House of Commons - Business and Enterprise Committee

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

Memorandum submitted by Dr Paul Benneworth, Newcastle University

INTRODUCTION AND SUMMARY

1. The Business and Enterprise Select Committee have recently announced an Inquiry into the future roles and responsibilities for regional development agencies. I welcome this Inquiry as a timely opportunity to reflect on a decade of attempts to address the "delivery deficit" in the English regions outside London (where there is a directly elected Mayor). I am a Research Councils UK Academic Fellow in "Territorial Governance" at Newcastle University, and submit this evidence as part of RCUK's commitment to outreach work by its fellows.

2. I can fairly claim to be one of the first people in England active in researching the eight English RDAs created by the 1998 Regional Development Agencies Act. I wrote a bi-monthly column for the Regions magazine from the time that the Act was passed into law until 2003. These columns were later published by the Regional Studies Association as the book Regional Development Agencies: the early years. I was subsequently funded by the RDAs individually and collectively to undertake very small amounts of consultancy for them[29]. I was also funded by two regional assemblies (the North East and North West) to support their scrutiny activity. My evidence is informed by all this work, with various elements (developed with colleagues at Newcastle University) presented to previous Parliamentary Inquiries[30].

3. In this memorandum, I argue that the RDAs suffer from an image worse than their performance justifies, and contemporary calls for their abolition are driven as much by a drive for revenge as dispassionate analysis (paras 4-5). I argue that the continuing salience elsewhere for a regional approach to economic development implies its continuing significance for the English regions (paras 6-12). RDAs are indisputably an improvement on the way that spatial policy was previously carried out (paras 13-23). RDAs have delivered strategic projects in the regions with wider national benefit, but which would fall between the "silos" of Whitehall ministerial thinking (paras 24-35). However, not all functions are suitable for RDAs to execute: both small business support and regional spatial strategic functions are too different from RDAs' core integrative roles to sensibly be executed by RDAs (para 36-44).

PREAMBLE

4. There is clearly a gap between the performance of Regional Development Agencies and the way they are perceived by key stakeholders. In comparison with the piecemeal institutional framework which preceded them, the RDAs are qualitatively better in ensuring all the English regional economies contribute to the national wellbeing. However, it is a problem that the RDAs have made some very simple and largely inconsequential mistakes which have apparently generated a disproportionate level of ill-feeling towards them.[31] There also appears to be in some recent publications a sense of revenge, that the very idea of regions is part of an overall political project very much in retreat. RDAs may well become the early sacrificial victims satisfying a demand for visible signs of change around a wider political watershed, which will be demonstrably very harmful for the northern regions.

5. Some analogies can be drawn between the current situation and that in Wales in the early 2000s. The Welsh Development Agency (WDA) were initially very dismissive of the newly elected Welsh Assembly Government (WAG) and there were some ill-timed salary increase announcements. This contributed to the decision by Rhodri Morgan's decision to bring the WDA within the Welsh "bonfire of the quangos".[32] In this memorandum, I will argue that the RDAs perform a vital administrative function with national economic benefit. Launching into another round of administrative reforms, and especially abolition, has risks not just for the regions but also for the national economic interest.

THE NEED FOR A REGIONAL ECONOMIC DEVELOPMENT TIER

RDAs in an international comparative perspective.

6. There is an increasing recognition of the increasing importance of "place" to economic activity. As innovation becomes central to economic performance, and inter-personal interaction is vital for innovation, regions are increasingly important as the "natural scales" for interpersonal interaction, innovation and competitiveness.

7. Regions are also the natural scale for the exploitation of strategic infrastructure such as airports, hospitals and universities. The interaction between these investments, often located in core urban areas, and the potential beneficiaries in their hinterlands, requires that public bodies ensure that these infrastructures' benefits are spread as far as possible.

8. An increasing number of governments recognise the need for a sub-national tier to optimise policy delivery within in these "natural" regions, both for the benefit of the regions, and also for the nations of which they are part.

9. Professor Mike Danson (University of the West of Scotland) and Professor Henrik Halkier (University of Aalborg, Denmark) are the leading European experts on the purposes, functions and roles of regional development agencies.[33] Danson & Halkier emphasise that effective RDAs occupy a middle ground between top-down central approaches and local bottom-up mobilisations. They are creatures of neither local nor national government, but a means to ensure that each benefits as far as possible from the other's policies.

10. In the last decade, there has been a substantive shift in the tasks undertaken by European RDAs, from helping local businesses to create jobs, to improving regional capacity for supporting innovative, high growth or high-growth potential businesses.[34] In practice, this involves ensuring that business support offered helps small, innovative companies to be formed and to grow by local entrepreneurs working with global networks of knowledge suppliers.

11. However, what has not changed about effective RDAs is that what makes them successful are the long-term relationships that they establish. These relationships enable RDAs to national policies work better locally, to respond to external shocks such as factory closures, and to take (or advise impartially on) difficult decisions between competing local interests.

12. But RDAs are not just agents for central government—as well as implementing national policies, they also help national departments to make policy that better reflects the needs of all its regions by acting as repositories of knowledge about the economic situation in their regions.[35]

The demand for a regional English economic development tier

13. There are three main economic rationales for why England needs RDAs, which are similar to the rationales for regions elsewhere in Europe outlined above.

14. The first is that England is a very big country, and different places face different challenges: RDAs can tailor national economic development policies to regional needs and responsiveness to these policy measures.[36]

15. The second is that there are persistent economic disparities between the English regions, which undermine England's overall economic performance. Regional institutions provide a means to target this "regional growth gap".[37]

16. Thirdly, RDAs can ensure the most effective public decision-making concerning flagship infrastructure investments ensuring that all localities can benefit from these regional prize assets, and advising nationally on the optimal location for these assets.

17. England's administration remains as heavily centralised as a decade ago—the Public Service Agreement process has subjected increasing numbers of publically-funded bodies to meeting centrally directed targets. These three rationales remain as important for effective policy delivery today as they did a decade ago when the RDAs were created.

18. It is reasonable to ask how effectively the RDAs have realised these potential benefits: that question will be addressed in subsequent sections. However, there does not appear to be a diminishment in the a priori case justifying RDAs as a solution to deep-seated regional economic inequalities limiting national economic performance.

19. One of the key debates which is still salient is whether every region needs an RDA—particularly the richer south eastern regions—if their purpose is to "level up" poorer regions' performance towards the national average. There are arguments both for and against the present situation. I certainly follow Professor Kevin Morgan's maxim (Cardiff University) that treating "unequals equally is hardly a recipe for promoting equality".[38]

20. However, we also have sympathy with the axiom that "services for the poor easily become poor services": a policy focused on England's poorer regions could easily become a poor regional policy. Having RDAs for all English regions ensures that regional policy is not seen by central government as something exceptional, but as something with salience for all departments. This ensures that regional policy expenditures are seen as investing in places' competitive potential (which are a sensible use of public funds) rather than subsidies for past failure (which are not).

RDAs contributions to effective national policy-making

21. This is not a hypothetical situation—there are areas where the eight RDAs acting in concert have improved UK policy-making by placing something on the national policy agenda. The most obvious example of this is what is now called PSA 7, namely to "improve the economic performance of all English regions and reduce the gap in economic growth rates between regions". This is a highly contentious PSA target for Whitehall ministries because it runs counter to the notion of intervening only in market failures.[39] It has also been very difficult to operationalise, because of a series of technical issues around how to fairly measure gaps in regional economic growth rates.

22. In CSR2000, there was a much weaker (in terms of implied economic rebalancing) target set for the (then departments) DTI and ODPM to raise the average economic growth rates of all regions and nations. The RDAs worked closely with DTI to demonstrate that this target could be operationalised and measured, and would not become a Trojan Horse for arguing for directly redistributive regional policies.

23. The shift between this easy PSA and the much more substantial 2002 PSA, in the 2002 CSR reflects this work by the RDAs which laid the foundation for the more substantial commitment, to closing divergence in growth rates. Working with the Government departments, they were able to address a problem that had long been regarded in government as "too difficult" and contribute to more sensible public policy-making though the Spending Review process. Having a network of development agencies covering all regions allowed the RDAs to reflect a national position from a regional perspective, rather than being seen as special interest pleading from failing regions.

THE EFFECTIVENESS AND ADDED VALUE OF RDAS

24. In assessing the effectiveness and added value of the RDAs, it is not my intention to look at the detail of RDAs' value for money, as they were given a clean bill of health by the National Audit Office as recently as 2007, a fact that has been overlooked in much of the recent criticism of the RDAs.[40] It is more instructive to consider how their organisational characteristics and performance compares as against the organisations they replaced.

25. The RDAs (outside London) were created from a number of antecedent organisations which were merged, depending on which bodies were already present in the region. These bodies included residual bodies of urban development corporations, Government Office Regeneration teams, Inward Investment promotion bodies and the Rural Development Commission.[41]

26. Prior to 1994, urban policy had been a highly fragmented policy area, criticised for lacking a systematic approach to dealing with the problems of poorer areas, often tackling particular symptoms of deprivation without addressing its root causes.[42] One set of bodies which had avoided that criticism were the Urban Development Corporations, which focused on comprehensive redevelopment of highly localised land-parcels with special planning powers to rehabilitate the land and facilitate urban land markets.[43] A number of them had been relatively successful in developing large multi-functional projects but these were often criticised for failing to relate to local needs or support local business activities, a result of their very narrowly specialised management teams.[44]

27. The Single Regeneration Budget (SRB) was introduced in 1994 in response to these criticisms of existing urban regeneration policies. SRB introduced the opportunity for a single regional authority to organise proposals into coherent work programmes, avoid the situation where new programmes were introduced to deal with the problems arising from past policy interventions, and ensure that activities delivered a balanced score-card of outcomes. What the SRB programme did not do was use the funds as an investment tool to create wider regional spill-over effects which addressed local deprivation more systematically. It remained almost entirely focused on solving the problems of the country's most deprived localities.

28. For the first three years of their existence, RDAs budgets were primarily those inherited from the antecedent organisations, and consequently SRB funds. These prior commitments largely prevented the RDAs from supporting regeneration activities embedded within "urban science policy". Underlying urban science policy is the concept of using investments in science, technology and innovation—in an urban setting—to drive wider regeneration activities. Building a new science quarter amidst or adjacent to pockets urban deprivation has proven a very effective driver of gentrification. RDAs initially did not have the budget flexibility or indeed the budget to invest in these kinds of flagship activities.

29. Notable European examples include the 22@ Quarter in Barcelona[45] or the "Västra Hamnen" district of Malmðöñ, Sweden. Urban Development Corporations were successful in this; in the North East, Tyne and Wear Development Corporation provided new inner city campuses for Sunderland and Newcastle Universities respectively at St. Peters and the Life Centre. European Union structural funds played a similar role in the Objective 1 regions, Merseyside and South Yorkshire, notably the Cornerstone campus of Liverpool Hope University in Everton.

30. In 2002, in response to perceptions within senior Government politicians that RDAs were achieving their objectives, RDAs were granted the Single Programme Budget, the so-called Single Pot. In return for agreeing a single set of targets with central Departments, the RDAs were given considerable freedom to spend their resources according to their own choosing. This opened up the possibility of investing resources in large-scale projects serving multiple aims, such as regeneration and innovation.

31. The RDAs received an additional encouragement to engage in urban science policy in December 2004, when the then-Chancellor of the Exchequer announced the designation of three "science cities", Manchester, York and Newcastle.[46] This group was later joined by three more southerly science cities, namely Bristol, Nottingham and Birmingham. However, despite the rhetoric of a "£100 million technology investment programme", no new central funds were forthcoming.

32. Nevertheless, all six of these regions have developed "science city partnerships" of some form. Manchester Knowledge Capital (the Science City body) has won significant funds from the National Endowment for Science, Technology and the Arts (NESTA) to evaluate the generic benefits of urban science policy exemplified by MKC. In Newcastle, the RDA, University and city council have invested £30m in a city-centre regeneration site to build a new knowledge marketplace bringing universities and businesses together adjacent to poor localities.

33. These science city projects could not have been funded under SRB, because they concentrate resources in central urban locations rather than sharing them between all locations. They would not have been funded by Urban Development Corporations, because they lacked the depth of senior management to juggle relationships with local firms, universities, municipalities, hospitals and other bodies. National government would not have funded them because urban science policy falls between too many policy silos (science, industry, education and regeneration).

34. RDAs' effective adoption of an approach proven elsewhere but unsupported by other institutional arrangements demonstrates without question that RDAs can and do add value to policy-making with overall national economic benefits.

THE ACQUISITION AND DISCHARGE OF NEW FUNCTIONS BY RDAS

35. The RDAs have acquired considerable new functions since their formal investiture in 1999. There have been two quite distinct rationales underpinning this build-up of responsibilities. On the one hand, before 2004, DETR/DTLR/ ODPM sought to make RDAs the lead bodies for economic development in regions, so that RDAs could provide the kernel of an executive arm for elected regional authorities (ERAs). On the other, RDAs acquired some functions as a consequence of the continual reforms to which the general "machinery of government" has been subjected in the last 11 years.[47] In both cases, this has left the RDAs exercising some functions for which there is no longer a clear rationale for them to exercise. There is a also some ambiguity between whether RDAs are strategic or operational bodies.

36. One of the most trenchant recent criticisms of RDAs in recent months has been levied by the Opposition Industry Spokesman.[48] To paraphrase his words, the needs of small business support show as much variation within regions as between regions, and what is important is quality and consistency of delivery rather than regional oversight of services. I wholeheartedly concur with this point, but do not concede that this is an argument against RDAs. The blame for this clearly lies with continual central government tinkering with the Business Link and Small Business Service organisations. Business support is an operational matter and it is probably better delivered to national quality standards,[49] but remains just one small element of what RDAs do, and is largely irrelevant to their strategic, joining-up missions.

RDAs as regional planning authorities

37. The 2007 Sub-National Review was concerned with rectifying inconsistencies at the regional level created by the rejection of elected regional assemblies (ERAs) for England. The "no" vote in the one region which did vote (78% no in the North East of England) was of such ferocity to warrant dismantling the structures created in anticipation of ERAs. The 1998 Act established Regional Chambers in each region to scrutinise the work of the RDAs. The Regional Chambers contain a mix of elected members and stakeholder representatives, and only made sense as shadow bodies for ERAs. The 2002 White Paper designated them as the statutory planning authorities for their regions, replacing the Regional Planning Conferences.[50]

38. The sub-national review plans to disband the Assemblies (or de-recognise them) and pass regional planning powers to RDAs. This proposal is intuitively attractive, as RDAs will be given the power to produce integrated regional strategies bringing land use planning together with transport and economic strategies. When I once highlighted the potential value of integrated regional strategies as a valuable tool for improving regional governance, my co-authors and I did not envisage a model where a single body was responsible for all strategies.[51]

39. I see little merit in proposals to pass regional planning powers to the Regional Development Agencies, and envisage serious problems if this proposal is not moderated.

40. I anticipate that the UK's professional planning bodies will be commenting on this specific proposal, and do not wish to detract from their points. I would underline the fact that RDAs Regional Economic Strategies follow very different principles to regional spatial strategies. Regional Economic Strategies are written to satisfy a bewildering complex of stakeholders, and have held back from making hard decisions in favour of demonstrating regional consensus and promoting a positive rather than critical regional image.

41. The 2003 Regional Economic Strategy for the North East of England identified 38 "strategic sites" for economic development in the region.[52] This large number was driven by a desire to ensure that all local authorities with spare land parcels felt they would be eligible for RDA support if a large inward investor proposed developing the site. Whatever the rationale behind the designation, it was not "strategic" in a way that land user planners would acknowledge, namely a site whose development would stimulate pan-regional economic development.

42. Taking hard decisions and being prepared to talk critically about the region and differences between localities lies at the heart of effective spatial planning. They create a set of principles in which conflicts over land use are mediated, recognising that development creates winners and losers, and it is important to maximise the public gain from private developments. These are not principles to which the RDAs have yet had to address themselves, and there are potentials for conflicts between dispassionate spatial strategy development and the more "boosterist" elements of the RDAs' work.

43. I have grave reservations about RDAs' to impose regional spatial strategies with the degree of firmness necessary to provide a robust conflict resolution mechanism which ensures the maximisation of the public benefit.

19 September 2008