Memorandum submitted by IPPR North
ippr north is part of the Institute for Public
Policy Research think-tank. Based in Newcastle-upon-Tyne, ippr
north has a strong track record exploring the impact of national
policymaking in the UK's regions and communities. This research
work has covered varied policy areas, including economic policy,
devolution and decentralisation, rural issues and democratic engagement.
ippr north is pleased to submit evidence to this opportune Inquiry.
The structure of ippr north's submission follows the questions
upon which the Committee has expressed an interest.
SUMMARY OF
HEADLINES
— ippr north supports the underlying
rationale for policy interventions being developed and delivered
at a level between central and local government. The primary focus
for these interventions should be functional economic geographies.
— The rationale behind the RDAs was
ambitious and praiseworthy. Difficulties in attempting to accurately
measure their impact should have been foreseen, as modelling a
counterfactual scenario was inevitably going to be difficult.
— The implications of the Review of
sub-national economic development and regeneration (SNR) on the
expertise required by RDAs will be significant. Expectations of
the RDAs have evolved significantly over the years and this needs
to be recognised in this debate.
— RDAs' overseas activities are the
subject of increased scrutiny. ippr north outlines the nature
of potential disadvantages that may arise through these activities,
but concludes that there is insufficient evidence available to
determine whether or not this represents the reality.
— ippr north welcomes the Government's
attempts to address the "democratic deficit" at the
regional level, but expresses concerns over the efficacy of the
Leaders Forums proposed in the SNR. The role of the RDAs' Boards
is also brought into focus as a result of these developments.
— Creating a series of effective performance
management structures for the RDAs is challenging. Headline economic
indicators are important, but it is quite possible that an RDA
could perform very well and find that prevailing economic trends
reduce or negate its impact. Internal performance management structures,
however, can sometimes appear cosy.
THE NEED
FOR A
LEVEL OF
POLICY DELIVERY
BETWEEN CENTRAL
AND LOCAL
GOVERNMENT
1. The answer to this question in its literal
translation is yes, there is a need for some aspects of public
policy to be delivered at a geographic scale that sits between
national and local government. A centrist approach, while appropriate
for some policy areas such as national security, can lead to the
imposition of inflexible policies that do not reflect local realities.
Refuse collection provides an obvious example, the notion that
a central agency might seek to coordinate this for the whole of
England is impractical; this task is best dealt with by local
government.
2. However, some policy areas fall between
central and local. Transport and welfare to work are principal
among these and this is because they are intertwined with "functional
economic geography". Open and flexible labour markets determine
peoples' decisions on where to live and work and transport infrastructure
needs to be responsive to this. Travel-to-Work Areas (TTWAs) best
define the geography of local labour markets, and they clearly
extend beyond local authority boundaries (but not to national
boundaries[!]). Welfare-to-work programmes that seek to increase
economic activity are increasingly focussing on improving the
connectivity between areas of high inactivity and buoyant employment
hubs. These regularly require collaboration across local authority
boundaries. Procuring goods and services on a regional or sub-regional
basis also allows public agencies to take advantage of economies
of scale not available to individual local authorities without
encountering the diseconomies of scale that can affect central
government.
3. But that endorsement requires further
clarification. First, caution should be shown over agreeing the
terminology; policy delivery is one-dimensional and a perception
of RDAs solely as delivery organisations would be unwise. While
this may sound like unnecessary semantics, for regional agencies
whose remits are changeable (as the RDAs' are) it is important
that they understand—and furthermore determine—the
policy context under which they operate. Enhancing regional agencies'
analytical capacity and freedom to determine policy increases
the likelihood that responses will effectively identify local
circumstances. Centrally imposed systems will not enhance their
performance.
4. Second, an endorsement of the need for
a policy presence between central and local government does not
constitute an endorsement of the RDAs per se. We would
strongly argue the case for a regional policy presence, for the
reasons outlined above, but whether or not the status quo is the
optimum arrangement will be discussed through this submission.
THE EFFECTIVENESS
OF RDAS
AND THEIR
ROLE IN
ADDING VALUE
5. The overarching ambition for RDAs was
that the public investment that they received would directly catalyse
the regional economies. This was consistent with the Government's
commitment to the "hand up, not hand out" ethos. It
was, however, divergent from some of the other mainstream policy
aims; the direct impact of increased investment in healthcare
and childcare facilities, for example, was designed to deliver
direct positive social outcomes and any economic benefits that
were subsequently derived should be considered incidental. Other,
incumbent institutions (such as schools and hospitals) were in
a better position to deliver enhanced social outcomes should they
have received additional investment. The decision to allocate
resources to organisations whose ambitions deviated from this
and towards a more abstract idea of economic development that
brought with it improved social outcomes (there is wealth of evidence
linking steady employment with positive health outcomes, for example)
was a brave move and, as this question suggests, one that requires
the RDAs to evidence the value which they have added.
6. This is not a one-way street. Improved
economic circumstances typically lead to improved social outcomes,
but it would be injudicious to conclude that improved social outcomes
cannot lead to improved economic circumstances. Continued public
investment in RDAs seeking to add value to regional economies
should not be taken for granted. When it comes to public investment,
there is always an opportunity cost; the capital could be allocated
elsewhere. Therefore RDAs must continue to justify why resources
should be allocated to them when they often address public policy
challenges—unemployment excepted—that are not central
to the concerns of the electorate in England.
7. As far as the RDAs' effectiveness is
concerned, the general perception appears to vary significantly
from region to region. It is unrealistic to expect RDAs to operate
and perform uniformly. Moreover, it is undesirable for them to—developing
the economy of South East England will be very different to North
East England. Decentralisation will necessarily involve some degree
of policy divergence. Nevertheless, a varying remit should not
insulate the RDAs from a thorough assessment of their achievements.
The biggest hindrance (revisited later in this submission) is
that it is virtually impossible to accurately model what a regional
economy would look like in a counterfactual scenario where an
RDA hadn't existed. Because of this key limitation, benchmarking
RDAs and evidencing their added value is inherently very difficult.
RDA EXPERTISE
8. The work carried out by employees of
the RDAs is equivalent to other professional disciplines. The
extra responsibilities that they will inherit as the Review of
sub-national economic development and regeneration (SNR) reforms
come into effect are perhaps more technocratic and require expertise
in more established disciplines (such as planning). It is important
that the RDAs pro-actively pursue ways of enhancing their capacity
in these key areas in advance of them taking on these roles.
9. The role of the RDAs has evolved throughout
the decade in which they have been in existence. RDAs were designed
with a degree of flexibility to enable them to reflect the economic
challenges of their respective region (which vary significantly;
between the South East and the North East, for example). This
flexibility has led to RDAs being expected to absorb various new
policy initiatives, some of which perhaps did not sit perfectly
within their remit. This evolution has dictated that RDAs be required
to swiftly develop new skills within their workforce. In some
circumstances this challenge can be accomplished through drawing
on skills from outside the organisation, either through outsourcing
to consultants or recruitment, but on others the skills required
might not be readily available. Addressing any potential shortages
of this kind should involve the RDAs in conjunction with other
agencies, such as the Academy for Sustainable Communities (ASC).
10. A more stable programme of work would
assist the RDAs, as they would be able to develop a highly-skilled
workforce focussed on clearly defined objectives. The disruption
caused by demands from central government that are spontaneous
and transitory appears to obstruct this development. Additionally,
continuing professional development (CPD) is important for a variety
of professional disciplines. Organisations often have internal
monitoring processes that ensure that their staff are constantly
seeking to renew and refresh their skills. It is important that
RDAs do this. RDAs should harness the benefits of professional
membership organisations (such as the Institution of Economic
Development [IED], Royal Town Planning Institute [RTPI] or Royal
Institute of Chartered Surveyors [RICS]) all of whom require their
members to evidence CPD on an annual basis, thereby ensuring that
their skills are renewed and refreshed.
THE EXTENT
OF, AND
NEED FOR,
THEIR OVERSEAS
ACTIVITIES
11. The RDAs adhere fastidiously to their
commitment not to compete with one another inter-regionally. For
example, an RDA would not seek to encourage a firm based in an
adjacent region to relocate to their region. This cooperation
was a clearly stated intention when the RDAs were introduced—failure
to adhere to its ethos would undermine the claim that the RDAs
work to improve the performance and competitiveness of the UK
economy.
12. The central claim against the RDAs'
overseas offices is that this principle is being compromised through
the pursuit of Foreign Direct Investment (FDI). For example, let's
say a multinational corporation was seeking to locate a major
production facility to serve its growing UK customer base. This
corporation might court the attention of the RDAs to see if any
financial assistance was available to them should they choose
to locate in their region. If this scenario developed to the extent
that RDAs were (perhaps unknowingly) competing against one another
to offer the most attractive package to the corporation, this
would be a serious cause for concern:
— First, any additional financial assistance
provided as a result of this bargaining process is a direct drain
on the public purse and it only occurs because of government agencies
creating a competitive environment.
— Second, in addition to the unnecessarily
increased direct subsidy, the UK government is funding this activity.
Not only could it find itself losing out financially as a result
of the process, it is bankrolling the artificial competition.
Instead of a coordinated intervention that the government might
pay for once, it is simultaneously funding the activity of different
agencies.
13. Most importantly, we have not been presented
with any evidence to suggest that the scenario described above
is what happens in reality. The purpose of including the scenario
is to articulate the potential problems that could arise from
RDAs having overseas offices. Further evidence is required to
determine whether or not there are unintended consequences arising
from the activities of RDAs overseas offices. UK Trade and Investment
(UKTI) could coordinate the RDAs' overseas offices, leading to
improved monitoring of their activity and potentially a framework
for attracting FDI. Greater transparency in relation to how RDAs'
overseas offices operate more generally would be welcomed.
14. The RDAs' overseas offices appear to
be undertaking functions that are similar to those previously
carried by UK Trade and Investment (UKTI). Clarification over
how these functions interrelate would also be beneficial.
THE ACCOUNTABILITY
OF RDAS
15. The accountability of the RDAs has been
contentious since the North East's rejection of elected Regional
Assemblies in 2004 derailed the Government's plans to move to
a more federal system of governance in some policy areas. The
ambition of this programme was that regional bodies—primarily
the RDAs—would become accountable to the electorate through
directly elected regional assemblies that monitored and scrutinised
their performance. Ever since 2004 the Government has grappled
with how best to address this democratic deficit and, in 2007,
the publication of the Review of sub-national economic development
and regeneration (SNR) sought to address this.
16. The SNR is a cross-departmental report
and its solution to the persistent democratic deficit was for
the Integrated Regional Strategy (IRS) to be agreed by a forum
of local authority leaders from each region. This attempt to address
the regional democratic deficit through the utilisation of locally
elected members is welcomed. It will become particularly relevant
when the RDAs take on planning policy, which is inherently political.
However, while this is well intentioned, it is difficult to see
how a region with over seventy (South East England) local authorities
will reach consensus; failure to agree will lead to central government
imposing its own vision, which is not a position that sub-national
agencies would want to return to. It also perhaps underestimates
the antipathy some local authorities have for RDAs. This process
of negotiation between the two organisations will be further complicated
by the SNR's instruction that RDAs adjudicate over individual
local authorities' capacity to carry out their own programme of
economic development activity. This potential volatility could
lead to projects being delayed due to organisational friction.
It is important that the future relationship between local authorities
and RDAs is monitored.
17. It is also unclear why the Government
Offices for the Regions have not been more prominent in this debate.
While they do not provide a flawless solution to the democratic
deficit, it does seem that they have a strong track record of
assessing the capabilities of local government across a variety
of other policy domains. Their apparent exclusion from the process
seems to make little sense.
18. Additionally, RDAs have operated with
a Board since their inception. The RDAs Boards are cross-sector
and allow the RDAs to retain their claim to be business-led organisations.
All Board appointments are subject to the approval of the RDAs'
parent department, Business Enterprise and Regulatory Reform (BERR).
Under the post-SNR arrangements the purpose of the Board becomes
increasingly ambiguous. If the role of the Board is to change—if
Board members were to become less concerned by scrutiny and take
on a more ambassadorial role, for example—then the scale
of membership might require reassessment.
HOW RDA PERFORMANCE
HAS BEEN
MEASURED IN
THE PAST
AND WILL
BE MEASURED
IN FUTURE?
19. Overall, performance management appears
to be one of the more opaque aspects of the RDAs operation. This
is partly due to circumstance; as outlined above, it is difficult
to know what RDAs should be comparing their performance against.
Assuming that this debate is restricted to headline economic indicators
(which it needn't be) such as economic output (GVA) per capita
and rates of economic activity:
— Should these be measured against
other regions' performance?
— And should this be regions with similar
economic/industrial profiles?
— Or the best performing regions?
— Should these be measured against
the UK average? Or the average across England?
20. A significant hindrance is that the
ideal performance management framework for the RDAs would involve
headline economic indicators being compared with a counterfactual
scenario where the region had not received investment through
an RDA or other equivalent body. As described earlier in this
submission, the near impossibility of creating such a baseline
makes performance management inherently tricky.
21. Under the current system, RDAs agree
performance management targets (including a selection of Key Performance
Indicators [KPIs]) in their corporate plans. These are based around
the ambitions of their RESs and agreed with their Board. Some
limitations with this approach:
— It is unclear exactly how the Board
decide whether these targets are sufficiently demanding or not.
— It is also unclear whether an RDA
has ever failed to meet its targets as agreed within its corporate
plan.
— If it has not, then this might suggest
that the targets are not demanding enough.
— If it has, it is unclear what corrective
action the Board has taken (or is entitled to take).
22. The RDAs are periodically subjected
to an assessment from the National Audit Office (NAO). Again,
the process undertaken by the NAO is slightly obscure. It appears
that its ambition was—through a systematic visit to every
RDA—to conduct a comparative analysis of the RDAs. In other
words, benchmarks were agreed relative to cumulative levels of
performance and then individual RDAs were evaluated on how they
measured up. This, in principle, is a very commendable approach,
but again there is a lack of clarity over exactly how the resultant
data were used and what actions were taken as a result.
23. We would endorse a future performance
management system that is both more robust and more innovative.
Headline economic indicators are too crude a measure; it is quite
possible for an RDA to perform very well and yet find that economic
activity rates have fallen in its region due to exogenous economic
factors. On this basis, a more inventive assessment methodology
needs to be developed that takes into consideration a broader
set of indicators and moderates these with recognition of the
prevailing economic climate. Quality of life is a potential indicator
and a potential example, but it creates questions as well as answers—a
sense of wellbeing is notoriously personal and the justification
for government policies that increase wellbeing are less convincing.
Regardless of what this set of measures looks like, it is important
that assessments are rigorously carried out and that the corrective
action that a Board will can take will be equally clearly understood.
19 September 2008
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