Memorandum submitted by the Institute
of Directors in the East of England
This Submission is made in response to the The
Business and Enterprise Committee's inquiry into the future role
and responsibilities of the Regional Development Agencies ("RDAs")
and in particular the role of the East of England Development
Agency ("EEDA"). The Institute of Directors ("IoD")
is a membership organisation for directors of UK companies, partners
in professional firms, and chief executives of voluntary bodies.
The membership of the the IoD nationally is in excess of 51,000,
and the membership in the East of England ("Region")
is in excess of 6,500. A National response to this consultation
will be issued centrally. This Submission is made on behalf of
the members within the Region.
This Submission assumes that the review of sub
national economic development and regeneration ("SNR")
will be implemented broadly as indicated in the recent consultation
exercise, to which the IoD responded, both nationally and regionally.
For the avoidance of doubt, the IoD concluded in it's response
on SNR that the proposal was dangerous and ill-considered, although
the concept had some merit.
This Submission addresses the seven areas identified
in PN 48. Thus:
1. THE NEED
FOR A
LEVEL OF
ECONOMIC DEVELOPMENT/BUSINESS/REGENERATION
POLICY DELIVERY
BETWEEN CENTRAL
AND LOCAL
GOVERNMENT
There are fundamental problems caused by this
statement. Local government in the Region is unsure of the outcome
of impending decisions on Unitary versus District Councils. The
reorganisation of local government that is presently being trialled
in the West of England is not producing the benefits hoped for.
Until the precise structure of the local authorities in the Region
is known it will be impossible to identify suitable economic development
groups at local level with the capability of delivering the so
called benefits of SNR. Can the RDAs help in this process? The
IoD doubts this to be the case. EEDA in particular has such minimal
funding when compared with other RDAs, that it will not be able
to contribute substantively towards this exercise.
If Government feels the need for another tier
of public sector employees between it and the local authorities,
it will have to show:
1.1 that the RDAs have the skills needed. EEDA
probably do not as their funding is so meaguer, and
1.2 that the economic benefits outweigh the cost
of the provision of this extra layer of government, and
1.3 that the RDAs are properly funded for these
purposes, which EEDA most certainly is not.
The IoD in the Region doubt that any of these
criteria can be met.
2. THE EFFECTIVENESS
OF RDAS
AND THEIR
ROLE IN
ADDING VALUE
EEDA is on record as stating that it has had
the following impacts:
1. It developed an effective system for the formulation
of the Regional Economic Strategy ("RES"), by creating
a Strategy Committee of all interested parties who were able to
challenge the drafting of the RES as it developed.
2. It lead on direct interventions such as;
2.1 rovision of higher education infrastructure
in key parts of the Region, such as Ipswich and Southend:
2.2 streamlining business support to provide
a more customer focused service—Business Link East;
2.3 putting forward the business case for
greater investment in the Region's transport infrastructure.
Were these involvements ultimately of value?
The arguements both for and against this proposition are many.
The IoD take the view that, with the exception of the RES, this
work could have been done just as well by a properly staffed Government
Office. From the viewpoint of business in the broadest sense of
that word, the benefit of the RDAs has been their business focus.
Unfortunately as the years have gone by, that focus has diminished
in the Region, not through the fault of EEDA, but through Government's
consistent underfunding of EEDA, with the consequent reduction
of the quality of their performance.
3. RDA EXPERTISE
RDAs will only have expertise at the levels
that business would expect, if they are properly funded. The North
East has a budget in excess of £800 million, yet EEDA is
only funded to £140 million. The expertise available to EEDA
is therefore dramatically reduced. The Board of EEDA has done
a remarkable job given such chronic underfunding, but it's inability
to match the budgets of other RDAs means that recruitment of the
right people is very hard. The IoD has noticed with regret the
rapid staff changeover that has gone on over the last two years.
It is almost impossible to keep up with those changes, which in
turn makes it very difficult to have a consistent relationship
with EEDA.
Business invests in success. It will not pour
money into projects that are unlikely to succeed. The Region is
the the third most successful region in the country, yet Government
consistently fails to fund the infrastructure it needs to build
on that success. That infrastructure deficit is not just about
roads. It also encompasses those institutions needed to facilitate
further success. Government does need to spend money in the underperforming
regions, but it ignores this Region at it's peril. Nothing reflects
this deficit better than the poor relation that EEDA has been
allowed to become when viewed against other RDAs.
4. THE EXTENT
OF, AND
THE NEED
FOR, THEIR
OVERSEAS ACTIVITIES
RDA's are supposed to facilitate economic development.
The United Kingdom relies on foreign businesses setting up businesses
within it's jurisdiction. It is inevitable therefore that RDAs
will need connections within those areas that are seen as "connected"
to their regions. EEDA has a very limited presence in Bruxelles.
Europe is a short boat ride away. This presence is justified and
much used.
Anything beyong the EEDA model is beyond what
the public purse should fund.
5. THE CONSEQUENCES
OF EXPANDING
RDA REMIT TO
INCLUDE NEW
FUNCTIONS, AS
PROPOSED BY
SNR, INCLUDING THE
DELIVERY OF
EU FUNDING
5.1 Funding of the RDAs will have to be increased,
not reduced as BERR are currently requiring. The IoD has noted
that the Governement has funded its propoerty market initiatives
by clawing back money from RDA budgets. No business can operate
in this way, yet Government proposes to increase the workload
of the RDAs at the same time. Quite simply, the SNR based proposals
will fail if such conduct continues
5.2 The RDAs do not have the expertise needed
for such tasks. EEDA will be required by SNR to take over the
planning function of the Regional Assembly when it is abolished
in 2010. They are simply not equipped to do this.
5.3 The body that will oversee EEDA will be the
Regional Local Authorities, yet the functions of EEDA will be
to empower those same authorities to spend money/provide services.
Such a conflict of interest would simply not be accepted in Business.
5.4 Those same local authorities will have the
right to appoint directors of the RDAs, yet if company law is
followed those directors will not be able to vote on many of the
board decisions as they will be conflicted out.
5.5 Business is supposed to be the focus of the
RDAs, yet the consequence of SNR will be to deprive business of
any effective involvement in the economic development of the Region.
There is no provision within SNR for business to be consulted
on anything. EEDA have given the business organisations an assurance
that they will continue to consult with business, as they realise
that excluding business in this way will be counterproductive.
Overall Government is making the roles of the
RDAs less business orientated, and more overtly political—yet
it was to avoid that problem (inter alia)that the RDAs were first
conceived.
6. THE ACCOUNTABILITY
OF RDAS
The arguement behind SNR is that expenditure
on regeneration and economic development should be made at a local
level by politicians who are elected for that purpose. This is
not the place to question the wisdom of giving funds into the
care of people who do not have the expertise to use them properly.
However local authorities would at least be publicly accountable
for the monies they spend. The board of directors behind the RDAs
are not in any way elected, probably do not have the expertise
needed for this role, and in EEDA's case will have insufficient
funds to ensure that their staff possess that expertise. If national
government does not believe that it has the ability control local
authorities through it's departmental structure, then some form
of intermediate body is inevitable.
The IoD are of the view that given chronic underfunding
of EEDA, government should consider:
6.1 either a complete re-organisation of the
Region by properly funding GO-East to perform the RDA role to
the degree needed. That would at least make the economic "controller"
an accountable body. A separate planning body would then be needed,
probably centrally funded, and not necessarily regionally focused.
6.2 Or EEDA's budget should be trebelled to allow
it to perform it's role properly.
More generally, government has, through SNR,
and the proposed Supplemental Business Rate, effectively disenfranchised
business both from a meaningful role in the economic development
of the Region, and by allowing local authorities to impose additional
rates burdens without any consultation with business. This latter
step adds to the problems that government has caused in making
the United Kingdom a far less attractive place in which to locate
a business. The IoD in the Region does not understand why government
should be concerned about accountability, given the above track
record.
7. HOW RDA PERFORMANCE
HAS BEEN
MEASURED IN
THE PAST
AND WILL
BE MEASURED
IN THE
FUTURE
This area concerns the IoD in the Region as
it presupposes that the RDAs will survive this review in some
form or other. The question is particularly sensitive in relation
to EEDA as it has underperformed in the past. Indeed the last
occasion on which EEDA was judged resulted in the poorest score
for any RDA that was then adjusted after objections so that EEDA
was merely one of many failing RDAs. The IoD in the Region finds
it difficult to understand how this can happen when EEDA is so
underfunded, yet is custodian of a region that is one of only
three that "make a profit" in the United Kingdom. The
methods imposed by the DTI, now BERR in making these assessments
are a source of mystery to simple business folk. The GVA methods
being applied to the RES may in fact be the only way to measure
success of an RDA, but if that RDA does not have the same per
capita amount to spend within it's region as do other regions,
how can there be any true comparison?
CONCLUSION
The IoD in the Region believes that the disenfranchisement
of Business through the effect of SNR both locally and on the
RDA, coupled with the imposition of the Supplementary Business
Rate, will make the Region a very uncomfortable place for business
to work in..
RDAs can only function if they are independant
from Government. Current funding and roles make that proposition
difficult to fulfill. Having said that, with business being disenfranchised
though SNR, there is a need for a business focused organisation
within the Region. It must be properly funded, and independant
of the hand of Government. Without those essentials, there is
little argument for an RDA in any region.
11 September 2008
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