Examination of Witnesses (Questions 60-79)
MR NEIL
KINGHAN, PROFESSOR
MARK KLEINMAN,
MR ANDREW
CAMPBELL, MR
BOB LINNARD
AND MR
STEPHEN SPEED
13 MARCH 2006
Q60 Mr Betts: So we are going to
end up with a local authority, a city region and a Regional Development
Agency?
Mr Kinghan: We do not know yet
what proposals we are going to pursue. What Mark was describing
was one of a number of possibilities. You were pressing us to
say whether or not there will be something about the city regions
in the Government White Paper and I said it was possible, I think
it is likely, that the Government White Paper will talk about
city regions but exactly what it will say Ministers will need
to decide between now and then. But we come back to the point
that we are not necessarily talking about governance changes.
There may be governance changes—
Q61 Martin Horwood: I was talking
about economic planning actually because you were talking about
the economic role.
Mr Kinghan: I understand, and
if we take forward economic planning changes then obviously we
need to think about what that means for the rest of the region.
Q62 Martin Horwood: You would support
in principle the concept of breaking up the South West region
on an economic planning basis if it did not prove to be a sensible
unit—
Professor Kleinman: No. I thought
your question was pointing towards the role of the Regional Economic
Strategy, the RES, which is an RDA document, precisely designed
to balance the economic needs across the region, and it is noticeable
that as the RDAs are going through the process of reviewing their
RESs they are taking on board the concept of city regions as important
to their overall view on what the economic strategy should be.
Q63 Dr Pugh: I do not think the Chairman's
question has been answered about what actually is a city region?
In Lancashire, or the North West rather, you have a Merseyside
city region and a Manchester; some people even suggest there is
a Central Lancashire city region, which is a line drawn vaguely
around a lot of towns which are left out of the other city regions.
Do we have a concept here of a city region possibly without a
city?
Professor Kleinman: The concept
of the city region is primarily an economic one which means it
does not have to have one major city. There are examples all around
the world of where you have three or four equally sized cities,
none of which are dominant, of which the most obvious example
is the Randstad in the Netherlands where you have four essentially
equally sized cities which have different roles and none of them
would claim to be primus inter pares against the other. That is
between Amsterdam, Rotterdam, The Hague and Utrecht. But they
found it useful for more than thirty years to cooperate together
as an economic unit, not as a governance unit or a fiscal unit.
Q64 Chair: Can we try to move on
because I am conscious that we have representatives from the Departments
for Transport and Trade and Industry. Would you like to introduce
yourselves?
Mr Linnard: I am director of regional
and local transport policy in DfT.
Mr Speed: I am head of regions
at DTI.
Chair: It might be most appropriate,
John, if you have a go at the questions you were asking about
RDAs very briefly, and we can deal with that and then get on with
the other ones.
Q65 Dr Pugh: There are documents
which lay down precisely what the Regional Development Agencies
will spend money on. They are kept rather covertly and are called
Strategic Investment Plans. They are not on the website of the
Regional Development Agencies but are the most discussible documents
in a sense because they indicate where one sum of money is spent
this year and next, and also where it will not be spend because
there are always many more projects around than are funded by
the RDAs. Do you think it reasonable that such documents of such
importance as these should be well distributed and open to discussion
and serious examination and scrutiny from all the stakeholders
in whatever region these documents apply to?
Mr Speed: The short answer to
the question is yes. There is a sort of hierarchy of documents
which exists. There are the regional economic strategies which
Mark referred to earlier which are, if you like, overseen by the
Regional Development Agencies but they belong to the region as
a whole. From those derive each Regional Development Agency's
corporate plans which are signed off by Ministers, and at the
end of each year the agencies, like most other publicly accountable
organisations, produce annual reports of what they have achieved
during the year, and certainly I believe all of those documents
should be, as it were, widely available and certainly in the case
of the regional economic strategies, many of which are being rewritten
at the moment, the degree of public participation and public scrutiny
in the development of those documents has been very widespread
indeed, in my experience.
Q66 Dr Pugh: But you will acknowledge
that hitherto the strategic investment plans that say what projects
give what money and when have been not elusive but have not been
given the same visibility as the other documents that festoon
the postbags of MPs and the like on a regular basis?
Mr Speed: I am not sure whether
I am in a position to answer that question except to say that
I do not think the Regional Development Agencies have anything
to hide, and nor should they.
Q67 Chair: Can I probe further the
role of the RDA and the DTI in making sure that each region fulfils
its growth potential but also in reducing disparities between
regions? What is it that the RDAs do and what is it that the DTI
does, and how does each of you help the other to do your job more
effectively?
Mr Speed: That is very complex.
What we both share, of course, is our regional economic PSA, our
public service agreement, and indeed several other PSAs which
the Regional Development Agencies contribute to, and what that
means is that the Department of Trade & Industry has a key
role in looking at the drivers of productivity which we have set
out in the memorandum for you, and at employment issues, and determining
to the extent we need to how we should improve regional and, indeed,
national growth through national frameworks. So we have national
frameworks for things like enterprise, innovation, business support,
science and so on. I think what we try to do with Regional Development
Agencies is develop a complementarity where the agencies who have
far greater knowledge than we can ever have in Whitehall of what
is happening at regional and local level, are able to produce
actions in support of regional economic strategies which, when
they work with partners in the region, are able to deliver in
a regionally intelligent way, if you like, which we would find
very difficult to do from where we sit. So there is an enormous
complementarity and very many of my colleagues right across the
Department work very closely with RDAs.
Q68 Chair: What does the DTI do to
try to reduce regional disparity?
Mr Speed: We have in support of
the regional economic PSA devolved quite a lot of the things we
used to do ourselves to the Regional Development Agencies in recognition
of the fact that the agencies are in a better position to deal
with the issues which are unique to them. A particular obvious
example would be Business Link where the service delivery was
devolved to the agencies last April. The RDAs work with Business
Link on a national framework in that they are able to tailor the
information, brokerage and delivery within each region and that
is very important because one of the things which is very obvious
if you look around the country, particularly at the business environment,
is that the problems facing businesses in the North East, for
example, can be very different from those in the South East, and
we have tried to develop systems which allow the regions both
to deliver through a well-known national brand which reduces confusion,
but also to tailor their delivery to the circumstances which they
understand in their region better than we do.
Q69 John Cummings: Current trends
tend to suggest that regional economic disparities are set to
grow further between London and the rest of the country. Is that
your understanding?
Mr Kinghan: I think you are referring
to the PSA target which is jointly owned by the ODPM, the Treasury
and the Department of Trade & Industry. I think our information
is that the trends at the moment are encouraging for the target
which relates to economic disparities. There is stronger employment
growth in the north midlands and the west and at the moment there
are signs that the gap is narrowing, but we do recognise that
these developments are cyclical and as the economy in London takes
off again we will have to be careful to ensure that the growth
in the other parts of the country remains strong.
Q70 John Cummings: You see, your
written evidence tends to suggest that the gap in growth rates
between London and the South East and the East and the other regions
declined in the last two years?
Mr Kinghan: The gap? Yes, which
is what we are seeking to achieve.
Q71 John Cummings: But you accept
that the definitive judgment should be over a full economic cycle.
Mr Kinghan: Yes.
Q72 John Cummings: Can you tell the
Committee what is a full economic cycle? When did it begin? When
do you expect it to end? And will you also indicate to the Committee
whether judgement will treat the rest of the regions as one unit
or consider them separately?
Mr Kinghan: The target relates
to our desire over the long-term to reduce the persistent gap
in growth rates between the regions and to demonstrate progress
by 2006. The period that we are looking at is the period from
2003 to 2012, so I think for these purposes that is where the
economic cycle has been identified.
Q73 John Cummings: The cycle is a
nine-year cycle?
Mr Kinghan: You are asking me
to be more precise than I feel able to be. I do not know.
Q74 John Cummings: It is a simple
sort of question.
Mr Speed: It is a simple question,
I agree, but I think as the Treasury has found out there is not
always a simple answer. The Treasury, indeed, themselves have
had to revise not only the endpoints of economic cycles but the
start points—
Q75 John Cummings: I am sure you
are a lot more astute than those in the Treasury!
Mr Speed: I am not suggesting
that the cycle will necessarily coincide with those points but
the 2012 date emphasises the long-term nature of the problem we
face which has built up over many decades in the North West and
the Midlands versus the South and the East. We need to allow ourselves
quite a significant amount of time in order to address the disparity.
Q76 John Cummings: Would the judgment
to which you refer treat all the regions as one unit? Or would
you consider them separately?
Mr Speed: Of course all this is
driven by data and data economists for each of the regions.
Q77 John Cummings: So does the data
indicate whether they will be judged separately or as one?
Mr Kinghan: The disparity we are
seeking to address is between the Greater South East region which
would mean London and the South East on the one hand, and I think
probably Eastern region as well, and the North, the Midlands and
the West on the other. So in that sense we are taking it as two
big blocks.
Mr Speed: I beg your pardon; I
misunderstood the question. That is the way the target is technically
measured, yes.
Q78 Chair: Can I turn to the funding
projections which seem to be based on a standard annual increase
of 2% for 2015-16 without taking account of regional variations
in prosperity? To what extent do you expect to adhere to those
figures, and what is the evidence base on which those annotations
are decided?
Mr Kinghan: I will start if I
may. I think what you are referring to is the regional funding
allocations exercise that we are involved in at the moment. What
we are seeking to do was to get advice from the regions on the
priorities in their regions in order to inform government decision-making
both in the short term and in the context of the Comprehensive
Spending Review, so what we did was to give each of the regions
an allocation which was firm for the next two years but indicative
for the following seven, which takes you up to 2015, so we are
not saying that the allocations will actually increase by 2% of
the year over that time: what we are saying is: "This is
an indicative allocation. If this is what happens then tell us
what you think the priorities are within that spending pattern",
and then that would feed back into the decision-making process
which will initially be taken forward in the Comprehensive Spending
Review.
Mr Campbell: It was exactly that.
It was a figure for planning assumption purposes to give each
region an idea. 2% is in line with the Government's inflation
target so that was the basis for it. So it is not saying, "This
is a forecast of what you think you will get"; it was a planning
assumption figure.
Mr Speed: I wanted to add the
detail that when the advice was given to the regions we also asked
the regions to say what they would do if those numbers were either
10% greater or 10% lower than the figures published.
Q79 Dr Pugh: But surely in connection
with transport allocations the North West knows, or was told,
it had 1.4 billion to spend over 10 years; it was not told everything
was going to be revised within two years. Given that it has that
figure and that London has a different one which will have to
accommodate huge projects like Crossrail and so on, what is the
basis for saying to a particular area, "That is your figure;
that is for transport; that is what you need for the next 10 years?"
How is that figure arrived at? I know there is consultation about
how that will then be divided up and what they will wish to do
with it, but I suppose one could argue about the fairness and
the figure and argue about where the figure comes from in the
first place.
Mr Linnard: London is excluded
from this exercise; London's funding for transport is different.
There is a five-year settlement that is agreed between the Government
and the Mayor. What we are talking about here is the exercise
for the English regions outside London. How the figures were arrived
at: we took the funding settlement after the 2004 Spending Review
that came to the Department for Transport and we identified within
that in the usual divvy-up process how much funding was going
to be available for local authority and Highway Agency schemes—
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