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
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