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


1.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. (Paragraph 21)
2.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. (Paragraph 29)
3.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. (Paragraph 32)
4.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. (Paragraph 40)
5.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. (Paragraph 41)
6.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. (Paragraph 45)
7.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. (Paragraph 51)
8.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. (Paragraph 58)
9.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. (Paragraph 59)
10.Whatever the merits of the timing of reform during a major recession, it would be easier to implement if there was clarity about the proposals. Throughout the inquiry, the Committee was surprised and disappointed by the lack of detail contained in the Government's proposals about how the new arrangements for sub-national governance of economic development policy would operate in practice. This can only be a cause of significant concern for the RDAs and local authorities faced with implementing the legislation. We believe that much of the clarification called for in this report could, and should, have been provided at an earlier stage. It must be available during the Committee stage of the Bill. (Paragraph 67)
11.The Committee recognises the broad support for the integration of the existing regional economic and spatial planning strategies and welcomes the Government's decision to merge the two. The Committee emphasises, however, that it will be essential to balance the economic and the spatial planning aspects of the strategies. It will be difficult for RDAs to remain business led organisations whilst jointly responsible for a strategy which encompasses a range of often very sensitive community issues. (Paragraph 116)
12.The Committee notes the tensions between witnesses about the need to represent business interests and the need to represent community concerns within the integrated regional strategy. The Committee believes that business interests cannot be presumed to take precedence over the democratically expressed wishes of local communities. The process that eventually results from the Bill must allow community concerns raised through the local democratic process to be fully recognised and taken into account. (Paragraph 117)
13.The Committee welcomes the fact that local authorities, through the Local Authority Leaders' Boards (LALBs), will retain their democratic link with spatial planning issues under the revised proposals. As the Committee has already stated, however, it is concerned that RDAs must remain business focused to perform their primary functions and that the Bill does not provide sufficient safeguards to local communities. The Committee urges Members to address these central points during the passage of the Bill through the House of Commons. (Paragraph 118)
14.The Committee welcomes the revised proposals relating to the functions of LALBs and supports the Government's decision to separate the executive and scrutiny functions. We are concerned, however, that over the evolution of the Government's proposals an accountability gap may have been created. The Committee recognises that regional committees are expected to have a key role in the accountability of the integrated regional strategies and regional governance. It is too soon to judge their effectiveness but this Committee does have concerns about whether regional committees will have the time and resources to scrutinise sufficiently regional strategies. Nor is it clear how such scrutiny will fit with existing committees' remits, such as this Committee's scrutiny of BERR and its agencies, including RDAs. (Paragraph 119)
15.The Committee regrets the lack of clarity about the procedure to be followed if the integrated regional strategy cannot be agreed. The Committee notes that, other than clause 74(1)(a), the Bill is silent on the relationship between LALBs and RDAs and remains concerned about the confusion about how disagreements between the two can be resolved. The Committee recommends that the Government clarifies this before the Bill reaches committee stage in the Commons. If sufficient clarification is not provided, Members may wish to amend the Bill to address this. (Paragraph 120)
16.The Committee is also concerned about a lack of clarity about how LALBs will operate. We believe that the effectiveness of some LALBs might be limited due to the size and diversity of their membership or the number of two tier authorities within the region. As the schemes for the establishment and operation of an LALB need to be approved by the Secretary of State, the Committee recommends the Government publishes draft guidance on the criteria that acceptable schemes should meet before Committee stage is reached. (Paragraph 121)
17.The Committee shares witnesses' concerns about the proposed timetable for the drafting and agreement of the regional strategy. Experience of regional spatial strategies suggests that two years is likely to be too short a time for drafting, consultation, revision and agreement with Ministers. If this is the case, revising the strategy every five years also seems unrealistic. The Committee notes the undertaking by Government officials that further guidance will be provided as the Bill progresses and calls on the Government to provide such guidance as soon as possible. (Paragraph 122)
18.The Committee notes the concerns over RDAs' ability to deal with spatial planning matters. The Committee notes that RDAs have already begun to address this issue but is concerned that they may not be able to attract staff with spatial planning skills as quickly as they need. The Committee recommends, therefore, that colleagues on regional committees satisfy themselves that RDAs have sufficient skills and expertise as a matter of urgency. (Paragraph 123)
19.The Committee agrees that the success of regional strategies will rest on how well they address the needs of their region and reflect the views of all regional stakeholders. The Committee notes clause 69 of the Bill deals with community involvement and recommends that this provision should be strengthened. Currently it requires the responsible authorities to identify the "persons who appear to them to have an interest". The Committee considers that the Bill should specify that certain groups should be included in the consultation as a matter of course. The Committee does not seek to set out a definitive list here, but considers that bodies such as local chambers of commerce, emergency services, primary care trusts, parish councils, utilities, the Highways Agency and Network Rail should be included. We also recommend that regional committee colleagues consider the issue of whether there is effective consultation on integrated regional strategies. (Paragraph 124)
20.The Committee notes the Government's ambition to increase the role of local authorities in economic development and regeneration policy and agrees that the proposed economic assessment duty is one way to realise this. Concerns over local authorities' understanding of business, however, were raised in evidence to the inquiry and the Committee expects authorities to address any skill gaps before the first assessments are undertaken. The Committee recommends that the House seek assurance on this matter as the Bill progresses. (Paragraph 140)
21.The economic assessment duty should not be seen as an end in itself, however, and there should be a clear mechanism to ensure the assessments are considered when the regional strategy is drafted. Despite assurances that this will be the case by the Minister, this is not reflected in the Bill. If this part of the Bill is not amended before it reaches the Commons, the Committee recommends that clause 71(1), Matters to be taken into account in revision, be amended to ensure that the economic assessments must be considered by responsible regional authorities when revising the regional strategy. (Paragraph 141)
22.The Committee also notes the Government's commitment to provide support to enable local authorities to undertake this duty effectively. The Committee agrees that local authorities must be given the capacity required and recommends the Government should provide a statement setting out how this support will be provided and how Ministers intend to monitor its provision. (Paragraph 142)
23.The Committee's inquiry has found that there is significant support for collaboration on economic development issues at sub-regional level and, in principle, the Committee welcomes the Government's attempts to encourage this. The Committee notes, however, the concerns of witnesses that Economic Prosperity Boards (EPBs) might be an unnecessary addition to the plethora of organisations and strategies which operate at local, sub-regional and regional level. The Committee shares this concern and recommends the House consider this issue as the Bill progresses. (Paragraph 161)
24.The Committee recommends that the Government provide further information on what use, if any, the Secretary of State will make of the review required by clause 92 when deciding whether to make an order establishing an EPB. The Committee also notes that the Bill is silent on the role of RDAs in relation to this review. (Paragraph 162)
25.The Committee is concerned that there is a potential for conflict between the requirement for collaboration to be flexible, to adjust to possible changes in local authority leadership and direction, and the need for a certain amount of stability to make collaboration across local authority boundaries meaningful. The SNR explicitly envisages that EPBs will provide this stability, by stating they will "bind in local authorities to long-term decision-making" (see paragraph 146). (Paragraph 163)
26.The Committee is concerned about the process by which local authorities or combined authorities can leave EPBs. It notes the conditions placed on local authorities when applying to create an EPB or combined authority and believes that these will circumscribe the decision of the Secretary of State when considering an application from an authority to withdraw. The Committee is concerned that an authority might be prevented from withdrawing from an EPB, even though it no longer wished to participate; considerable disruption could be caused if one of the members of such a body was no longer a willing participant. Moreover, the Bill does not state whether those authorities who wish to leave will be able to reverse clause 86(4) and re-gain control of powers that have been ceded to the EPB. The Committee also notes that orders to change the boundaries of an EPB or combined authority can only be made if all the councils concerned agree and it is unclear what the consequences will be if unanimity cannot be reached. These points, and the consequences for local democracy if there is no change, must be clarified as the Bill progresses. (Paragraph 164)
27.The Committee agrees that RDAs will be better able to focus on strategic economic and spatial planning matters if as much as is reasonable of the delivery of the strategy is undertaken by local authorities and other sub-regional partners. (Paragraph 179)
28.The Committee welcomes the assurances provided to it, through One NorthEast, that RDAs are preparing to delegate responsibility to local authorities. It notes, however, that the very different terms 'delegation' and 'devolution' of responsibility are used interchangeably in the SNR documents and finds this unhelpful and confusing. (Paragraph 180)
29. The Committee notes the comments made in evidence regarding the process by which RDAs will be able to accurately measure the readiness and skills of local authorities to deliver these responsibilities. The Committee seeks further information from the Government on how RDAs will measure local authorities' readiness and ability. The Committee foresees that difficulties might arise if a local authority has a different opinion of its capability than that of its RDA. The Government should be able to get tell whether a RDA is generally willing to devolve funding to local authorities by considering the degree to which it devolves funding to other local authorities or in other policy areas. The Committee calls on it to clarify whether it intends to do this and what steps it would take if RDAs are found to be unwilling to devolve decision making to local authorities appropriately. (Paragraph 181)

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 13 March 2009