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7 Feb 2007 : Column 282WH—continued

Over the past nine years, however, the RDAs have increasingly become the Government’s primary vehicle for an ever-widening range of different economic functions, such as economic regeneration, business promotion,
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employment, skills and sustainable development. However, established Government agencies are already engaged in many of those functions—for example, urban regeneration task forces or the sector skills council—and there is a genuine danger of overlap, duplication and confusion. That is something that hon. and right hon. Members have referred to in this debate. Can the Minister tell me how many different executive agencies in Departments are engaged in the skills arena and are independent of RDAs?

Duplication and waste are not the only problem. By constantly widening their remit, RDAs can become unfocused and lose sight of their original role. The South East England Development Agency, for example, wanted to tackle social exclusion, which seems a reasonable idea until one discovers that it set a target of reducing coronary heart disease by 40 per cent. in its region. However worthy or desirable reducing coronary heart disease may be, it is not the job of an RDA. It is the job of the NHS. I hope that the Minister will respond to that concern.

The most important yardstick in measuring an agency’s performance is what it does for businesses and jobs. The RDAs have claimed that they have managed to lever in roughly £2 billion for the £2 billion that they spend, and that the result is the creation or safeguarding of about a quarter of a million jobs. If that is true, it is something that we should and can celebrate. However, many economists are beginning to question the basis of those claims and have pointed out that the evidence is not independent empirical data, but is based, in part, on subjective consumer surveys. Given the importance of that information, which will be used to debate the issue, will the Minister explain how figures relating to RDAs are calculated? When she quotes the results of their work, as I am sure she will do, can she tell us what proportion of that information is based on consumer evidence and not on measurable facts?

It is equally important that performance figures are measured against what the RDAs spend. For example, since 1998, overall private sector employment in this country has risen, although only slightly. The Minister will be aware that in four regions private sector employment has fallen. That is despite RDA spending in those four regions nearly doubling; it is now at 178 per cent. Given that, why does the Minister believe that a spending increase has failed to work in those regions? What, if any, correlation can she show between the RDAs’ spending and local private sector labour markets?

Alongside the issue of performance is that of value for money. Overall, RDAs have spent roughly £12.5 billion since their inception—thousands of millions of pounds rather than hundreds of millions. Indeed, last year they spent £2,157 million. What proportion of that money goes on front-line services and what goes on administration? I looked at the figures before this debate, and found that the average spend on administration is said to be about 8.48 per cent., but within that there is considerable variance. Some agencies are spending at 6 per cent., but the South West of England Development Agency—about which we have heard a considerable amount during this debate—manages to spend 13 per cent. Why is there such a wide variation when agencies carry out the same
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function? Has the Minister discussed that with the agencies and is she satisfied with their performance? I appreciate that it is a tricky question for her because the Department of Trade and Industry’s own central administrative costs are 17.9 per cent. of its entire budget. I understand if that is an issue that she might wish to avoid, but I hope that she will respond to it in this debate.

A classic example of the disparity in the way that agencies are run is how money is spent on producing and publishing corporate plans. Since 2002, Yorkshire Forward has produced its corporate plans without any extra publishing costs by using the internet. In London, the picture is very different. Since 2002, the London Development Agency has spent more than £100,000 on publishing such reports. Why is that the case? If that method of publishing is good enough for businesses in Yorkshire, why does the LDA feel that it can waste that money when there are thousands of small firms that need help in London? Does the Minister agree that the LDA needs to get its house in order? I understand that figure may be a small proportion of its total budget, but to many people in London it speaks volumes about the LDA’s priorities.

In conclusion, ensuring that all parts of the UK have a healthy economy is vital to the national picture and to millions of people on the ground. We need to recognise the gap in job and wealth creation within and between the regions and to be honest about what is working and what is not. I look forward to hearing the Minister explain why the gap between the regions is growing and what she plans to do about it. I also hope that she will tell us how the RDAs’ performance is measured, what reliance is placed on survey information as opposed to facts and why there is often little correlation between what the agencies spend and their achievements. The Government have had nearly 10 years in office and it is time that they explained why the economic gap between the regions has widened and not narrowed as they have claimed.

10.47 am

The Minister for Industry and the Regions (Margaret Hodge): I congratulate the hon. Member for Bournemouth, East (Mr. Ellwood) on securing this timely debate. As he will probably know, we are, as part of the comprehensive spending review, having a sub-national review of all our structures to ensure that they are appropriate and fit for purpose as we move into a period of greater globalisation and technological change. We are considering whether the incentives, governance and accountability are right.

This has been a good debate in which important issues have been raised; some are tougher to grasp than others. I will respond to some of the issues and, if time permits, will then move on to our wider objectives. The right hon. Member for Wells (Mr. Heathcoat-Amory) has reflected the old Tory attitude. When we set up RDAs the Conservatives opposed them; in their 2001 election manifesto, they said that they would scrap them and by 2005 their policy was a bit vaguer and they suggested that RDA powers should be reduced. In today’s debate the majority of hon. Members from all parts of the House—with the exception of a couple of hon. Members from our side—understand and appreciate the role of RDAs. We have come a long way.

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Mr. Heathcoat-Amory: Will the right hon. Lady give way?

Margaret Hodge: No, I will not give way because I am short on time.

I say to the hon. Member for Bournemouth, West (Sir John Butterfill) that he is mistaken in suggesting that the moneys that the RDAs dispense come from Europe; they do not. However, the decision that we have taken is that from 2007 onwards in the next period of the European structural funds those moneys will be managed at a regional level. That is because we want to decentralise to a more appropriate tier the decisions on how to dispense that money.

I say to the hon. Member for Totnes (Mr. Steen) that the report will be made public and will be available to the public. I wish him well in his battle to ensure the continuation of Dartington art college.

My hon. Friends the Members for Ipswich (Chris Mole) and for Manchester, Blackley (Graham Stringer) know that I visited both RDAs. I will discuss in more detail the issue of city regions and their role in relation to RDAs. My hon. Friend the Member for Stroud (Mr. Drew) talked about site reclamation, which is very important. My hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) also made a point that is important to the RDA debate. She emphasised the role that the RDA is playing in the defence industry down in the south-west region. That shows the difference between regions, which is one reason why we have gone for the sub-regional structure. This is not old, Stalinist, central Government prescription, as one or two Opposition Members suggested; it is a decentralisation of power and of implementation of economic policy, which I think has worked.

Let me deal with one of the points made by the hon. Member for Hertford and Stortford (Mr. Prisk). He is just wrong on the figures. I do not know which figures he looked at, but he is wrong to suggest that the gap between the regions—one of the tasks that we set the RDAs was to narrow that gap—has widened. It has not. The most recent statistics that I have show that the employment rates in every region have increased and the gap has narrowed.

Mr. Prisk: I was not talking about employment; I was talking about gross value added.

Margaret Hodge: These are Office for National Statistics—

Mr. Prisk: Will the Minister give way?

Margaret Hodge: No, I will not, because I am very short of time.

Mr. Prisk: On a point of order, Mr. Cook. The Minister is citing a different statistic. I made it clear that the value was the differential between the most successful and the least. The Minister is now talking about employment. They are two different things. Do you agree?

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Frank Cook (in the Chair): It is not up to me to agree, as the hon. Gentleman well knows. The point is part of the debate, which is ongoing.

Margaret Hodge: The statistics that I am citing are the figures from the Office for National Statistics. We can examine employment rates across the piece. I do not want to go into the broader statistics, but any statistic on the economy demonstrates a massive improvement. That includes employment, inflation and productivity. It covers the whole range, and certainly the gap between performance in the regions has—

Mr. Prisk: GVA? Not employment.

Margaret Hodge: The gap between the—

Mr. Prisk: GVA?

Margaret Hodge: Yes. GVA. The gap between—

Mr. Prisk: No, we are not talking about employment; I was talking about GVA.

Margaret Hodge: The gap between the performance of the regions has narrowed. I am sorry that the hon. Gentleman finds that a difficult fact. He ought to be joining the rest of us in celebrating an achievement in the regions.

May I deal with some of the broader issues that have been raised? Regions are different. We cannot respond quickly or sensitively to regional differences and variations if we try to do all that from central Government. The range of issues that are best addressed at regional level is a matter for debate. The hon. Member for Bournemouth, East raised transport infrastructure. That is something that we are considering. Extending the impact of the RDAs could be considered, because the effect that they could have on regional logistics and transport infrastructure could be enhanced by decisions taken at that level. That is one area that we are considering.

Another issue is technology transfer and innovation, and I come now to the issues raised by my hon. Friend the Member for Manchester, Blackley. Interestingly enough, one of the achievements by his local RDA is the bringing together of the universities in Manchester to develop a much stronger capacity that can challenge some of the other centres of research excellence, which have tended to be concentrated in the south-east. There are also the combined universities in Cornwall, and in Cumbria there has been another attempt to establish a centre of academic excellence and innovation. That is something that the RDAs have done well.

Skills have been talked about a lot. The RDAs oversee the regional skills partnerships. There is a plethora of agencies and voluntary organisations that try to tackle the skills challenges that we face, but all those bodies are brought together under the skills partnership. Can we do more to make that simpler and more coherent and to achieve better joint working? Yes, and that is one of the challenges that we are considering in both the sub-national review and the structures that we put forward for the future.

Catalysing sustainable environmental regeneration projects of the type that my hon. Friend the Member
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for Stroud alluded to is another important function that is best carried out at regional level. Attracting investment to the area is another function. A number of regions have been extremely successful at attracting inward investment, particularly from the Asian economies.

Linda Gilroy: Will my right hon. Friend give way?

Margaret Hodge: No, I have only five minutes left, so apologies to my hon. Friend.

Since we set up the RDAs, their responsibilities and functions have increased. That shows that their performance is becoming ever more effective and that we have growing confidence in their ability to deliver for their regional economies. They now have greater flexibility with the single pot of money; they did not have that when the money was much more tightly controlled by the various Departments from which it came. The regional economic strategies are much better. They are more evidence based, there is more buy-in from all the partners in the region, and they are much more focused. I do not accept the argument that they are all the same. Compared with the South West of England Regional Development Agency, the RDA in the north-east has to deal with a very different environment—it is raw, an ex-industrial economy. There is nuclear energy up in the north-east. That is not an issue for the south-west, so the two areas are very different.

Business Link is now administered, appropriately, at regional level, as are housing allocations. That is one of the areas that we devolved most recently. The regional housing allocation budgets were determined through the RDAs, which I think was a very successful exercise in decentralisation. As we reflect for the future, of course we want more simplification of business support. A number of hon. Members raised that issue. I agree also that we need to streamline and simplify some of the existing regional strategies, to try to bring them together. Again, those are some of the challenges that we are considering.

May I deal quickly with the relationship between cities and regions? That issue was raised in particular by my hon. Friends the Members for Manchester,
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Blackley and for Selby (Mr. Grogan). Cities are utterly crucial to the economic well-being, prosperity and growth in their regions. That is why we have done all the work that we have on developing the role of city regions in economic activity, but cities are inter-dependent. If we put all the authority, power and economic drivers into cities, we would find that cities alone would not succeed in increasing the potential and prosperity in regions. Even Manchester and Liverpool, two huge cities in their region, have some inter-dependencies and specialisations. If we are to compete globally, we must ensure that that inter-dependence is well realised, whether it is on transport, innovation, academic excellence or regional skills needs. Those are all issues on which city regions, working together in their wider regions, will be best at closing the gap in economic performance between the regions.

My final point relates to the accountability of RDAs, which is often raised by hon. Members on both sides of the House. The RDAs are accountable to Ministers and Parliament. Indeed, much of the information used by the hon. Member for Bournemouth, East came from the RDAs’ annual report and accounts, which are audited by the National Audit Office and then laid before Parliament. The figures that he chose to use were the half-year figures. Had he chosen last year’s total figures, he would have seen that the targets were met.

RDAs do hold public meetings. Regional assemblies have their friends and their foes, and we are considering whether and how we can strengthen that capacity for democratic accountability without introducing massive bureaucracy, which inevitably arises given the number of, for example, local authorities or MPs in every region. However, we have had the independent performance assessments done for five of the eight regions outside London. The performance of all those regions was in the top two categories. All were seen to be fit for purpose and to be maturing as agencies. All were felt to have the ability and the capacity to secure real economic prosperity for the UK, focused on the regional strengths and regional challenges that every region has.

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Bad Debt (Water Industry)

11 am

Mr. Robert Syms (Poole) (Con): The water industry is one of our most successful industries, and has made major strides in recent decades in improving quality and providing decent first-class services. It has a problem, however, in the large and growing bad debt that impinges on its ability to continue making environmental improvements, and increases the amount paid by bill payers, some of whom are not as well off as those who do not pay.

I have been aware of this growing problem for some time. Just before Christmas, my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) and I were briefed by the managing director of Bournemouth and West Hampshire Water, Tony Cooke, who raised the issue and drew our attention to the very good House of Lords report, chaired by Lord Selborne, that reviewed the water industry. I also thank the other people who have given me briefing material for this debate, including Phillip Mills of Water UK, Michelle Lewis of Yorkshire Water and Colin Skellet of Wessex Water.

So what is the problem? According to the Office of Water Service, the outstanding household revenue in this industry was £814 million in October. In 2005-06, the industry had to write off more than £103 million, and 4.4 million households have revenue outstanding. That is about 15 per cent. of all bill payers. Some £400 million of that debt has been outstanding for more than 12 months. The industry has a high operating expenditure on collection—well over £70 million. The cost of bad debt to the average UK household bill is about £10 or £11, which is a considerable sum. The £814 million that Ofwat reported in October was up from £760 million in the previous year, so the problem is growing. I hope that the Minister will at least acknowledge that there is a problem.

When the Government came to office, they brought in the Water Industry Act 1999, which removed the right to disconnect. I do not argue that we should go back to those days. Indeed, the vast majority of the water industry does not want the power to disconnect, but it wants several areas of public policy to be improved so that it can have a much better chance of bearing down on bad debt and being fair to its customers.

The Government’s decision to stop disconnection, combined with a 1999 High Court ruling that ruled out the use of prepayment devices and restrictions in the water industry as illegal, has given the industry a difficult hand to play on bad debt. Since then, the status of water charge arrears has dropped down the priority list for citizens advice bureaux, money advice centres and customers. I must admit that when constituents of mine have come to me with financial difficulties, the first thing that I have told them is, “Don’t pay your water bill,” because I know that that they can get away with it. I am sure that we all do that, but it puts the industry in an unfair situation. Data protection changes might have added to the problem because they make it difficult for the industry to trace absconders, who are responsible for a quarter of all the debt.

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