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


Regional development agencies

12. The Regional Development Agencies Act 1998[6] provided for the creation of eight English RDAs on 1 April 1999 and the London Development Agency (LDA) in July 2000. Schedule 1 of the Act sets out the boundaries of the nine development agencies and this information is annexed to the Report.

13. Section 4(1) of the RDA Act 1998 set out the following purposes for each RDA:

    i.  to further the economic development and the regeneration of its area,

    ii.  to promote business efficiency, investment and competitiveness in its area,

    iii.  to promote employment in its area,

    iv.  to enhance the development and application of skills relevant to employment in its area, and

    v.  to contribute to the achievement of sustainable development in the United Kingdom where it is relevant to its area to do so.

14. RDAs are also key partners in the delivery of the Regional Economic Performance Public Service Agreement (REP PSA) which seeks to:

    improve the economic performance of all English regions and reduce the gap in economic growth rates between regions.[7]

15. Since their creation in 1999, RDAs' responsibilities have increased, taking on the administration of regional development grants (April 2002), research and development grants (April 2005), Business Link (April 2005), the economic and social funding elements of the Rural Development Programme (April 2006), European Regional Development Funds (ERDF) (2007) and the Manufacturing Advisory Service (MAS).

Need for a level of regional governance

16. In its call for evidence, the Committee invited comments on the need for a level of governance between the national and local in promoting economic development and regeneration. The very strong consensus was that there is such a need at sub-national level. Representatives from business organisations, for example the British Chambers of Commerce (BCC), Confederation of British Industry (CBI) and the Federation of Small Businesses (FSB), were supportive of a form of sub-national governance. The FSB told the Committee that it "broadly supports the need for a regional tier of economic development/ business and regeneration policy. … We do not believe that central government or local authorities have the ability or skills to operate effectively at this level."[8]

RDA model of regional governance

17. The Committee went on to pursue the issue of whether the RDA model of regional governance was the most effective and the evidence received by the Committee was, on the whole, and subject to some of the detailed comment discussed in later paragraphs, supportive.

18. In their joint response to the Committee's consultation, the RDAs set out their model of regional economic development governance. They stated a number of key elements: business-focused approach; strategic economic leadership; partnership working; operating flexibly and remaining fleet of foot; making catalyst investments and being natural leaders across a region to respond to economic shocks.[9] The Chief Executive of East Midlands Development Agency (EMDA) highlighted RDAs' business focus:

    Why we are there is to sustainably grow the economy of our region. We do that through an economic strategy. We are able to consult across all stakeholders. We develop the evidential base so that we actually develop a strategy based on what is necessary from fact and evidence and the analysis of that evidence. What would not get done if we did not exist? I would like to think we are a very much business-led organisation. We are primarily there to ensure that businesses grow, develop and create wealth that can then be distributed in other ways. What would not get done is you would not have the business-led organisation, pulling everything together and making things happen.[10]

19. When the Minister appeared before the Committee, he was asked why RDAs are the best model to deliver the Government's economic development objectives. He responded:

    I think they do several important functions quite well. They are a business-led organisation, which makes them different from other parts of government. They are not official-led, they are not Civil Service-led; they are business-led. They are responsible for a lot of regeneration and investment that happens across local authority boundaries and very often if something is the responsibility of several people that can mean that it is difficult to make progress. They deliver a lot of business support through various programmes which have just been simplified, a lot of them going into the new Solutions for Business Portfolio. They also respond to shocks, such as the floods which affected many parts of the country in the summer of 2007, where RDAs stepped in very quickly with loans to businesses and so on in a quicker way, I think, than would have been the case if the response had just been Whitehall-led. They perform a number of functions which, as you say, lie between that which Government at the centre does and that which would normally be done by local authorities.[11]

20. The Committee saw several projects in which RDAs were involved during individual visits to Advantage West Midlands, One NorthEast and Scottish Enterprise, as well as Members' visits to their own RDAs. We were impressed by the achievements of these projects, as well as the positive comments made by a range of business people about the impact of the development agencies within their regions.

21. The Committee notes the broad and strong consensus about the need for a level of governance between central government and local authorities and is satisfied that regional development agencies (RDAs) serve a useful function. The Committee acknowledges that other models could have been developed to perform the function, rather than that established by the Regional Development Agencies Act 1998, but believes that, given the nature of RDAs' responsibilities, it is appropriate that these organisations are business-led.


22. Although, on the whole, the evidence received by the Committee supported these constituent elements of the RDA model, the appropriateness of some RDA boundaries was raised. It was acknowledged by a number of witnesses that RDAs operating in a region with a strong sense of identity—the North East was most often cited as an example—are more easily able to operate effectively within a region,[12] but it was identified as more of a problem where cross-boundary issues are more frequent or the region itself lacks a clear sense of community or identity.

23. Essex County Council claimed that the boundaries were based on no more than the post war civil defence regional structure.[13] The Committee pursued this issue with BERR and was informed that: "There have been various different arrangements for dividing England geographically for very many years. … In terms of the distinct set of boundaries, given in the RDA Act, John Major's Government created a set of ten Government Office Regions in 1994. This standardised practices which at that point varied across Departments. The last major change to those boundaries was in 1998 when North West and Merseyside were merged (to form the current nine Regions). The boundaries are set out in Schedule 1 of the RDA Act 1998 which lists the counties which make up each Region."[14]

24. In its written evidence, the Engineering Employers Federation (EEF) stated that:

    one of the challenges of the regional structure is to ensure that its artificially imposed geographical boundaries do not become obstacles to economic competitiveness. The RDAs' focus on reducing regional disparities has also, arguably, made them somewhat inward looking. However business operates in an environment where the boundaries of RDAs are irrelevant to their day-to-day operations.[15]

25. This issue was discussed further at the Committee's meeting on 7 October 2008. The BCC considered that it was vital for the RDA boundaries to mirror the functional economic areas. Where necessary, it advocated joint working to do that, highlighting the economic area covering London, the South East and East Anglia which "is a huge economic area with London at its heart and we have got three RDAs. Where you have not got the RDAs joining up effectively that makes for a slightly piecemeal approach to economic development."[16]

26. This point was also strongly argued by Essex County Council:

    The challenge, frankly, for the East of England, is that, bluntly, we have the wrong boundary. We have the smallest RDA with one of the largest populations that it serves, and therefore its ability to actually act at a sub-regional level is hampered by the fact that for large chunks of East of England they would look to a much greater relationship with London and parts of the South East than they would do with the rest of the East of England. … the effectiveness of any RDA is clearly dependent on its ability to serve a functional economic area. … However, a critical issue—and the weakness—under the current structure, is that that often does not reflect the functional economic area. So it is difficult to intervene and deliver. [17]

27. When questioned about the suitability of their boundaries and potentially consequential inward perspective, the RDAs highlighted the degree of cross-boundary working and partnership undertaken, arguing that "we are not precious and defensive of our regions"[18] and citing joint initiatives such as the Northern Way and Thames Gateway project. RDAs also considered that claims of confusion within business about RDA boundaries were overplayed. The Chair of EMDA said that "I think there is a lot of anecdotal stuff about confusion and what have you. … When I meet them [multinational companies], and I meet them on a regular basis, never once have they raised with me: it is all a bit confusing having RDAs."[19] We note that many companies and trade bodies express private concerns about this aspect of RDAs but are reluctant to do so on the record. This makes it difficult for the Committee to reach definite conclusions.

28. When the Minister gave evidence to the Committee, he responded saying:

    Am I saying they are a perfect representation of an identity that people feel? Not in every region, but would it really gain anything to start redrawing these boundaries? I am not sure about that either. They work in the sense that they are there and different parts of government are used to dealing with them, the local authorities are used to dealing with them, the boundaries are familiar. Whether they are perfect or not I do not know but I am not sure that changing them would lead to a better situation.[20]

29. The Committee recognises the real concern that exists about the inevitable arbitrariness or inappropriateness of some borders between RDAs and seeks reassurance from both the Government and the RDAs themselves that strenuous efforts will always be made to work across boundaries where sub-national economies or industries that are truly national in scope demand a wider approach than a regional one.


30. There were also a number of comments made, particularly by business organisations, about the increase of RDAs' responsibilities since 1999, as set out in paragraph 15. In its written evidence, the BCC lamented that "RDAs have not had the autonomy to resist central government imposing new initiatives and policies being tasked to them. The full remit of issues is extensive."[21] The CBI told the Committee that its members reported that RDAs tried to do too much and, as a consequence, did not fulfil their core functions as effectively as they might.[22] In oral evidence, the BCC went on to argue that:

    What we have got now is quite far from the original model. They have acquired a whole range of what you might call non-economic responsibilities to deliver government policy because they happen to be something that can deliver a policy objective below national level and that is the tool the government alights on. That has been one of their problems because it has diluted their focus away from economic issues.[23]

31. When this was raised with RDAs, they acknowledged that this was seen as a weakness by business organisations but argued that they had been given the additional tasks after proving to be successful deliverers for government.[24] The Minister indirectly supported this by saying that RDAs were well placed to respond to crises because of their flexibility and existing business focus.[25] Their single pot budgets[26] were highlighted as being crucial to RDAs' flexibility.

32. The Committee understands and shares the concerns of business organisations that the incremental increase in RDAs' responsibilities to date has resulted in some loss of their business focus. Moreover, the Committee is concerned that increasing RDAs' responsibilities in a piecemeal fashion could seriously impact on their ability to maintain the strategic outlook which the (sub-national review) SNR proposes. If responsibilities are to be widened in future, there must be full public consultation before any such change.

Performance and effectiveness

33. BERR's website states that, since 2005, RDA performance has been measured by progress reports (submitted by RDAs to BERR and publicly available on the web) and the National Audit Office's (NAO) series of independent performance assessments into each RDA (except the LDA) between June 2006 and March 2007.[27]

34. The RDA progress reports are comprised of six core outputs[28] and each RDA has set target ranges against these outputs in their Corporate Plans. The progress made by the RDAs in delivering against their output targets is laid before Parliament at the mid and end-year. The progress reports for 2007-08 show that, on average for the ten outputs measured, RDAs exceeded the maximum target range on six outputs, achieving results within the target range for the remaining four outputs.[29]

35. In its submission, BERR highlighted the following activities as areas where RDAs have been effective:

  • Large scale projects which are expected to have a positive impact on the regional economy: Birmingham New Street re-development and the port development in Great Yarmouth;
  • More traditional economic development activities, such as:

      ii.  Managing Business Link and overseeing the delivery of the Business Support Simplification Programme; and

      iii.  Managing the delivery of EU funding.[30]

36. The NAO's assessments measured ambition, prioritisation, capacity, performance management and achievement and found six agencies performing strongly overall and the other two performing well. In its submission to the Committee, BERR referred to the NAO reviews which found that RDAs were "fit for purpose organisations which are maturing as agencies with the ability, capacity and self-awareness to improve their performance further, that they are providing strong leadership, and have a track record of successful delivery."[31]

37. The picture of successful performance and effectiveness is contrasted, however, with the anecdotal views expressed to the Committee through the evidence received. The Committee was given differing reports of performance across a range of areas, including stakeholder consultation; provision of business support; co-ordination of stakeholders, particularly in a crisis; easing access to funding; and support for infrastructure projects.

38. In addition, a number of submissions referred to the fact that RDAs' objectives are affected by too many external factors to be able to accurately attribute their achievement to RDAs. This adds to the difficulty in measuring RDA effectiveness.


39. Despite the positive performance reports, the Government also appeared to believe more information about the extent of RDAs' success was needed. In its submission to the inquiry, BERR referred to its commissioned research from PricewaterhouseCoopers (PwC) on the effectiveness of RDAs. It argued this was necessary because "we do not yet have a complete understanding of what the overall impact they [RDAs] have had in the regions". PwC was expected to publish its report in November 2008 but this deadline has slipped and the Minister informed the Committee when he gave evidence that the PwC report was now expected sometime in the new year. The Committee understands that the report is due shortly but has not been published at the time of writing.

40. The Committee notes the National Audit Office's (NAO) positive assessments of RDAs' effectiveness; it also notes the strong, but anecdotal, views expressed to it criticising aspects of RDA performance. Ideally, we would have delayed this report until the PricewaterhouseCoopers (PwC) report on RDA impact was available but we feel it is important that this Report is published in time to inform the House's consideration of the Local Democracy, Economic Development and Construction Bill. This central issue of effectiveness is one to which this, or a successor committee, might wish to return.

41. We welcome the commissioning of the PwC report on the effectiveness of RDAs but are very disappointed that the Government has introduced legislation implementing the SNR proposals before its publication. It is regrettable that Parliament is being asked to decide on RDAs' future responsibilities without a full analysis of the way they fulfil their current ones. The Committee strongly recommends that the PwC report is published before the Committee stage of the Bill begins.


42. The Committee also considered the extent of business skills and expertise within RDAs' staff and boards as this is an important factor in whether they can effectively serve businesses' needs and truly are 'business led'.

43. A number of submissions highlighted concern at the technical expertise of RDA staff. Some submissions referred to the amount of work contracted out to consultants and others on the business experience and capabilities of staff. The FSB stated that the majority of RDA staff had public, rather than private, sector backgrounds[32] whilst the CBI asserted that "too many RDA staff appear to be 'administrators' rather than dynamic drivers of economic regeneration", and argued that staff with strong commercial skills, particularly in negotiating, influencing, partnering, project management, risk management and appraisal should be recruited.[33] Many submissions suggested greater opportunities for secondments to and from RDAs to develop staff awareness, skills and experiences to help address this issue. Similar concerns about the skills and experiences of RDA board members were also raised.

44. In response, RDAs stated that 43% of RDA staff across the UK come from a business background, a figure that they felt to be a good balance between private and public sector skills and experience.[34] They also argued that their boards were business-dominated.

45. The Committee notes the concerns about the private sector experience of RDA staff and board members. Moreover, the Committee is itself concerned that the percentage of staff with a business background will decrease further if, as the Bill envisages, RDAs become more involved in matters currently undertaken by other regional bodies, such as planning. This could have a significant impact on RDAs' ability to be truly business led and we recommend that the Government monitors the experience of RDA staff and board members on a regular basis.

Overseas activities

46. The Committee was keen to look at RDAs' activities in promoting their regions' industries outside the UK. The Committee has considered twice previously the overseas activities of RDAs. In its Sixth Report 2006-07, Marketing UK plc—UKTI's five-year strategy,[35] concerns were noted regarding duplication of promotional work, confusion about delivery and a dilution of the 'UK brand' and the Committee argued for greater co-ordination of activities and greater clarity over RDAs' and UK Trade and Investment's (UKTI) responsibilities. In its Fifth Report 2007-08, Waking up to India: Developments in UK-India economic relations,[36] the Committee considered the possibility of RDAs' overseas offices co-locating with other RDAs, UKTI or diplomatic offices abroad and recommended that this option be pursued more vigorously in future.

47. RDAs justified their overseas activities by stressing its effectiveness, arguing that "RDAs are very, very successful in attracting inward investment. If you just take pure involvement of RDAS, 50% of the jobs last year were RDA-driven. If you take RDA assisting UKTI in their endeavours, 83% of the jobs that came into the UK were for inward investment last year; so we are very successful. Also, we are very cheap. Every job that we generated last year was £336. That is extremely cheap in public terms or public expenditure to attract and retain jobs."[37]

48. Other submissions to this inquiry were mixed. Some argued that RDA overseas offices were useful in allowing regions to understand better the global market-place and promote their region within it. Others, however, were less supportive, arguing that they were not co-ordinated with national efforts, duplicated work done elsewhere and that such activities would be better done through UKTI or other national level initiatives, arguments similar to those made to the Committee in 2006-07. Likewise, some local authority submissions criticised RDA overseas activities for not considering, or co-ordinating with, local authorities' overseas activities.

49. Regardless of respondents' support for overseas activities, however, most stated that there was not sufficient evidence to support them or not. A number stated that they would welcome independent analysis of the costs and benefits of this activity, unaware of, or unconvinced by, the August 2007 Arthur D Little report, Research and Analysis of Overseas Representation, commissioned by UKTI.

50. In its submission, BERR stated:

    In 2007 UKTI jointly reviewed with the RDAs and DAs their overseas representation, supported by research and analysis from consultants Arthur D Little (ADL). … The review concluded that more could be done to strengthen existing arrangements and drive better co-ordination. As a result UKTI and the RDAs have agreed a new model for overseas representation which sees UKTI leading the co-ordination of a fully integrated overseas network, including co-ordinated business planning, consistent branding across England and promotional activity. Performance measures are being agreed, to provide a clear picture of joint impact, and common UKTI-led evaluation; and options for co-location of teams and joint procurement are being exploited to help achieve better value for money. …

    The new overseas representation model has recently been rolled out in three "Pathfinder" markets (France, India and Canada) with full implementation in all markets by April 2009. As part of this roll-out, UKTI and the RDAs (except LDA) have agreed to use a common "UK" brand for marketing activity overseas. UKTI and the RDAs are confident that these new arrangements, which will be systematically monitored and evaluated, will deliver an even more effective UK FDI effort.[38]

51. The Committee notes the conclusions of the Arthur D Little Report but this issue seems to remain a cause of concern to businesses. We are not fully convinced by the report's findings. The Committee will monitor the success of the new arrangements for overseas representation and expects to see more robust co-ordination in the future. The Committee also expects the new overseas representation model to lead to progress on the Committee's earlier recommendation that RDA overseas offices co-locate within Foreign and Commonwealth Office overseas and UK Trade & Investment (UKTI) offices, wherever possible. In its response to this report, we ask the Government to report progress on this important subject.

Regional development agencies' budgets

52. Over the course of the inquiry, the Committee considered the implications of the current economic climate on RDAs, particularly in the light of recent cuts to RDAs' budgets. As part of the 2007 Comprehensive Spending Review, the RDAs' budgets over the three years were reduced by 2.5% (£320 million). In addition, the RDAs identified cash savings of about £350 million, which will be funded from value for money savings. The following table below shows the revised budget figures:[39]

Total RDA Allocation by Region
£ million
£ million
£ million
£ million
Advantage West Midlands
East of England Development Agency
East Midlands Development Agency
London Development Agency
North West Development Agency
One NorthEast
South East England Development Agency
South West of England Regional Development Agency
Yorkshire Forward
TOTAL [Single Budget]

53. RDA budgets have suffered further cuts. £300milliom was diverted from the Department for Communities and Local Government's funding stream to the single pot to establish HomeBuy Direct in September 2008. The money will be diverted in two stages; £25 million from 2009-10 budget and £275 million from 2010-11 budget. A number of submissions highlighted this funding diversion as an example of the lack of the Government's commitment to RDAs and to tackling economic disparities across the English regions.

54. When asked about this diversion, the Minister argued that:

    The Government has to take difficult spending decisions and the view that we reached was that, given what was going on in the housing situation, it was important to announce a housing package in September. … The Government reached a judgement that that was the right call on the money for the moment rather than the projects it was allocated to in a couple of years' time.[40]

The Minister also said that the diversion amounted to about 5% of the budget over three years.[41] Given that the money will be diverted in two stages, which amount to 1% in 2009-10 and 10% in 2010-11, the Committee believes that the 5% figure, while statistically accurate, was disingenuous.

55. The Winter Supplementary Estimate 2008-09 made further reductions in RDAs' budgets. The Department for the Environment, Food and Rural Affairs contribution to the single pot was reduced by £17.088m "due to DEFRA's need to set a balanced budget for 2008-09. This entailed a review of all areas of spend and a need to prioritise spending commitments"[42] and a £17 million reduction in capital budget was made to meet cold weather payments and warm front delivery, essentially to cover overspends in other areas. The letter also stated that "BERR is unable to increase its contribution to the RDAs as there is no surplus budget and no availability of End Year Flexibility funding".

56. These budget reductions come when RDAs are already under increasing pressure to reign in their budgets and maximise efficiencies. The SNR document reported a "robust and sustainable value for money plan, which will enable a spending settlement for the 2008-09 to 2010-11 period on their existing budgets in line with the most ambitious departmental value for money programmes in the CSR."[43]

57. The Committee raised this issue with the Secretary of State, Rt Hon Lord Mandelson, when he gave evidence on 14 January 2009. The Secretary of State has recently been promoting the role of RDAs as a key source of business support to the regions, notably speaking on 'putting the regions at the heart of industrial activism' on 8 January 2009 at a breakfast meeting in Salford.[44] When speaking to the Committee, he said RDAs were doing a "first rate job and a job which is becoming all the more important in the economic conditions we are facing in the country now".[45] When the Committee asked the Secretary of State about the apparent contradiction between his statements of support and the budget cuts, he conceded that, in principle, these would impact on RDAs' ability to support businesses but went on to argue that it was not true to say the Government is cutting RDA budgets, rather it is 'dipping into' them "for specific tasks and reasons".[46] He also admitted that the "dipping in has become a bit habitual".[47]

58. The Committee appreciates that the Government is facing a significant challenge in dealing with the effects of the current economic recession and that there are many calls on public funds. The Committee recognises that it may be that RDAs can make efficiency savings and operate effectively on a smaller budget. Any budget cuts made, however, must be done after a comprehensive and thoughtful review of RDAs' budgets and programmes, rather than being determined by departmental budget shortfalls on other priorities.

59. It is important that RDAs have some certainty over their budget in order for them to work with regional, sub-regional and local partners to fund and deliver meaningful economic development programmes. The Government should support Ministerial rhetoric with financial clarity; 'dipping into' RDA budgets is no way to do that.

6   Regional Development Agencies Act 1998 - Back

7   Regional Economic Performance PSA - Back

8   Ev 248 Back

9   Ev 221 Back

10   Q129 Back

11   Q256 Back

12   Q14 Back

13   Q84 Back

14   Ev66 Back

15   Ev 205 Back

16   Q18 Back

17   Q72 Back

18   Q138 Back

19   Q145 Back

20   Q257 Back

21   Ev 116 Back

22   Ev 135 Back

23   Q15 Back

24   Q154 Back

25   Q270 and 287 Back

26  RDA funding is through the single pot, a fund which pools money from all the contributing Government Departments (BERR, CLG, DIUS, DEFRA, DCMS and UKTI) Back

27   BERR - Back

28   The six core outputs are 1) Employment creation: number of jobs created or safeguarded; 2) Employment support: number of people assisted to get a job; 3) Business creation: number of new businesses created and demonstrating growth after 12 months and & businesses attracted to the region; 4) Business support: number of businesses assisted to improve their performance; including 4a) number of businesses within the region assisted to engage in new collaborations with the UK knowledge base; 5a) Regeneration: public and private regeneration infrastructure investment levered and 5b) Regeneration: hectares of brownfield land reclaimed and/or redeveloped; 6) Skills: number of people assisted in their skills development as a result of RDA programmes; 6a) number of adults gaining basic skills as part of the Skills for Life Strategy that count towards the Skills PSA Target and 6b) number of adults in the workforce who lack a full Level 2 or equivalent qualification who are supported in achieving at least a full Level 2 qualification or equivalent Back

29  BERR - Back

30   Ev 61 Back

31   Ev 62 Back

32   Ev 251 Back

33   Ev 138 Back

34   Q156 & 157 Back

35   Business and Enterprise Committee - Back

36   Business and Enterprise Committee - Back

37   Q162 Back

38   Ev 63 Back

39   Note 2007-08 total does not sum to individual parts, total is consistent with PBR, individual parts consistent with PQ answer

Source of table -

Debate 17 December 2007 c1078 -


HM Treasury, PBR 2007, October 2007, Cm 7227, Section D19 - Back

40   Q298 Back

41   Q299 Back

42   See Appendix 1 for further information Back

43   SNR1, para. 6.113 Back

44   BERR, 'Putting the regions at the heart of industrial activism' - Back

45   Oral evidence taken on 14 January 2009 HC143-I Q129 Back

46   Ibid, Q130 Back

47   Ibid, Q131 Back

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