Regional development agencies'
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:
|Total RDA Allocation by Region
||£ million||£ million
|Advantage West Midlands||291
|East of England Development Agency||137
|East Midlands Development Agency||176
|London Development Agency||374
|North West Development Agency||395
|South East England Development Agency||163
|South West of England Regional Development Agency
|TOTAL [Single Budget]||2,274
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
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.
The Minister also said that the diversion amounted
to about 5% of the budget over three years.
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"
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
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."
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.
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".
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".
He also admitted that the "dipping in has become a bit habitual".
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