
show a very marked progress, not down to the role of the RDAs
but I think down to the national policy framework as well—this
is not just about RDA or regional interventions—and does
show progress on the part of the English regions particularly
in relationship to the performance of the European regions. There
is, however, a big issue—and I know this Committee has concentrated
on this throughout—of narrowing disparities in performance
between those regions. We have to say there, to use jargon more
familiar to Steve Fothergill and his colleagues, that it is partly
about the counter-factual. The evidence is that, in most developed
economies, for most of the last generation regional disparities
have been getting broader rather than narrowing, for a series
of reasons but particularly around skills.
Q246 Mr Beard: Mr Briggs, I am all for
the aspiration that we do want to narrow the productivity gap
between regions, but I am looking very critically at the means
by which we go about doing this. When I talk to business people
in my area, they have no idea what all these organisations are
for. They have no idea what BusinessLink is for, they have never
heard of it. BusinessLink does not actually go and visit them;
they wait until people come and knock on their door. Really, unless
you have a clearly defined theme linking the RDAs and the learning
and skills council and all the rest of it together, how on earth
are the people that you are intending to benefit going to understand
what is available to them?
Mr Havenhand: From many years
of not having any kind of focused and bought-into regional policy,
I think the introduction of regional economic strategies has been
quite a powerful focus of what the priorities really are. We have
done the second revision of them—a couple of years ago—and
there is now greater buy-in to them. We want to make sure those
regional economic strategies do have a regional impact of all
the national funding streams, so that the organisations, of which,
as you have quite rightly said, there is a plethora in the regions,
are more and more starting to make their investments more in line
with what those priorities should be. Our emphasis from the regional
development agency, private sector led, would be the frustration
about private sector members saying it is not happening quickly
enough and it is not happening in a way that actually is integrating
them in the way we would like. Therefore, our current work, working
with the DfES in trying to say of the importance of the learning
and skills councils having more regional discretion to be able
to dispense their funds to deliver the regional economic strategy,
would be an emphasis that we would very much want to come out
of this process.
Q247 Mr Beard: I accept the need for
a regional economic strategy but you are not really addressing
the point that you have all these different organisations and
they all look as though they are addressing individual aspects
of the problem. The regional development authorities have been
created and nobody has gone through with a fine-toothed comb and
said, "We now do not need all that." We are doing the
old business in the public sector; we are doing the new things
leaving the old ones in place. Is that not the case?
Mr Havenhand: In some cases, yes.
Q248 Mr Beard: There is a model of industrial
organisation which is called the matrix organisation, where you
have the project teams across the top and all the ingredients
that go into the project down the side, and the people down the
side are the ones who look after the skills, whether they are
learning and skills council or Capital or whatever, and the people
at the top looking downwards are the project leaders. Is it not
reasonable to presume that the role of the regional development
authorities is essentially in any region leading that project
of economic development? The learning and skills councils and
the business support organisations and transport and education
all coming in as ingredients of that, but the regional development
authority is conducting the band.
Mr Havenhand: Without doubt.
Q249 Mr Beard: Would it help if somebody
actually enunciated that as what we are talking about?
Mr Briggs: They may not have done
so loudly or well enough but the regional development agencies
boards have enunciated that. I think the position of national
government has been subtly different from what you describe—which
has not been to say all these things go on and they have nothing
to do with the regional economic strategy; in fact, government
delights in people consulting each other about their strategies,
and there is a great deal of that that goes on. The position has
been that consultation, and by broadly speaking through concordats
and the rest, is the way to do it. I think there is an impatience
within the RDAs, particularly RDA boards, that says, "That
is all very well, but when it comes to the crunch does it make
a real difference to the priorities that people set and the degree
to which they are focused on achieving regional outcomes?"
We appreciate that to our audiences, both regional and national,
we have to build up the confidence that we are capable of delivering
that co-ordination. We need to be careful not to arrogate to ourselves
a position that actually you need to show through the way in which
you perform, but I think we will also say and our boards would
say that we are agitated because we do not feel there is yet a
clear-cut enough account of precisely how those players are going
to play into the project or the clear lines of accountability
that will make your matrix model work.
Mr Riordan: It is back to the
question about targets because a lot of those agencies you mentioned
which would be in that project team are driven by different targets
from the ones which might be right for the region. We think these
national targets need to fit in and mesh much more effectively
with what is happening at a regional level.
Q250 Mr Beard: Do you not think you are
likely to get that right if you define the role for them in the
region properly and their relationship to the regional development
authority?
Mr Riordan: Yes.
Q251 Mr Beard: At the moment they will
look as though they are chasing the same ball.
Mr Havenhand: We would emphasise
that in our regional economic strategies in Yorkshire and Humber,
in particular, we do have the matrix approach just like you say.
So the strategic objectives do have the individual role of the
public agencies operating within the region, who will actually
take a lead role in delivering their part of it. We are emphasising
that if from a national perspective some of them were able to
focus more on the regional priorities in their investments they
are making—as opposed to at times a challenge between national
priorities and regional priorities—that is where the emphasis
is that we would make.
Q252 Mr Beard: In your submission there
is a further dimension of complication, in that you say "too
many initiatives" are "hampering effective delivery
and confusing consumers". Which departments are the worst
offenders for all these initiatives?
Mr Briggs: Let me tread where
angels fear!
Q253 Chairman: A straight answer.
Mr Briggs: A straight answer.
Q254 Mr Mudie: It is no longer a chance
at Sir Martin, you understand!
Mr Briggs: I would say that it
is culturally embedded in Whitehall. I do not think you can pick
on one department as opposed to another. Everybody does it if
they get the chance. I have to say—and this is not false
flattery—that there are ministers—and I instance Patricia
Hewitt, for example, in the sterling work in which she has been
involved in trying to simplify business support within DTI—who
have been battling hard to try to reduce that cultural phenomenon.
But from where we sit it is an immense problem that takes us back
into the territory, for example, that Michael Lyons visited a
few months ago, about the way in which government works and the
way in which government works at national level as opposed to
regional level. I have often said that if you have hundreds of
bright people around to deliver policy, they will not sit on their
hands; they will do things, they will invent things, they will
initiate. I do not blame them because they do not want to be wasting
everybody's time but from our point of view most of that work
actually can have the effect unintentionally of making life more
difficult at a regional level if you are trying to achieve the
regional economic strategy integration that we have described.
Q255 Mr Beard: What would you do to streamline
all these initiatives?
Mr Briggs: I would first of all
make it absolutely clear that the dialogue, both in terms of delivery
and policy, has to be between regions and government. It is not
a one-way thing where bright ideas are thought up and regional
organisations or mechanics are then there simply to deliver; it
has to be a circle, a policy dialogue, and I would commend the
way in which the Treasury handled the regional emphasis documents
coming in as part of this-time spending review of the way of doing
it. The second thing I would do is to get really serious about
the sorts of approach that Michael Lyons commends, ensuring that
people are doing their job closer to the audiences and the groups
with whom they need to deliver. My recipe would be to do much
less of the delivery and policy making in Whitehall.
Q256 Mr Beard: This is really the new
piety, is it not? That everything will be better if everybody
did it in their own location. I am not sure that is entirely demonstrated.
There is a lot of money going through these initiatives as well.
What is happening to it?
Mr Briggs: There is a lot of money
going through these initiatives and there would be in future.
The fact that people are geographically dispersed should not make
them less accountable, I would say. It is nice to be accused of
uttering a piety—that is probably a flattery actually—but
I think it comes out of a new emphasis on the role that economic
strategies play, frankly. From our point of view, this is not
simply rhetoric. I think we have shown evidence of the regional
economic strategies and our own corporate plans and the way in
which we account for delivery to show that you can get extra value
out of resource where you integrate more effectively your approach
to delivering it.
Q257 Mr Beard: When you talk about accountability
for these funds, accountability means "Show me what you have
got for it."
Mr Briggs: Absolutely.
Q258 Mr Beard: Well, show me. What has
come of all this money that has been pumped in?
Mr Briggs: You can be shown either
through pointing at big scale projects, of which there are quite
a number around the country—in my own region, if you ask
me to point specifically, for example, in the sphere of innovation,
I would point at Biocity in Nottingham, which is a joint venture
bringing together the two Nottingham universities and ourselves
in creating a spin-out incubator environment—but also you
can measure us in terms of the outputs against which we each report
year by year in relation to jobs, in relation to the number of
skills and learning opportunities generated, in terms of brown-field
land remediated, in terms of the number of new businesses that
are generated.
Q259 Mr Beard: Those are not outputs,
Mr Briggs. In terms of your ultimate goal, which is improving
regional productivity, those are inputs. The ultimate output,
the regional productivity, has been not changing very much at
all in all this process. We have been pumping all this money in.
Tell us why we should throw good money after bad.
Mr Briggs: I would not describe
it as throwing good money after bad. We could argue for a long
while about what are outputs and what are inputs. I am using the
terminology that government uses at the moment in testing us.
They describe those objects as outputs. I would agree that they
are inputs to our wider objective.
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