Regional development agencies and the Local Democracy, Economic Development and Construction Bill - Business and Enterprise Committee Contents


Examination of Witnesses (Questions 100 - 119)

TUESDAY 7 OCTOBER 2008

COUNCILLOR DAVID SPARKS, COUNCILLOR STEPHEN CASTLE AND MR SEAN MCGRATH

  Q100  Mr Hoyle: Just touching on economic development, I welcome what you said about Chorley as I was the Chair of the Economic Development and I thought we were brilliant. They have lost the way since because it is not been a priority, and I am pleased that it is going to be back as a priority for local authorities. What I would say, listening to Lancashire County Council, who also have a very good reputation, is I think you have got to re-engage with the new chief executive, and it has got to be one of the priorities for counties. Is there a danger that we have a beauty competition between RDAs, saying: "Come to us; look how good we are; look what we can do" and we are now going to extend that beauty competition between districts and mets within one RDA area? Is there a danger that we will be wasting money, or do we believe we can go back to the old method of delivering good images and a very prosperous economic development through the local authorities in the way that we used to? I am just bothered that we are in danger of having another beauty competition at a lower level and retaining the one at the higher level.

  Councillor Sparks: I think the pertinent point to make on this one—and I will quote a practical example, which is known to Adrian—is the situation in relation to the Black Country, where you have Wolverhampton, Walsall, Sandwell and Dudley, where there is now, in essence, one plan for that area. They have, together, been able to sort out tricky political problems such as the Merry Hill Shopping Centre, for example, practically in my own ward, and it would be stupid for us to think that it should go back to, say, Dudley having a large economic development unit, or Sandwell having a large one and others not having it. Clearly, it has moved on and therefore those four local authorities would be better advised to work out what works for them collectively, and that might be a model that might be applied elsewhere.

  Mr McGrath: On the same basis, there could be a danger but that is about maturity of partnerships between local authorities. I would quote another group of local authorities I used to work for in terms of Greater Manchester, whose people would come across as being very coherent but would, like anybody else will, argue in private. Certainly, if local authorities come together on the basis they need to work on their common issues are in terms of discussing the RDAs, you can overcome that beauty contest approach, but you need a degree of maturity in terms of partnership working.

  Councillor Castle: I would agree with both David and Sean. We have all got examples, and we have in Thames Gateway over the Lakeside basin development and the commitment of all of the local authorities there that were competing town centres to actually back an expansion of Lakeside, because that is politically in a regional context. I think that is perhaps where things have changed since pre-RDA, and that is due, I think, to the maturity of local government and its ability to work together in partnership, compared to, perhaps, where we were 10 years ago

  Mr Hoyle: My final question is: do you think Lancashire County Council still needs a fully-staffed office in Brussels, or should it now be a shared office?

  Q101  Chairman: Can you remember that question? There might be a final question from Lindsay and I at the end in which we explore that at greater length. Just remember that. Hold that thought and Mr Hoyle can ask that question again at the end. I do not want to throw that issue away. Hold that thought, Lindsay; I will let you ask that one again at the end. Treasure that one. Before I bring in Adrian Bailey, can I just say we have talked a lot about the variability of performance of RDAs, but if we are honest local authorities vary in their performance a great deal too: the quality of councillors varies wildly around the country; the quality of leadership of those councils varies wildly; the quality of officers varies wildly as well, and the ability of local authorities to work together varies wildly. I was told recently in the North West (whether or not it is true) that Greater Manchester is great—local authorities work together and are very co-operative, but in Greater Liverpool that is not the case at all; the districts fight each other. We have still got the variability of performance of RDAs; so is there not also a need for quite a strong thumping between Government and local authorities to make sure that variability of performance of your members is also dealt with?

  Councillor Sparks: I think it is important that in local government we do recognise that we continually need to improve; that it is the case that local authorities vary by definition, and there will be good and bad practice. My own view in relation to the economic role of local authorities, by definition, is that those local authorities who do not get their act together, either individually or collectively, will not best serve their communities and their communities will not regenerate to the extent that they should do. Ultimately, if they fail they should be punished in the ballot box.

  Councillor Castle: I think David is obviously right in terms of the ultimate sanction in terms of the electorate, but certainly in the period that I have been involved in local government this time, and the time when I was a district councillor, I think there has been a very significant improvement in the overall quality of local government: in councillors, in officers and in the way in which they engage with their communities. Whilst I am sure we have all got to be on the comprehensive performance assessment process and the degree to which local government is audited and inspected, one outcome of that has definitely been a substantial improvement in the quality of the way in which local government operates and, I would argue, to a much greater extent than other areas of government, possibly even RDAs. So in terms of the CPA process, you can learn from the journey that local government has been on. I think the challenge is around economic development because there has been this sense that that duty has gone somewhere else and, therefore, it is no longer a priority for local government, but actually the quality particularly around that area is an issue.

  Q102  Chairman: And the local authorities' stock of retired business people whose views of business are probably out of date, typically—typically—may not be the best people to drive that process forward. Not always—there are very honourable exceptions.

  Councillor Castle: In fact, I was doing my books at 11 o'clock last night—but I am not retired.

  Q103  Mr Bailey: I think you probably would have heard the comments made by the business representatives on the local authority board. Could I ask you what your position is on this? What are your feelings about it?

  Councillor Sparks: As I say, we have already given evidence that we think that the leaders' forum in itself is insufficient and that, from our point of view, the best way for local authorities to be involved in the accountability of Regional Development Agencies is for us to do it in conjunction with Members of Parliament. Following on from that, it is equally the case that you cannot expect, for example, in a particular region, 30-odd leaders to effectively monitor an organisation; those 30-odd leaders will need to come up with some arrangements that will reduce the numbers to more manageable proportions, will need to take into account proportionality so that there is inclusivity, and will need to reflect the actual region, if it is going to result in something that is an improvement on what we have already got. The other point that is particularly crucial to us, based on our experience now, is that if leaders are there to be part of (for want of a better expression) the executive role of RDAs—i.e. helping to produce a single strategy—then they should not equally be expected to scrutinise the efficiency and effectiveness of that process.

  Councillor Castle: The critical issue for me is that we are talking about leaders. Probably the biggest failure that I have seen in terms of regional assemblies, and I certainly would criticise the way in which scrutiny has been exercised by the regional assembly of RDAs (certainly in my experience), is that it has often not engaged the people who are actually the leading local authorities, and I think the construction of a leaders' forum—I take David's point it is going to be one that actually is small enough, and we have looked at different models in the East of England and we have an executive group, where there are going to be issues about balancing the size of authority, and I take his point on proportionality, but I still think, in terms of engagement, there is more opportunity there that would bring us significant improvement in that. I would also go back to the first point that I made: there is this issue about is it the right size region, is it the right size structure that we are trying to engage with, but if you accept that is there and it is a given then I think we would certainly support the leaders' forum with a model that is distinct in each region. Again, I think somebody made a point which picked up how would you deal with a group representing the CBI, and a lack of agreement within that forum? I think you have to allow each region to decide how they are going to deal with that. It cannot be imposed necessarily from the outside, but I think local government is now mature enough to have that discussion and that debate. You will avoid a lot of those conflicts if you get the regional structure right, and therefore it feels functionally correct, and you do not have wildly competing priorities from regions that are so disparate that they do not function.

  Q104  Mr Bailey: How do you feel about the point that David made—I think I have it right—that there is a potential conflict of interest with the body being led by local authority leaders who may have had a say in the formulation of the policy anyway?

  Councillor Castle: You can put together structures that would enable people who are, perhaps, outside of that immediate executive relationship—it might be the broader leaders group, if you like—because there is a challenge about going from 30 down to 10 that David was talking about. I think the critical issue for me, to be honest, is not just about the scrutiny process. With respect, I accept you may not agree with that, in terms of your current role, but for me it is about how do you bolt the leadership together, democratically accountable leadership, that is scrutinised ultimately by the electorate with the formulisation, with the business community. That, for me, is the most important thing. In this sense I think it actually does a better job. What the regional assemblies, frankly, were not doing (you can argue whether they were providing effective scrutiny) is they were not connecting the leadership, ultimately—democratically accountable representatives, the leaders of those local authorities—with the RDAs.

  Q105  Mr Bailey: I was on a regional assembly for a very short period of time so my experience would not matter, but I accept it was when they were in their infancy.

  Councillor Castle: So was I.

  Councillor Sparks: Some of them did not grow up.

  Q106  Mr Bailey: Sean, do you wish to add to that?

  Mr McGrath: The point I would make, just referring to the comments made by the private sector in terms of perceived difficulties or perceived interests stopping things happening, in terms of the North West there is actually a track record of taking some hard decisions by leaders coming together and taking a broad position around issues. In terms of the scrutiny side of it, I think the county's position is really that it is difficult for those leaders to scrutinise another organisation like that, and what we would like to see is more sub-regional engagement in terms of scrutiny of RDAs in terms of what they are doing at different levels, and actually bringing in some of the experience of local authorities. We would not say that every local authority would need to do it but certainly we could actually take different models; you could bring in different leaders in different levels, which I think would bring some more experience to the role.

  Q107  Mr Bailey: If I have interpreted your answer correctly, what you are saying is that local authorities could set up their own individual authority monitoring mechanisms which could then feed in to the local authority leaders' forum.

  Mr McGrath: I think you ought to see partnerships of local authorities, but you could look at that kind of model in terms either of a sub-regional footprint or a functional economic area footprint.

  Q108  Mr Bailey: Could I just put it to you: you are all involved in local government in one way or another and I have heard three rather different models of accountability put forward, all of which may have merits. Is there any sort of common theme, if you like, amongst your comments that you could agree on?

  Mr McGrath: That there is accountability for the area that the RDA is operating in. It is not one-size-fits-all; people need to make their own decisions that are appropriate to their area, and that work, I think, is the key issue for me.

  Councillor Sparks: I would agree with that but make the further point: what has not happened so far—and it is not just in relation to RDAs—is that when you get these regional or regional-type mechanisms they do not necessarily plug into the real political world—the real key decision-makers—and that it does not make any difference, for example, in the West Midlands how many people scrutinise the Advantage West Midlands from the Dudley point of view; what matters in Dudley is that the West Midlands joint district, which represents them, has an effective link into that scrutiny process because that is, as you know, how we work.

  Q109  Mr Bailey: I would agree with that, personally. Do you think that, given the current proposals, there is a genuine problem that the strategic integrated regional strategy could be delayed in some areas rather more than others because of the complexities of the local authority structure and accountability?

  Councillor Castle: Yes, I would not disagree with that. The fact that we have only just about got our Regional Spatial Strategy through, and there is a legal challenge against it, demonstrates that clearly. It, bluntly, comes back to the first point I made, which is that whatever the regional structure is and whatever the strategic coming together of people, it needs to make sense for the elements within that. Otherwise you are always going to struggle to get agreement.

  Councillor Sparks: I totally agree with Stephen, but I think you need to ask the question, where it is not working: "Is this a fundamental problem or a superficial problem?" I think you might find in some cases it is a fundamental problem going back to boundaries, and so on and so forth.

  Mr Bailey: Could I just conclude on this one: you will have heard some of the comments or, maybe, read some of the comments about the business community's opinions of this forum. Are you concerned, from a local authority perspective, that it is a genuine issue and that vital decisions could be either delayed or not made because of, basically, petty, parochial local politics?

  Q110  Chairman: Or "democracy", as I prefer to call it.

  Councillor Sparks: Looking at the evidence before you today and listening to the previous session, the fundamental point here is that the private sector are missing the point in relation to the single strategy. The single strategy is not purely an economic strategy; it involves planning. In particular, it is at the centre of planning that starts the ripple that ends up in terms of a wave that hits us, as local councillors and Members of Parliament, on individual planning decisions. We feel very strongly that there has to be a democratic input into that process.

  Councillor Castle: The reality is that if we are talking about the current structure, in terms of its relationship, or proposed structure, you have the RDA, as the business-led organisation, which is engaging. To be honest, I also do not see this artificial divide between so-called local government and so-called private sector. I have already made the point that I run a business. Frankly, a third of our current cabinet in Essex are actively running businesses; at least two-thirds come from a very significant business background. So, bluntly, I do not see that divide. I think sometimes we can play into that. I understand the role of the representative organisations and what they are trying to articulate; I would question, frankly, whether any of the organisations there were representing me as a business, or indeed the majority of businesses in Essex. Frankly, as an elected politician, I would suggest I probably represent more of them than they do.

  Mr McGrath: I would agree with both the statements; the only example I give is in terms of the North West leaders' forum (or a version of) that will be representing the private sector for the East Lancashire Chamber of Commerce sitting on that group. They have actually accepted that they can engage in that way and see a role for it now. Again, I think it goes back to the point made earlier: it depends upon the forum and how it is set up for each area and how appropriate it is. That is the key issue.

  Mr Bailey: Can I just say thank you, and I am sure you will share with me delight at the Chairman's forthright support for local democracy.

  Chairman: And rejoice in the fact that the Black Country has now recognised the Ordnance Survey maps for the first time too. Let's rejoice.

  Q111  Mr Wright: In terms of the proposals to devolve the funding for economic development to local authorities, there has been concern expressed from some of the written submissions we have had that the RDAs will probably try not to use the powers to delegate funding to local authorities. Indeed, in Lancashire's submission as regards the North West Development Agency, they say the agency appears to be reluctant to devolve funding to the extent required by the sub-national review.

  Mr McGrath: In terms of our experience, we are getting a number of mixed messages in terms of how the RDA are intending to address the sub-national review. In some places it is: "Well, if you develop the capacity we will devolve funding, but the onus is on us to judge you, in terms of whether you have the capacity or not". We would argue that in terms of the various assessments that local authorities go through, at a number of different levels, we jump through those hoops on a regular basis, to a certain extent, and certainly from a county perspective we can show that we are an Excellent authority certainly in managing resources. On the other hand, you read a copy of the RDA's corporate plan here, and it refers to delegating, as opposed to devolving. I think there is an issue around language there. What we want to see is not just: "These are the outputs to be achieved, here's the money to go away"; what we want to see is: "Here's the broad outcome, go away and work out what is the best way of delivering it", depending on what the footprint is. So I think we do have a number of concerns, in terms of the way things are moving, in terms of the strategy; we are not necessarily seeing changes in the organisation at the current time, but they may come at a later stage.

  Councillor Castle: I would argue that there should be an assumption that local authorities are competent unless there is proof otherwise. I think there is a danger that it is the other way round. I would also argue, from an RDA's point of view—and I can understand the reticence in terms of devolving this activity—for some RDAs that is quite a big leap in confidence, and whether they have got the capacity themselves to really understand whether local authorities are competent, you know, is a challenge. With 50 local authorities in the East of England it is a big ask of EEDA to turn round and say: "Yes, I am absolutely comfortable this small district over here, or this county and unitary here, is competent". There is a challenge around that and how we have bounced into the process is challenging, but from a local government perspective I would argue there should be an assumption, unless there is proof otherwise. It is absolutely Sean's point, in terms of the way in which we are measured and tested, that evidence should be there.

  Councillor Sparks: In view of the time, I have nothing to add.

  Q112  Mr Wright: In part of the other submission that you made from Lancashire, you did mention that it is possible that RDAs will require additional incentives or motivations in order to follow through the promise of the SNR. What incentives do you think they should need? Surely, if it becomes a given that that should happen, they should not need an incentive to do that.

  Mr McGrath: It goes back to this point that the assumption should be that, unless there is a good reason otherwise, something is devolved. That needs to be built into it. At the moment it is about if the capacity exists, in terms of the local authorities coming back. Who makes that judgment on the capacity? What we would like to see is that the assumption is there, first of all, and then it would be up to the RDA to actually then say what the problems might be rather than making a judgment around: "We just do not think you have the capacity".

  Q113  Mr Wright: You mentioned the question about competency. How would an RDA actually measure the competency of each of the local authorities?

  Councillor Castle: You should be able to judge that through a comprehensive performance assessment process. That is there, it is visible, so in that sense it is capable. I think the challenge then is to what extent that is focused through to the two-tier system—the upper-tier authority and then going through into the districts. There is a challenge, particularly for a small RDA, in suddenly being asked to be able to account, in terms of their accountability status, for the fact that these local authorities are able. I do not know whether that is about government providing more financial assistance for RDAs to go through that process, but otherwise there will be a natural internal pressure to say: "We can't absolutely guarantee that those local authorities are capable, so therefore we're going to at best delegate and perhaps not go through the process". So I think we need to understand it is quite a challenging role for RDAs to adopt, although, as I said, I would go back to the position that the information is there and the assumption should be that local authorities are competent. I do not think it is an easy process, much as I might wish it is, certainly from an Essex perspective.

  Councillor Sparks: RDAs have existed long enough. The pertinent question is: where RDAs have a problem with a particular local authority, what have they done to sort it out and why have they not sorted it out?

  Q114  Mr Oaten: In view of the time, perhaps just for shortness (I think you mentioned this was an area you were involved in), I put to the business groups about the ability of the RDAs to manage the European Regional Development Funds, and they did not seem to be aware of this process. Have you, in your experience, got concerns about how the RDAs will manage what is a significant pot of money?

  Mr McGrath: In terms of the process, it has happened so far. I think the starting point has been that under the previous European programme, certainly in the North West, we built up quite a robust relationship with Government Office, who were managing the funds, and over a period of years probably came to a position where we felt we were doing things in the right way and delivering. I think the trick has been missed with the RDAs in terms of they are starting from scratch, and my personal opinion is I think they have underestimated the scale of the issue. Certainly, the principle to give the money to the RDA to be able to provide matched European funding straightaway is good, and is one of the key issues for the funding officer, but trying to put European funding on to an existing process without adapting it too much has caused quite significant problems, in terms of the process. I also feel this may just be a North West issue because we have had a number of action plans which I know in some areas, or even nationally, were not always looked upon terribly well. We feel they have over-centralised, and have lost a lot of the local expertise that exists in very good projects across the region and tried to take it all in-house. I think that has been a major issue in terms of expertise but also capacity. So things are improving but things are slow, and the unfortunate thing is we are actually in the same position we were in the old programme, whereby we had not spent any money for a significant period of time, and we thought we had learned those lessons last time, but I do not think we have.

  Councillor Sparks: Could I quickly comment, because I represented local authorities in the negotiation on European funding for about 20 years in the government and European government community. There are two points that need to be made on this, and it is also pertinent to you trying to identify what are good performing RDAs, and how you get an answer. The first point is that it does vary, and there is best practice. In the West Midlands it will not make any difference because there has always been a partnership between Government Office and the Regional Development Agency and local authorities and Uncle Tom Cobley and all, so it does not really make much difference. The pertinent question is: if you cannot get people to give you negative comment, if you have got a best practice example and you can carry this right across the board, you identify a best practice example and then compare what other RDAs are doing or other local authorities are doing, and then draw your own conclusions.

  Q115  Mr Clapham: Finally, on the accountability issue of the sub-national region, we have heard a lot about accountability, and I am just interested in what you have to say, Stephen, about the way in which the West Midlands has worked, and there has always been that engagement right through from business to local authorities etc. The one thing that the SNR does is actually take some of the powers away from local authorities, and I know that in terms of accountability your submissions have suggested there should be seven major points that should be used in terms of the way in which we actually scrutinise the RDAs. So, are you satisfied that the measures, for example, of scrutinising the transfer of the powers under the SNR are sufficient? Do you feel that they are appropriate? Do you feel that there is more that needs to be done? If you do feel there is more that needs to be done, are you making government aware of that?

  Councillor Sparks: There needs to be more flexibility at government level at this particular moment, and this is why your report is so important. We just need a little bit more flexibility on the scrutiny point. There is a whole case study now of scrutiny of bodies outside of Parliament, and the Parliamentary model does not always translate exactly if you want effective scrutiny. Our point is really strongly made that every local authority in the country has to perform a scrutiny function, and every local authority in performing that scrutiny function has to separate the executive from the scrutiny function for it to be effective. This needs to be the case here.

  Q116  Mr Clapham: These points, presumably, have been made? Has there been a response? Has Government responded?

  Councillor Sparks: We are still awaiting a response on this—a positive response.

  Q117  Mr Clapham: There is another area, and Lindsay touched on it, which is important in terms of accountability, and that is as we move to an integrated sort of single strategy, we have got, at the same time, the RDAs competing abroad to bring business in to certain areas, and that is something that is going to be problematic for accountability. Do you feel that there is a need to look at how we might adjust our system of accountability to ensure that RDAs that are working abroad in order to attract business in are doing it in a way which is going to be—shall we say—a more cohesive and open approach across the piece, rather than just sort of focused on those RDAs that are perhaps better equipped than others in order to attract business? Just to give you an example, we were in Washington earlier this year, and whilst we were in Washington there were people there from Yorkshire Forward, and doing a good job. It seems to me that there is an issue here in terms of the way in which we look at that sort of integrated regional strategy; that there may be some areas that benefit much more than other areas because they have got a better machine that is able to actually attract the business in. Are there measures sufficient to allow us to ensure accountability of the RDAs in the way in which they do work internationally?

  Councillor Sparks: I think this is a really, really important point because one of the things that has not been examined sufficiently is the degree to which RDAs do in fact need to collaborate with each other. There are examples. The East and West Midlands, for example, collaborate on inward investment. Again, we have found with local authorities the best way to make progress is by emphasising best practice. You have only got a small number of RDAs, after all, so it is not going to take Einstein to sort it out.

  Councillor Castle: Can I add on that? I think it is a really significant issue and it comes back, again, to my original point around budgets and the capacity of RDAs. I have been, putting my Olympic hat on, in Beijing with Yorkshire Forward, with a massive stand, advertising Yorkshire as somewhere to come to for pre-Games training camps and, indeed, large events. I have sat there with three other regions on a stand half the size, purely because those regions do not have the budget to compete against something like Yorkshire Forward. There is a challenge around that in terms of disparity, and particularly when it comes to that more discretionary spend around attracting international opportunities, whether it is sports, Olympics, or business opportunities. Some regions have a very significantly greater capacity than others, and I think there is a real challenge around that. To an extent, large local government can offset that, but that might be something you want to look at.

  Chairman: That is very interesting. We do just have a couple of minutes, and there is this one "hold that thought" moment from Lindsay Hoyle, which builds on what you have just said.

  Q118  Mr Hoyle: Obviously, the emphasis is on the counties but you have still got the ivory tower in Brussels. Do you still think there is a need for that and do you think it should be shared with the rest of the North West?

  Mr McGrath: If I go back to your original question, first of all, you asked us about why we have our office, and should we have a shared office. We do have a shared office, to begin with; we have the University of Lancaster and the University of Central Lancaster as our partners, and Preston City Council are about to sign an agreement with us, so we have three partners so far and we are looking for more in terms of the office. In terms of why we have an office, we have particular issues that the county has identified which do not relate to other parts of the North West, and actually they do not show up in terms of the framework that the RDA and 4 North West have set for their Brussels office. Our focus is mainly turning to renewable energy, green issues and transport. You might talk to other places and there might be different issues; certainly, Greater Manchester will focus on transport and Liverpool will focus more on ports. In terms of the offices that do exist, there are five in the same building. I do not think I could describe it as an ivory tower—I do not know if you have actually been to the office or not.

  Q119  Mr Hoyle: It is still worth millions.

  Mr McGrath: In terms of where it is—we can disagree about that—but it is an older type of office block in Brussels rather than the new, shiny ones you see in pictures, I have to say, but we see a benefit for it in terms of influencing European Commission around things like the Soils Directive. looking at transport issues; we have a project called Civitas operating in Preston, South Ribble and, hopefully, parts of Chorley as well. That comes out of membership of the policy network and that is built upon the work of our Brussels office. Our view would be we would be happy to contribute, as we do now, to a broader, North West operating framework, which we do, with different people taking on different responsibilities, but what we do not see at the moment is a mechanism whereby those particular issues for Lancashire, as a large, local authority, can be actually addressed in Brussels.


 
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