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


Memorandum submitted by CBI

INTRODUCTION

  1.  The CBI welcomes the opportunity to submit evidence to the Business and Enterprise Select Committee's inquiry into Regional Development Agencies (RDAs). The Confederation of British Industry (CBI) is the national body representing the UK business community. It is an independent, non-party political organisation funded entirely by its members in industry and commerce and speaks for some 240,000 businesses that together employ around a third of the UK private sector workforce. The CBI's membership includes 80 of the FTSE 100, some 200,000 small and medium-sized firms, more than 20,000 manufacturers and over 150 sectoral associations.

  2.  The CBI believes that there are some economic development issues, such as spatial planning and transport that benefit from a regional perspective. The CBI supported the creation of RDAs as a business led organisation to drive economic development in the regions. We believe that RDAs can provide a valuable service in linking regional development policy to private sector. However, we have at times called for the RDAs to demonstrate their effectiveness.

  3.  Following the initial years of RDA operation the CBI set out its recommendations for improvement in its 2001 report, "RDAs: Getting down to business". Since that report was published there have been improvements in the operation of RDAs. However, it is still not clear that enhanced inputs have led to demonstrable improvements in outputs and some businesses remain sceptical about the extent to which RDAs add value. Remaining concerns about RDAs include: regional variation in the quality and services they provide; limited impact as other bodies have responsibility for many of the key influences on regional economic development, such as transport; a lack of strategic focus; patchy engagement with business and a consequent lack of skills and expertise; and some scepticism about RDA overseas activities in their current form.

  4.  Therefore this submission argues that:

    —  RDAs do play a useful role in regional policy development

    —  RDAs should improve on effectiveness in key delivery areas and focus on adding value

    —  RDA leadership should be strengthened to improve engagement with the private sector

    —  The impact of the Sub National Review on RDAs must not dilute their focus on economic development

RDAS DO PLAY A USEFUL ROLE IN REGIONAL POLICY DEVELOPMENT

  5.  Business considers that there are some issues where a regional context is very important—planning for infrastructure and transport are two good examples. The CBI supports the role of the regional tier in setting the framework for such decisions. However, in order for regional policy to be effective, any delegation of functions needs to be done on a strategic and systematic basis, to place each activity at the appropriate spatial level. It is also important that any devolved responsibility must be a genuine delegation of powers rather than a replication of what is happening at national level. Members have reported some areas where central government retains control over functions which could usefully be delegated to, or implemented at, the regional level. For example there remains a requirement to provide central support and assistance when helping areas develop, evolve, and improve (for instance, in responding to business crime and supporting the development of Business Improvement Districts).

  6.  CBI members report the useful role that RDAs play as the channel through which the private sector can be linked into regional policy development. Members cite the ability of RDAs to draw together local leaders to establish priorities as a key strength and consider that RDAs have a clear role as a coordinator of regional policy and regional support mechanisms. For example the role of RDAs in crisis management has been highlighted as particularly noteworthy. In responding to issues such as foot and mouth disease and major industrial decisions, members have noted that it is difficult to see how that level of coordination could have been achieved in the absence of RDAs. In addition, RDAs will have a crucial role to play in delivering on the climate change agenda at grass roots level in coming years.

  7.  So while the CBI does believe that RDAs have a role to play, the key challenge is to make them more effective. RDAs should focus on promoting economic development. This will allow them to target their financial and human resources more effectively and in those areas where business feels they can have the most influence. Members still report that RDAs try to do too much and as a consequence do not fulfil their core functions as effectively as they might. RDAs should act as a coordinator bringing together the capital and the service providers rather than acting as a deliverer in their own right. By becoming too involved in the detailed delivery of services they lose the important strategic perspective which is where they can add value.

  8.  The RDA role as a coordinator is crucial and one that should be developed further. If they are to add real value then duplication of activities must be reduced. RDAs should not seek to pre-empt government policy by announcing regional initiatives which cut across national programmes. For example the North West established two skills boards, one as a result of regional policy and one as a result of national policy. Greater coordination, both with other public and private organisations, and between RDAs, across almost all their activities is required to realise the overwhelming business priority—to see RDAs make a real difference on the ground.

  9.  The government must support RDAs by delivering on its promise to stop micromanaging them. There should be a clear process whereby government establishes a set of outcomes from RDAs but avoids excessive detail in planning and monitoring requirements. The move to the single budget from April 2002 was welcome in allowing RDAs to distribute their resources according to regional priorities. However, there are concerns that RDAs still spend too much time responding to government consultations and initiatives rather than delivering on the ground. RDAs should have the ability to refuse to become involved in more peripheral activities and focus on economic development.

RDAS SHOULD IMPROVE ON EFFECTIVENESS IN KEY DELIVERY AREAS AND ADDING VALUE

  10.  Business believes that the primary focus of RDAs should be to encourage economic growth to enable all regions to reach their potential. But a lack of clarity over the key objective of RDAs has in the past made it difficult to measure their performance. It is therefore not clear to what extent RDAs have influenced economic growth. Since they came into operation in 1999, economic growth has averaged 2.7% a year, comprising annual employment growth of 1.0% and annual productivity growth of 1.7%. Over the 1986-99 period—which was broadly a full economic cycle—growth had averaged 2.5% a year, comprising annual employment growth of 0.7% and annual productivity growth of 1.8%. Overall economic growth can therefore be said to have stepped up marginally, reflecting an increase in the rate of net job creation but not in the underlying productivity growth rate. However, as RDA activities are only one of many factors affecting economic development and job creation, and as we do not know how economic growth would have turned out in the absence of RDAs, it is impossible to come to a definitive conclusion on the agencies' contribution to growth at this highly aggregated level.

  11.  There are regional variations with some areas growing more quickly than others at different points in time. However, as with the aggregated national data, it is not possible to draw any definite conclusions about what part the RDAs have played in these regional growth trends.

  12.  It is important that RDAs have a strong influencing role in those areas that members consider to be the most important drivers of economic development, namely transport, planning, housing and skills. However, it is difficult to measure RDA performance in these areas as it is acknowledged that they are not, at present, the key player for delivery. Central government and/or local authorities make the decisions on individual transport schemes, regional assemblies are currently responsible for spatial planning, and RDAs are one of, not the primary, deliverer of skills outcomes. Notwithstanding this, members do support the role of RDAs as drivers of economic development in influencing decision makers in these areas. For example business has broadly valued the role of RDAs in making the case for individual transport schemes and in tackling cross-boundary transport issues.

  13.  It is vital that RDAs maintain and strengthen their role in influencing regional priorities in important areas of economic development, especially as the Sub National Review proposes to give them a much greater influence over strategic planning. But secondly, RDAs must enhance delivery in those areas where they already have more autonomy and can add real value, such as on business support and innovation. This will mean deploying efforts and resources to maximum effect and not simply duplicating the work of other organisations.

Business support

  14.  The CBI supports RDA funding of business support provided it complements private sector provision by filling gaps and reflects business demand. However, the business perception is that RDAs have in the past placed too much emphasis on addressing market failures by supporting failing and start-up businesses, and that the focus must now shift to supporting business growth. By helping growing businesses, RDAs should expect to see a better return on their support in terms of greater wealth, employment and productivity. Some members have noted a lack of qualitative evaluation of the value for money of business support programmes. There have been some very positive examples of successful RDA support for business growth based around strategic regional businesses. This should be built upon in all English regions.

  15.  Evidence shows that good quality services to businesses improve their survival and growth prospects. However, the array of similar schemes provided by different public sector organisations, means that businesses of all sizes continue to report fundamental problems of duplication, confusion and inconsistency in the quality of services being delivered. The CBI supports the government's aim to simplify the business support network and is working closely on this with BERR and the RDAs through the Business Support Simplification Programme (BSSP).

  16.  A vital part of the BSSP will be improvements to the Business Link service to provide a high quality, consistent service which growing businesses feel confident to use. A number of problems with Business Link have been identified which RDAs must continue to address through investment and improvement. Some Business Links have already begun to reform with good progress made. Ultimately, business should be able to access support at any point through a "no wrong door" approach and be confident of being sign-posted correctly regardless of the final provider of the service. RDAs must also better coordinate the business support provided by different public sector bodies to reduce confusion and ensure a more efficient use of limited resources.

  17.  CBI members have noted that one area of business support where RDAs have really added value is through Access to Finance Initiatives for SME's. These have levered in a substantial amount of private sector investment, and helped businesses to grow and prosper. In addition the latest mezzanine fund established in the North East should generate a substantial legacy for further initiatives of this nature.

  18.  The CBI would not prescribe the best spatial level for the procurement and delivery of publicly-funded business support, however there should be evidence that funders have considered these issues strategically. Contracts for business support should be done at the most appropriate spatial level, defined by the value for money and the ability of the contract to be flexible for local/regional needs. The full CBI position on business support was set out in our response to the consultation on simplifying business support in September 2007.[73]

Innovation

  19.  There are a number of benefits of RDAs providing innovation support to companies: programmes can be tailored to local needs, and knowledge of how each regional economy works can help in targeting support. Some RDAs are very active in innovation support and have a fruitful relationship with CBI at regional and national level. Regions also have a potential part to play in promoting innovation through procurement. However, regions sometimes overlap in the cluster targets they set for themselves, companies face different conditions in different regions and there are problems in effectively coordinating effort when innovation zones cut across agency boundaries (the London-Oxford-Cambridge triangle and its immediate neighbourhood fall under EEDA, SEEDA, EMDA and the LDA).

  20.  Businesses do not recognise regional boundaries when innovating and so need RDAs to present a consistent and coherent approach across the UK. Some CBI members have spoken of the need for a more joined-up and systematic approach to cluster development and technology funding, regulations, planning, infrastructure and other "ecosystem" factors affecting business investment and growth. RDAs often have market awareness, but sometimes lack full appreciation of the needs of business. Regions also sometimes lack appropriate financial policies for managing risk and failure in their support for R&D, for example a lack of sophistication in how different options (eg loans, grants, equity stake investment) could be used.

  21.  RDAs should focus on creating critical mass, building on regional strengths and reducing duplicated effort. It must be accepted that not every region can support leading centres in every discipline—but businesses (and other stakeholders) must be able to access these centres no matter where they are located in the UK.

  22.  When inputting into the Sainsbury Review of Science and Innovation, published in October 2007, the CBI suggested two measures to enhance the effectiveness of RDA innovation support:

    —  Portable funds: Make a portion of support funds given to a company in a region portable, eg 30% of a grant could be spent by the company in other regions where it may have operations or suppliers. (If a company has multiple sites, it should not be penalised for trying to make their whole enterprise work more efficiently.)

    —  Shared Public Sector Agreement (PSA) targets for RDAs, either bilaterally or as a whole group. Concerns about coordination have led to the establishment of cross-RDA working groups including one on science and innovation. However, without shared core targets there are few incentives for RDAs actively to engage in one another's strategies and investments.

  23.  The Sainsbury Review had major implications for RDAs, by recommending an increased focus on their science and innovation work. RDAs have collectively agreed to align £180m of their funding with the Technology Strategy Board (TSB), and the RDAs need to work together to achieve maximum value. An effective TSB-RDA working relationship will be very important for innovation support at a regional level. The TSB is responsible for a pilot re-launched version of the Small Business Research Initiative and there is much scope for RDAs to identify ways to amplify its impact by coordinating procurement at regional level with the national pilot. The RDA should facilitate demand side pull, supporting public sector customers to commission and procure innovation, linking them up with businesses involved in TSB supported work. This should be a major pillar in RDA work to support regional economic growth. Good practice is already being developed with RDAs being encouraged to team up with a Strategic Health Authority to create a bigger pot of money with which to procure R&D.

Overseas activities

  24.  One area of current RDA activity where business questions the added value is in their overseas activities. Each individual RDA undertaking activities abroad has the potential to create overlap and lead to an inefficient use of resources. The Committee's 2003 report recognised the value in greater coordination of inward investment activities. The CBI believes that greater coherence of overseas activities could be provided by UKTI which already has a network of regional offices.

  25.  UKTI should take lead responsibility for both inward investment and export support. This is an issue we understand UKTI is addressing following its review of regional trade operations which reported in March 2008. While there are some positive signs of rationalisation and coordination, there is clearly scope to explore this further.

  26.  Greater coordination through UKTI would also help ensure that RDAs avoid an over emphasis on encouraging foreign investment in comparison to the effort put into creating the climate for locally based businesses to grow. If the goal is sustainable business development then the value of regionally headquartered businesses needs to be recognised. Fostering domestic businesses and attracting inward investment are both vital to maintain healthy regional economies, the relative focus given to each will largely be dictated by regional circumstances.

Measuring performance

  27.  To focus RDAs on real delivery they must be measured by results. Establishing one clear objective will allow RDA performance to be measured more accurately. When setting any performance framework, a target culture which distorts genuine delivery must be avoided. Previous assessment methods were too focused on RDA inputs and the shift away from this is welcome. However, current assessment models focus too heavily on outputs, such as amount of brown-field land developed, rather than what those outputs achieve in terms of contributing to economic development. Consistent and overall impact evaluation that demonstrates the contribution to regional economic development, such as that being spearheaded by EMDA, would fulfil this objective.

  28.  It is critical that RDA priorities are substantially business driven and that the setting of priorities is business led. The number of stakeholders that RDAs consult with has lead to a growth in the number of targets. These targets must be streamlined to provide greater focus on economic development. The agreed targets should be clearly identified in the Regional Economic Strategy, and the objectives of RDAs and other responsible agencies should be aligned to deliver them. The streamlining exercise currently underway at the LDA to make it a strategic organisation with a clear focus on growth could provide a useful blueprint.

RDA LEADERSHIP SHOULD BE STRENGTHENED TO IMPROVE ENGAGEMENT WITH THE PRIVATE SECTOR

  29.  The perception of RDA effectiveness is hindered by a lack of business engagement in some areas. The experience varies across the country, for example in the North East businesses cite generally positive experiences, but elsewhere business sometimes struggles to describe any meaningful engagement. Members remain confused and frustrated by the seemingly endless consultation cycle, structural reorganisations, and complicated committee structures surrounding RDAs which stand in the way of actual delivery. This leads to frustration, but more often disengagement and scepticism about the value RDAs add.

  30.  RDAs have a challenging role and it is essential that they have the appropriate expertise and skills. Successful economic development is led by the private sector so RDAs need strong private sector knowledge and input. To demonstrate real regional leadership RDA boards need to be strengthened to secure a better mix of expertise. All RDA Chairs and 60% of RDA Board members must be drawn from the private sector with business people represented on selection panels. It has been noted that in the past there have been some creative interpretations of what constitutes private sector representation. Many of the appointed "business" representatives on RDA boards have limited private sector experience. The requirement for business representatives to have a real understanding and experience of the private sector must take precedence over all other selection criteria.

  31.  It is also important to improve communication between RDAs and the wider business community. CBI regional offices have noted that businesses that are not represented on RDA boards receive little feedback and engagement at present. For example some large members have reported a lack of opportunities to communicate either individually or collectively with the RDAs. The private sector has a role to play in improving engagement and there are arrangements in certain regions for business representative bodies to engage with RDA boards to provide a link back to their members. However, whilst this is valuable, it must not be a substitute for direct engagement with the private sector. RDAs must show a greater focus on developing closer business partnerships and dialogue. Changes underway at the LDA and the establishment of the Business Advisory Group which has greatly improved business engagement, could provide a useful model.

  32.  Within RDA staff, strong commercial skills, particularly in negotiating, influencing, partnering, project management, risk management and appraisal are necessary. The lack of these skills has been a concern over the last nine years. Too many RDA staff appear to be "administrators" rather than dynamic drivers of economic regeneration. Improved brokerage and influencing skills are vital to enable RDAs to make best use of the resources that they have. The budgets are relatively small in comparison to the size of the regional economies that they are trying to influence. The CBI does not advocate an increase in RDA budgets but instead wants to see RDAs focus clearly on the goal of economic development and gear up their influence and brokerage skills to maximise the work that is already ongoing at regional level and use their expenditure smartly to lever in other funding.

  33.  In the past the lack of appropriate skills has lead to numerous internal reorganisations in a drive to improve performance, rather than nurturing and recruiting suitably skilled individuals. Greater cross fertilisation between RDAs and the private sector at all levels, both through secondments and by making careers in RDAs attractive to those in the private sector, would be a positive development. RDAs can also improve skills by collaborating across boundaries to share best practice.

THE IMPACT OF THE SUB NATIONAL REVIEW ON RDAS MUST NOT DILUTE THEIR FOCUS ON ECONOMIC DEVELOPMENT

  34.  The CBI supports the concept of a single regional strategy. The current multitude of strategies and bodies that seek to promote development across regional areas is overly complex. In order to create additional coherence at the regional level it makes sense for that strategy to be "owned" by a single organisation. There is considerable merit in the RDA fulfilling that role.

  35.  However, in taking on any new functions, CBI believes it is essential that the RDAs continue to be business-led and that the processes for drawing-up, scrutinising and delivering the strategy include strong business engagement/representation. This must go beyond treating business as one of a number of stakeholders who are to be "consulted" to recognising that a strategy for future sustainable economic growth will not be achieved without successful businesses.

  36.  If the SNR proposals are implemented, Government should not underestimate the challenge it will pose to RDAs: they are being asked to assume a raft of new roles and responsibilities that they were not originally designed to fulfil. It they are to perform these new tasks efficiently and effectively it will be essential that they are provided with the necessary funding and skills. We are pleased that the Government has recognised this and in light of the new, and important planning responsibilities that RDAs are likely to assume as a consequence of the SNR, has brought forward amendments to the Planning Bill to enable Regional Planning Bodies to delegate their planning powers to RDAs where appropriate. The CBI considers these provisions to be a sensible step that will provide flexibility for handling the transfer of responsibilities and resource between Regional Assemblies and RDAs to ensure that essential regional planning skills are retained.

  37.  The main business concern with all aspects of regional policy is to see some real delivery on the ground. CBI members therefore expect tangible results from this reorganisation in terms of a genuinely more streamlined structure, more efficient processes and a real focus on economic development.

  38.  CBI accepts that the planned abolition of regional assemblies will require a new mechanism to ensure that local authorities within a region "co-own" the integrated strategy. However, we are very concerned about the proposals for leaders' forums as they currently stand.

  39.  The proposal to grant a wide range of powers to the leaders' forum for: drawing up and "signing off" the single strategy; scrutinising/holding to account the RDA; and delivering elements of the strategy, would be a significant transfer of power/influence away from the business community (and therefore the focus on economic development) towards local authorities. By essentially giving local authorities a veto, the Government runs the risk that regional strategies will follow the "course of least political resistance" instead of identifying and focusing upon the key areas of development and regeneration that have the greatest potential to improve sustainable regional economic performance. We remain to be convinced that this would result in the increased efficiency that Government seeks. More importantly, we are concerned that it could jeopardise the ability of RDAs to promote a balanced regional agenda that facilitates future economic growth. Similarly, allowing overly bureaucratic and onerous scrutiny of RDAs by local authorities with little opportunity for business participation, would also hinder economic growth.

  40.  The CBI believes that in order for regional strategies to promote a shared and balanced agenda it is necessary for all core stakeholders to be engaged equally, and from the outset of a strategy's development. One way of achieving this could be the establishment of a board of stakeholders that is collectively responsible for directing the development of a regional strategy and providing the final "sign-off". Such a board could comprise all stakeholder interests (business, unions, local government, utilities, environmental agencies) providing one focal point of engagement and consultation, thus helping to reduce both the scope for confrontation between key interests and ensuring a balanced consideration of policies. It is critical that adequate representation from the private sector is secured if such a board is to be meaningful. As with selection to RDA boards, private sector experience must be the overriding criteria determining selection. Within this overarching framework there should be flexibility for regions to adapt the governance arrangements to suit local circumstances.

41.  CONCLUSION

    —  There is support in principle for RDAs as business led drivers of economic growth at the regional level.

    —  However, RDAs need to demonstrate their effectiveness by focusing more clearly on the objective of economic growth to allow all regions to reach their potential.

    —  To achieve this, RDAs must enhance their influencing role over transport, planning and skills, where their input can at present only be of a limited nature, and when their influence is strengthened through the SNR proposals. Secondly they must improve performance on business support and innovation, where they already have more autonomy, to ensure that they deliver real results on the ground.

    —  Business places little value on RDA overseas activities in their current form.

    —  RDAs must work harder to improve business engagement both through effective private sector representation on RDA boards and greater consultation and engagement with the wider business community.

The aims of the Sub National Review to give greater responsibilities to RDAs are supported, but the CBI has serious concerns about the proposals to give leaders' forums sign-off of the single regional strategies as this could seriously weaken the business voice

19 September 2008







73   http://www.cbi.org.uk/ndbs/positiondoc.nsf/1f08ec61711f29768025672a0055f7a8/6722aadc737ad23e8025740900598d11?OpenDocument Back


 
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