UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 89-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

BUSINESS & ENTERPRISE COMMITTEE

 

 

THE ROLE OF RDAS

 

 

Monday 15 December 2008

RT HON PAT McFADDEN MP, MS PHILIPPA LLOYD and MS BERNADETTE KELLY

Evidence heard in Public Questions 254 - 379

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Business & Enterprise Committee

on Monday 15 December 2008

Members present

Peter Luff, in the Chair

Mr Brian Binley

Miss Julie Kirkbride

Mr Mark Oaten

Mr Anthony Wright

________________

Witnesses: Rt Hon Pat McFadden MP, Minister of State for Employment Relations and Postal Affairs, Department for Business, Enterprise, & Regulatory Reform, Ms Philippa Lloyd, Director, Region, BERR, and Ms Bernadette Kelly, Planning Executive Director, Department for Communities and Local Government, gave evidence.

Q254 Chairman: Minister, welcome to this third and final session on the Committee's inquiry into the role and effectiveness of regional development agencies. I wonder if I could begin by asking you to introduce your team.

Mr McFadden: Certainly. You know me. I cover regional development agencies at BERR. On my left is Philippa Lloyd, who is the Director of Regions at BERR, and on my right Bernadette Kelly, who is the Director of Planning from the Department for Communities and Local Government. The reason we thought it worthwhile having someone from Communities and Local Government is that if we are talking about the Sub National Review we have someone in both departments who has been working together on this.

Q255 Chairman: I appreciate, Minister, that there is a lot of overlap; that is very helpful. I think tomorrow will be rather busier, I read in the papers, on another subject dear to the Committee's heart.

Mr McFadden: Every day is busy.

Q256 Chairman: Can I begin by asking the overarching question: why RDAs? There is a lot of evidence we have had from the business community saying they welcome the existence of something between central government and local government and they want that something to be business-led, but why RDAs? Why are they the best model to deliver the Government's objectives?

Mr McFadden: I think they do several important functions quite well. They are a business-led organisation, which makes them different from other parts of government. They are not official-led, they are not Civil Service-led; they are business-led. They are responsible for a lot of regeneration and investment that happens across local authority boundaries and very often if something is the responsibility of several people that can mean that it is difficult to make progress. They deliver a lot of business support through various programmes which have just been simplified, a lot of them being solutions for the business portfolio. They also respond to shocks, such as the floods which affected many parts of the country in the summer of 2007, where RDAs stepped in very quickly with loans to businesses and so on in a quicker way, I think, than would have been the case if the response had just been Whitehall-led. They perform a number of functions which, as you say, lie between that which government at the centre does and that which would normally be done by local authorities.

Q257 Chairman: Are you happy with the boundaries? I have always puzzled about where these boundaries came from. Essex County Council, which came before this Committee said, "Actually, we are a residue of civil defence planning from the Second World War; that is our origin", and Essex in particular drew our attention to the Thames Gateway project where you have South East area, the Eastern area and the London Development Agency all partners in a project that is very different. Essex also pointed out that their issues are very different from those of, for example, Anthony Wright's constituency which lies in the EDA area as well. Do you think the boundaries are always appropriate?

Mr McFadden: I think if you redrew them you would simply move whatever problem you had up the road. You could say the boundary of the East Midlands, for example, should be ten miles this way or ten miles that way and we could probably take up a lot of heat and energy arguing about that and no doubt very good arguments could be made. Am I saying they are a perfect representation of an identity that people feel? Not in every region, but would it really gain anything to start redrawing these boundaries? I am not sure about that either. They work in the sense that they are there and different parts of government are used to dealing with them, the local authorities are used to dealing with them, the boundaries are familiar. Whether they are perfect or not I do not know but I am not sure that changing them would lead to a better situation.

Q258 Chairman: Julie Kirkbride and I share the same regional development agency, which, by the way, did respond very well in the floods in my constituency. Its boundary is obviously between Worcestershire and Gloucestershire. Going down to Gloucestershire you see the hi-tech business of aviation aerospace in the Cheltenham/Gloucester area in particular. We have a technology corridor supposedly running down from Birmingham through Julie's constituency and through mine down to Maldon where Qinetiq are based. That corridor goes right on down to the South West. Do you feel sometimes these barriers get in the way of proper joined-up thinking across those regional boundaries and focus attention in the wrong direction? In other words, at the moment one is almost forced to look north towards, of course, the West Midlands Development Agency rather than looking south to the South West Agency.

Mr McFadden: I do not think so. I think you took evidence from some of the RDAs themselves and where there is a big strategically important sector such as aerospace the South West has a lot of aerospace industries. It has got a big presence in aerospace but, as you say, quite rightly, so too does the West Midlands. Does that inhibit their thinking in any way? I do not really feel it does so I am not sure that is a huge problem. Certainly in my career in doing this job boundaries have not been raised with me a great deal at all.

Q259 Mr Binley: You comment on regions where there is a connection, an identity. We do not have that in Northamptonshire. We are really not a part of a thing called the East Midlands and we are not sure if anybody in the East Midlands thinks they are a part of a thing called the East Midlands, whereas in Yorkshire there is a very tight identity and I guess in the central part of the West Midlands there is too. Do you have any assessment of the relationship between the effectiveness of a given region and that identity factor?

Mr McFadden: In terms of effectiveness you are right that this varies around the country and the common example of a strong identity probably would be in the North East. It does vary around the country in the sense of what the local people feel about belonging to or having an affinity with the region. In that RDA role of a voice in the region perhaps that is easier where there is a strong regional identity. If you are asking me do I feel that in those parts of the country where there is not such a clear identity, such as your own perhaps, the RDA cannot fulfil a good role in some of the things that I said at the start I thought RDAs did well, I do not think that is so. I think maybe in terms of being a recognised voice internally within the region that might vary a little around the country, but I do not think that lack of strong regional identity would stop an East Midlands Regional Development Agency from doing a good job.

Q260 Chairman: Just one last question from me before I move on, quite an important one. The PricewaterhouseCoopers report was due last month and now I think is not due until next month.

Mr McFadden: That is right.

Q261 Chairman: And yet the House of Lords is beginning consideration of the Local Democracy and Economic, Development and Construction Bill which makes changes to the role and functions of RDAs. It does not seem very satisfactory in terms of parliamentary scrutiny that an important piece of evidence about the roles of RDAs is going to be available after the Lords' Bill progress where the Bill adds responsibilities on RDAs.

Mr McFadden: We hope to have this out in the new year and you are right: we had hoped to do it this side of Christmas. It is a major exercise. There are some 300 separate studies being pulled together in this in an evaluation of a different kind from that which has been carried out on RDAs before. This is really looking at outcomes and added value and, despite the fact that you are right to say that it has been delayed until the New Year, when it comes out it will still be hopefully an important and valuable contribution to this debate.

Q262 Chairman: It is unsatisfactory though, is it not, that the House of Lords is beginning its consideration without knowing these conclusions.

Mr McFadden: If you say you are going to produce something in November or December and it does not come out until January, of course, you would rather that was not the case, but, as ever with these things, it is important to get the piece of work right too and that is what we are doing.

Q263 Chairman: My concern is that the Government has already established its position in relation to a whole range of issues that it has already published in the Bill and yet the House of Commons and the House of Lords do not know what PWC is going to say.

Mr McFadden: Where I would differ with you is in suggesting that this delay makes a fundamental difference to the Bill or that this PricewaterhouseCoopers research is the defining moment in the whole policy on a Bill which covers a whole number of areas, of which this is one. We will publish that as soon as we can in the New Year but I do not think it somehow hobbles our ability to legislate in the Bill that has been published.

Q264 Chairman: You can guarantee that the PricewaterhouseCoopers report will be available before the House of Commons gives consideration to the Bill?

Mr McFadden: When is the House of Commons giving its consideration?

Q265 Chairman: You tell me.

Mr McFadden: As I say, we hope to have it out in the New Year.

Q266 Chairman: Early in the New Year? That is about April or May.

Mr McFadden: Hopefully before that.

Q267 Chairman: January?

Mr McFadden: As I say, early in the New Year.

Q268 Chairman: We know what "spring" and "summer" and "early new year" mean to government.

Mr McFadden: These are, as we know, flexible parliamentary terms.

Q269 Chairman: You do understand the importance we attach to seeing this very important systematic evidence about the role and effectiveness of RDAs?

Mr McFadden: I understand the point you are making.

Chairman: I do not think we will be able to reach a final report until we have seen it. I accept your comments but I think we want to hold back on our final judgment until we have seen that report.

Miss Kirkbride: We have just been mentioning that there is always going to be some dissatisfaction about the boundaries that the RDAs cover, but it also seems to me that RDAs were started with the idea of being economic development authorities, or whatever that might be, but now they have just become anything the Government wants them to be. There is no boundary to what they do. For example, the Chairman said, which I would not necessarily agree with but he has had more flooding than I have, that the RDAs did very well when it came to flooding. Why do RDAs deal with flooding when Worcestershire County Council is perfectly capable of doing that and they are actually in charge of the roads and the sewers?

Q270 Chairman: They were dealing with the economic consequences of the flooding, to be precise.

Mr McFadden: When I say they "did flooding", what I said was that they responded quickly in a business sense. The RDAs were not helping people whose homes had been flooded out. They were helping businesses which had perhaps lost stock or had some damage with a lot of business short-term loans. I will give you another example - and I hope we do not all retreat to West Midlands examples today because the three of us represent West Midlands constituencies - that really affected the region's tourism infrastructure, which was the destruction of the Severn Valley Railway. The RDA was able to work with the Severn Valley Railway to get that back up and running as quickly as possible. There was a lot of public support for that too. I met with businesses there while the reconstruction work was happening and the RDA was able to an important job in marketing the region by saying, "Come and visit. We are not closed down because of the floods. The region's tourism infrastructure is still there despite the fact that the railways are not running". That is something that no single local authority would have been able to do, so I think there was a role there, again, between central government and local government which the RDA was able to do quite effectively.

Q271 Miss Kirkbride: But where are the boundaries as to what the RDAs should do? What are the boundaries? Why has this become an alternative government?

Mr McFadden: Because an alternative government, if you like, or a regional government might be delivering health services, it might be delivering welfare benefits, all sorts of things.

Q272 Miss Kirkbride: Can you put in your own words what the boundaries are?

Mr McFadden: It is economic and business focus.

Q273 Miss Kirkbride: Then what about transport?

Mr McFadden: Transport is very important to the economy.

Q274 Miss Kirkbride: So they are do transport as well? It is not just economic and business; it is transport.

Mr McFadden: We are going to talk about regional strategies later on, I believe. I think any regional strategy which was focused on economic and business issues which did not take transport into account would be quite quickly criticised for not doing so.

Q275 Miss Kirkbride: And therefore what role should it have in transport?

Mr McFadden: I believe that the RDA in the development of its strategy, along with the local authority partners under the SNR, should be able to make long term recommendations on transport, working with the central government departments. It is an important part of the strategy.

Q276 Miss Kirkbride: Recommendations?

Mr McFadden: Yes.

Q277 Miss Kirkbride: What about money?

Mr McFadden: They would get money for that if central government bought into it, if they were funding this particular transport budget. It would depend on whether it was a major one funded by central government or a local one which would be funded by local authorities.

Q278 Miss Kirkbride: But they also manage to do that as well, do they not? They manage to put money into transport schemes.

Mr McFadden: Some of them have put money into transport schemes. For example, near my own constituency a few miles away we have the i54 development which is a major new business opportunity on the outskirts of Wolverhampton. The RDA were able to put some money into making sure there was a proper spur from there to the motorway. That is an important added value role, precisely on that boundary between transport and business.

Q279 Miss Kirkbride: The Government has quite a lot of money to put into transport, does it not? It has an awful lot of money to put into transport when it wants to, so it is doing transport as well, but the problem with that, Minister, is that you have a situation - and I do speak with a constituency interest here where we have a station in Bromsgrove, and in the old days ----- you may smile but that is very serious to the people who live in the West Midlands between Birmingham and Worcester.

Mr McFadden: It is very serious.

Q280 Miss Kirkbride: The fact of the matter is that in the old days when we had the Department of Transport, along with whatever Network Rail might have been called or might be called in the future, deciding where important infrastructure goes, and now you have a whole series of organisations under your bureaucratisation of our country, one of which is Advantage West Midlands or whatever the RDA is. Instead of having a linear structure to what our transport infrastructure is there is a whole series of meetings that we have to hold to try to persuade various bodies to do this because it is not defined what these things do because, as you have just pointed out to the Committee, economic and business development can include almost anything.

Mr McFadden: You could argue the other way round. If this station is important, and I believe it would be important to your constituents, -----

Q281 Chairman: And to mine.

Mr McFadden: ----- and to yours, it may be the case that having a regional organisation which is closer to the issue than simply the Department for Transport here in London might be of benefit in the end. You could make an argument for that. If your view is basically, "We do not like this regional thing and we would rather just deal with the Department for Transport", I am not sure that local communities seeking transport improvements or, particularly with my concern here, businesses seeking, for example, around the i54 to make sure there are good transport links in and out of that important economic development, would always be happy having nothing between the local authority (and very often it might cross the boundaries of local authorities) and central government. We go back to where we started, which is the need for something between the central and the local to work on some of these things. I do not know whether the station example is one that is inhibited by having an RDA or a regional structure. It may in the end be something that is helped by it.

Q282 Miss Kirkbride: You say that but the fact is that it gets complicated because this is the most important scheme in the West Midlands but it is not going to go ahead unless it gets money from your regional assembly, or whatever they are now called, and from AWM, and the fact is that they now have essentially a veto on all of this.

Mr McFadden: Why do they have a veto?

Q283 Miss Kirkbride: Because they say they are not putting forward the money because there is not enough money in the pot. The Government gives the money to various organisations which then rate it at their discretion according to the amorphous criteria that you have just set out, and if they do not fit those criteria - your link road might have had more jobs in it but they might consider that my community and transport are not jobs; therefore it does not fit their criteria - they do not get it; yet they have the money from central government which has to be apportioned to certain transport schemes in the West Midlands and if that station does not get it then it is not going to happen because there is not going to be enough money in the pot because they have to shake the tin at these organisations to get it.

Mr McFadden: Why would the Department for Transport not wish to fund your station if it was an important part of the railway network?

Q284 Miss Kirkbride: Because they have already given money to Network Rail and that is Network Rail's apportionment.

Mr McFadden: That is not the RDA's fault.

Q285 Miss Kirkbride: It is the RDA's fault if there is an expectation that they put money into it.

Mr McFadden: I did not say it was not their problem. I said it was not their fault.

Q286 Miss Kirkbride: But the fundamental point is that there is no clear boundary as to who is doing what, and so what you really have is a whole series of -----

Mr McFadden: Why are you blaming the RDA for something that the Department for Transport, for whatever reason, may have decided not to fund?

Miss Kirkbride: Because the situation that we now have under the Labour Government is one where a whole series of organisations has to agree to fund something before it can go ahead as opposed to a linear structure whereby transport infrastructure is done by one fundamental body.

Q287 Chairman: I have the feeling we are not going to agree on that. I think we have seen both sides of the argument. The other point that Julie reminded me of and you do hear quite a lot of people saying, is that the RDAs are there. It is a little like Christmas trees. You can see what they are for. People hang baubles on them, "Oh, there is a job. It is a regional job. We can give it the RDA", and privately some of the RDA chairmen and chief executives have expressed this tendency. We have had a number of examples in evidence sessions. One is on foot and mouth disease when they started clearing up carcases. It is a sort of political qualifier that is handed to them. Do you think you seem to be quite tightly focused on what the RDAs actually do or are they separate?

Mr McFadden: I think their flexibility is a strength. There have been a few transport projects, and there is another one to one of the docks around Hull which was partly funded by the RDA. It is the kind of thing that has been delayed for some time. It is not a huge amount of money normally. It is not a huge national project that would always catch the attention of national government but it might be that several million pounds can unlock something that has real local economic development potential. Having that flexibility I think can be a strength. They are funded by a single pot. It is not directed that every penny has to be dictated from the centre and that is precisely the sort of flexibility that they were designed to have. I can see that you can say, "I just want a completely tight job description here. I never want them to veer from it", but economic and local decision-making is not always like that. Things do come up that require a bit of flexibility and I think giving the RDA the flexibility to respond to that is a good thing.

Chairman: I should just say before I hand over to Brian Binley that I am the Vice President of the Severn Valley Railway, and their Santa Specials are well worth patronising.

Q288 Mr Binley: I worked on it for a time at Bewdley. RDAs devised their response to government on the economic slowdown, as you know, and I just wonder what support government gave to help them do that effectively.

Mr McFadden: We worked with them on the documents that they produced on what their response would be to the economic slowdown. We have also asked them to be present on the Regional Economic Council which had its first meeting last month, chaired by our Secretary of State. It was a very effective meeting which brought together the chairs of the RDAs, the local authorities, business and some of the trades unions, and they were able to give a very good report on the different ways in which the slowdown is impacting in different regions because it will not be uniform throughout the country. We have worked with them on that and there have been some specific things as well. For example, the Pre-Budget Report announced that RDAs would be able to set up what we call transition loan funds. This was based on the experience of the West Midlands following the collapse of MG Rover where a transition loan fund was set up specifically with a view to the supply chain where there were short-term problems in some of the Rover suppliers and by giving them loan funding, which had to be paid back, perhaps jobs could be preserved there in otherwise viable businesses which had short-term problems because of the collapse of Rover. What has happened this time is that the West Midlands has come back and said, "Look: we have been through that experience. We know how this works. We were able to run it quite successfully last time. We would like to do that again", and so the PBR announced that RDAs as a whole, not just the West Midlands, would be able to do that. It is not a huge amount of money, I think it is going to be about £25 million throughout the RDAs, but it is several million in each one, which may preserve jobs that would otherwise go because of short-term problems in access to finance and we know that access to finance is a huge issue for business at the moment. There have been a number of ways in which we have worked with the RDAs in response to the economic slowdown and that will continue.

Q289 Mr Binley: Can I refer you to the total RDA allocation by region budget which is set until 2010/2011? There is a massive diversity of spend per head of population, as you well know, ranging from some £19 per head of population in south east England way up to £97 in the North East. The East Midlands does not do very well, actually, Minister, but that is by the bye. Can I ask whether that structure is not too structured to deal with the present economic downturn, recognising, as you rightly say, that the impact will not be uniform throughout the country, and the truth of the matter is that it could hit many of those areas which traditionally have been seen as higher employment areas rather more disastrously than we might have thought? Do you think it is time to introduce much more flexibility into that sort of budgeting?

Mr McFadden: The budgets are historically based on a number of factors on what business needs and so on in different regions. These organisations are there to promote economic development. Economic development has historically been uneven in the country and so the budgets per head reflect that. In terms of your question about how that relates to the here and now and the economic downturn, I think it is important to remember that, while we are here today to talk about RDAs and their role in this, they are not the only part of government response to this. There have been huge interventions in the banking market and the liquidity for businesses and so on which are far bigger than any single RDA budget, and that will have an effect on the economy as a whole. I think it is important when looking at RDA budgets not to think that this is the Government's response and nothing else to the economic downturn. They are a weapon in the Government's response to the economic downturn. They are part of the armoury but only part.

Q290 Mr Binley: But, with respect, while £25 million spread across the RDAs might be important in saving jobs, you cannot ask the RDAs to give their response to what is a unique situation, certainly in respect of the last 20 years or so, on the basis that they are really not going to be very important in the process

Mr McFadden: I am not saying that.

Q291 Mr Binley: That argument does not really stand, does it?

Mr McFadden: I think you are slightly putting words into my mouth. I did not say they were not important. They are important. They are an important part of the armoury. They are not the whole armoury is what I said, and I think the downturn will affect different regions in different ways. The logic of your argument would be that we should maybe give the budget for One North East to a different RDA.

Q292 Mr Binley: No, that is not an argument. I am asking for you to be much more flexible than a three-year plan allows you to be in this respect.

Mr McFadden: The three-year plan is an advance, as we know, on what used to happen, which were annual budgets in public expenditure.

Q293 Mr Binley: It might not be in this respect.

Mr McFadden: On the whole RDA funding is flexible because it is a single pot. It enables them to have flexibility in response to shocks. I mentioned the transition loan funds. They are not the only thing RDAs are doing. Leave aside the national government steps that I talked about. For example, some of them have gap funding up for developments where they judge that unless they do that there will be a danger of the developer walking away and leaving nothing happening. They probably cannot fill that gap entirely because in a number of developments at the moment they have become very cautious, they are being risk-averse and so on, but in some circumstances that can continue with developments going ahead that would not otherwise be the case, and some of them have used gap funding to do that. They have got flexibility here and it is an important weapon.

Mr Binley: I think you have got the point and I think you will be keeping an eye on it and I would be grateful if you would, and so would the Committee.

Q294 Mr Oaten: I would like a bit more clarity on this point. You said that the funding rationale for the various regional development agencies had been based in part at least on what the economic need was and how hard in many ways the RDA would have to work in that region economically. However, I really do come back to develop Brian's point that it does seem that the rule book is ripped up a little bit at the moment and we might find that SEDA, for example, which has overseen one of the powerhouses of Europe as a region, has not actually needed a great deal of support potentially because the economy has been doing fine, but surely, Minister, there must be flexibility for the Chief Executive of SEDA to come to you and say, "It has all changed completely in this region. We really are in danger of losing a great deal. We need additional support. The way we based our grants has changed totally. Help." In those circumstances what can you do to get some additional resources in and, yes, maybe take from another region which you know is surviving the economic downturn a little bit better than it thought it might?

Mr McFadden: That has not happened. No region has done that. I suppose I would respond to that in a wider way. At BERR at the moment, and indeed I am sure at the Treasury too, there is quite a long queue of people saying, "We need help because of the economic circumstances". We have seen some of this in the news. It is not all regionally based. It may be sectorally based; it may be based on a particular region, a particular company. The Government has to take very careful judgments as to what it can help, who it can help, in the economic circumstances what it would be right to do. We made a big move on the banks. We now have what has happened with the credit crunch feeding into the wider area in a very real way. It has not happened in the way that you have outlined but I think that probably feeds into a more general point about how does the Government respond to requests for help during the economic downturn, be that from regions, sectors or particular companies. Not all of this will come through RDAs.

Q295 Mr Oaten: I think the question was a little bit more specific than that. It was really saying that if you have a structure for setting the budgets which has been based on some assessment of the economic need for the area you have decided that is how you are going to allocate money. You need to just have a quick check-in to make sure that that assessment is not totally wrong at the moment.

Mr McFadden: I am sure every RDA out there, if we came along and said to them, "Because of the downturn we would like to give you more money", would welcome that, be that SEDA or anyone else.

Q296 Mr Oaten: I am not asking about that. Minister, I am just saying will you not at least look at the assessment you use to see if it is still relevant for today's circumstances?

Mr McFadden: Across the piste, if we decide there are things that we need to do to help the economy through the downturn, we will do that. We have done that so far. Whether I am going to go back on the formulas that we have used previously to fund RDAs I am not sure, but obviously, when it is all hands to the pumps, yes, you need to be flexible in your decision-making, if that is what you are asking me.

Q297 Mr Binley: Can I continue that because here we are, and we recognise that the central role for the RDAs is to provide public funded support to businesses. That is their very central role, as you have said yourself, Minister. Given that, and given the fact that you yourself have added responsibilities to the job of the RDAs, how can you do that, have a very static, three-year budget which involves cuts to that budget and expect them to continue in a relevant role, fulfilling their central responsibility, in what is the worst downturn we have seen, certainly for 20 years; others would argue even longer?

Mr McFadden: I think you have answered your own question in the question that you and Mr Oaten have put to me, which is, they are funded by a single pot. They have got flexibility within that. Some of what we have asked them to do has been to take money from budget in two years' time and spend some of that now, and that is what has happened, so in responding to the new economic situation of course they having to look at their plans over the next few years, "Do we need to re-prioritise this? Do we need to re-jig this? Other things demand our money now", That is exactly what they are doing. They have got the flexibility to do that.

Q298 Mr Binley: I would not ask you to go off the Chancellor of the Exchequer's belief that we will see an upturn in the third quarter of next year, although most people in this country would disagree with him and you, but, given that the difficulties facing business are likely to stretch to 2009, and I think way into 2010, and that the RDAs are taking those additional responsibilities in following the SNR particularly, can I ask whether you think it is fair to divert funding from them to establish the HomeBuy Direct project?

Mr McFadden: The Government has to take difficult spending decisions and the view that we reached was that, given what was going on in the housing situation, it was important to announce a housing package in September. There is some more detail, I think, being announced about that today from CLG, and the Government reached a judgment that that was the right call on that money for the moment rather than the projects it was allocated to in a couple of years' time. These decisions are not easy. There is never unlimited money, but that is the decision we took.

Q299 Mr Binley: So you really are in truth putting a quart into a pint pot where it comes to RDAs and that is bound to affect them, is it not?

Mr McFadden: This amounted to about 5% of the budget over three years. I know that such decisions are never easy for organisations but, as I say, we felt that that was the right use of the money. That was the Government decision and I believe that RDAs are still capable of doing a very good job in helping business and helping their local areas through the downturn. Remember: they will be spending some £6 billion collectively over the three-year period. It is a substantial amount of money. It can make a substantial difference in a whole number of areas, be it regeneration, business support, all the things that I have mentioned. I am not saying that was easy for them but I believe that they can still play a very important role during the downturn.

Q300 Miss Kirkbride: Given that you have just said in your remarks that the hugest problem facing business is securing finance and credit, it seems to me that neither at the Government level or the RDAs at their level are remotely responding to that problem. £25 million is peanuts in comparison to the problem, and the administrative cost of each RDA doing this must make it worthwhile to the companies that are getting it, but there is a huge cost in terms of the administrative input into it. Why not do more or do it better? Why do it this way?

Mr McFadden: Again, the £25 million, of course, is not all the Government is doing on the credit crunch. We announced other measures in the PBR, such as a £1 billion addition to loan finance -----

Q301 Miss Kirkbride: Can you imagine how much that is in the global budget for credit?

Mr McFadden: ----- and that is on top of the Small Firms Loan Guarantee scheme which had its potential budget increased by 20% last year. We also announced a £1 billion package for export credit support in the PBR and, of course, the measures that we have taken with the banks have kept the primary source of finance on its feet in a way that may not otherwise have been the case, so again the transition funds are one element of a number of steps that we have taken. In terms of your point about admin costs, not every single region is going to set this up from scratch. For example, I believe the East Midlands is going to use the West Midlands structure, because they have done this before, to help set up and administer this.

Q302 Miss Kirkbride: But there will be an administrative cost because some regions will set up a new structure.

Mr McFadden: Some will set up new structures.

Q303 Miss Kirkbride: Can you supply the Committee with those costs? Do you know how much of the £25 million has been spent on administering this scheme that might be available in other forms?

Mr McFadden: No, I do not, but if we can give you more information on the admin costs, on the Transition Loan Fund, we will happily do so.

Q304 Chairman: There is a tendency for RDAs, because they have some responsibilities, to be seen to be doing something to address any problem, so a series of small issues builds up which do cost quite a lot, Minister, with government encouragement, whereas perhaps some simpler things would be more effective rather than these heavy pot sums of money that probably rather confuse businesses as well.

Mr McFadden: I believe that the experience in the past of the Transition Loan Fund was good value for several million pounds spent in the wake of MG Rover. They lent that to companies employing in the supply chain, I think, about 1,400 in total and estimated that they were able to save over 1,000 of those 1,400 jobs. For loan finance, the vast majority of which was paid back because the companies survived, that does not seem to me to be a bad bargain in terms of the effectiveness of the initiative, so I do not take the view that initiatives have to be big in order to be effective. Sometimes - and this is raised with me quite a lot by businesses at the moment - it is not a huge amount of finance that they need. For example, the Transition Loan Fund is only, I think I am right in saying, for loans up to £250,000. sometimes for a business a loan of that order or less can make a difference between surviving and not surviving, but it is still an intervention worth making if the business is otherwise viable and it is just going through a short-term problem. There is no point in lending to businesses which are not going to survive anyway, but if it is something that is viable and for whatever reason they need that short-term access to credit, that is worth doing, so I am not sure I would accept that because it is a relatively small amount of money it is not worth doing.

Q305 Chairman: I am just checking one fact on HomeBuy Direct hot-slicing here before I hand over to Tony Wright. The top slice is 5% over three years. I understand that it is 1% next year and then 10% in 2010/2011, so there is quite a lot of forward weighting. That 10% in 2010 is quite a big reduction. 5% sounds all right but it is weighted quite heavily.

Mr McFadden: The decision essentially was to take money mostly earmarked for spending in 2010/2011 and bring it forward to spend this year.

Q306 Chairman: So they are asking to take a 10% hit the year after next?

Mr McFadden: Perhaps Bernadette might be able to give you the detail on this.

Q307 Chairman: Is that factually right? I am not making an accusation. I am just trying to establish a fact.

Mr McFadden: I think most of the money does come from 2010, the money allocated in 2010/2011.

Q308 Mr Wright: Before I turn to my question on the economic assessment duty, I just want to plug my area in terms of the transport factors.

Mr McFadden: Is it a railway station?

Q309 Mr Wright: No, it is not a railway station; it is much bigger than that. It is a new port where we got the development agency to help on the infrastructure for the new port which will make it the success it is going to be in the future, so it does actually work in terms of development agencies when they look at the transport. Although it might not work in some areas for railway stations, it certainly works in releasing £30 million or £40 million in investment in a new port in my constituency. What I want to turn to is the decision that sparked the consultation to institute primary legislation to place a duty on all local authorities to carry out an assessment of the economic conditions in their area. Why have you decided to look at legislation in this?

Mr McFadden: What we are trying to do through the Sub National Review is to get local authorities and RDAs working more closely together on economic development. Some local authorities do that well at the moment but it is patchy around the country, and so the idea behind the economic assessment duty is to say to local authorities, "You have a lot to do". Local authorities are delivering services, they are running libraries, they are doing all the things that local authorities do. With this we want, as part of the plan to have local authorities and RDAs working together on economic development, to ask local authorities to assess the economic needs of the area because not every authority does that. That is the thinking behind that. If you asked business, which I assume the Committee either will do or has done already, "What is your experience of local authorities' capacities in this area?", they would probably broadly endorse what I have said, which is good in some places but a lot less good in others. That is the idea behind the duty.

Q310 Mr Wright: Was it not perceived that perhaps, rather than giving them legislation, they should give an instruction that this should happen as a national process?

Mr McFadden: It would be good if this always happened without legislation but up until now it has not.

Q311 Mr Wright: Could you give us some more detail about how the economic assessment is going to feed into the regional strategy of each development agency?

Mr McFadden: The regional strategy will be put together by the leaders board and the RDA together, and so the economic assessment will, I think, inform in a very valuable and important way the work of the leaders board in this.

Q312 Mr Wright: So in terms of the regional strategy, the economic assessment, for instance, in the eastern region, we have a very wealthy southern part of the region and a much poorer northern part with a lot of deprivation and a lot of regeneration required, so how is that going to feed into the strategy of that particular region as a one-off strategy?

Mr McFadden: Because the local authorities in these different parts of the region will now have a duty to assess the economic needs of their area. They, through the leaders board, which will represent local authorities on this, will be able to say, "This is our view of the needs in our area", and they are their partners in drawing up the single strategy which involves both the planning element and the economic element in a way that has not happened before. I think you can see quite a clear line there between the assessment duty and the formation of the single strategy. In the past what has happened is that you have had a spatial strategy and an economic strategy which have not been properly aligned. They have been drawn up independently and they have not been brought together. The prize from the regional point of view of the SNR is bringing all these things together in one strategy. The mechanism is for the local authorities and the RDAs to work together to do it.

Q313 Mr Wright: What support is going to be given to local authorities so that they can carry their duty out?

Mr McFadden: My friends at CLG have a philosophy that if they give a new duty to local authorities they should be paid for it, so my understanding is that there is funding available from CLG to carry out this duty.

Q314 Mr Wright: There has been mention of the disparity between certain of the regions, and my region, the eastern region, is one of the lowest per head in terms of the funding. Would the funding be on a par with all other areas or is it going to be according to the -----

Mr McFadden: I think I will bring Bernadette in in case I divide up the CLG budget inaccurately.

Ms Kelly: The philosophy here is that where we place a new duty on local authorities which incurs some burden or administrative cost then we fund it. Our assessment is that the duty in relation to the economic assessment duty will impose a new burden. Our assessment is in the region of £7 million to £8 million and so we would obviously need to find that sort of money. I think it will probably go through area based funding to local authorities to support that. It is modest in the scale of things. Additionally, the money which we currently use to fund regional planning and regional assemblies will, under the new arrangements, be directed towards the arrangements which RDAs and leaders boards put together to develop their single regional strategy.

Q315 Miss Kirkbride: Can we turn back to economic prosperity boards?

Mr McFadden: We certainly can.

Q316 Chairman: They were economic investment boards, were they not?

Mr McFadden: They were. It is really about governance for cross-local authority working, again, on issues like transport skills and so on. The best way to think about this is to think about some of the areas. If you take an area like Manchester where you have got Manchester City Council itself which has relatively tight boundaries around the city of Manchester but there are a lot of urban authorities around there, this is voluntary, people do not have to do it, but if they choose to come together and they want to set up a body to co-operate across some of these issues, that is a mechanism for doing so.

Q317 Miss Kirkbride: If they do that why can they not do that anyway, if they want to?

Mr McFadden: Because it will give a proper legal status, if you like, to that issue of cross-boundary working. They could come together in a meeting at the moment, they could all have a meeting about it, but somebody might not take part, somebody might take part for a short time and then walk away. This would give a governance, a legal status, to doing that and so the Bill will be permissive in the sense that it will allow such bodies to be set up.

Q318 Miss Kirkbride: It is local authority driven, so it is local authorities clubbing together. If they were to be created by one set of local authorities at any one particular time, would that transfer any powers to the new body that would then be lost by the individual local authority?

Mr McFadden: I do not think it is a zero sum gain. The local authorities taking part in such a thing could say, "We have got a common skills problem across this area of five or six local authorities", or whatever it is. "Let us set something up that seeks to work together on that". As I say, it is permissive.

Q319 Miss Kirkbride: But what I am trying to get at is, at any one time, if local authorities decide to do this, you are saying it will be good that they do it this way with local government issues. What I am asking is, at that point does the individual local authority lose powers that are then invested in the new area that can not be retrieved because this new entity has been created? The complexity of local councils might well change and a new local council might come along and not particularly like what the previous council got itself involved in.

Mr McFadden: So your question is, if one of these things was set up and council A decided it did not like the look of it much could it walk away?

Q320 Miss Kirkbride: Yes.

Mr McFadden: Bernadette, does the Bill allow that?

Ms Kelly: I think it really is about an opting-in mechanism and it does create, once you have got -----

Q321 Miss Kirkbride: No, can they walk away?

Ms Kelly: I think the point of having a formal mechanism is that it is slightly easier. It is obviously more difficult than a voluntary arrangement to walk away.

Q322 Miss Kirkbride: So no?

Ms Kelly: I will need to check whether there is a clause in the Bill which allows them to opt out in those circumstances. I do not know the answer.

Q323 Miss Kirkbride: I think the lady behind wants to tell you what the answer is.

Ms Kelly: There is a mechanism.

Q324 Miss Kirkbride: How comprehensive is that mechanism?

Ms Kelly: It is intended to provide the opt-out that you describe. Obviously, our aim would be to ensure that that operates in a non-bureaucratic way.

Q325 Miss Kirkbride: Subject to ministerial agreement or subject to the local voters wanting it to be opted out?

Ms Kelly: If a local authority chooses not to be part of it it may opt out. That would be for the local authority to determine though. This is for local authorities to decide whether they want to create this in the first place. It is not a Secretary of State-determined entity, so clearly it is for local authorities to opt out as well as to opt in.

Q326 Miss Kirkbride: I can see that, but local authorities change. We have local elections where local authorities sometimes change. When they do they might not like what the other local authority got them into and I want to know whether they can get out of it if they want to.

Ms Kelly: There is a clause in the Bill that will allow them to opt out.

Q327 Miss Kirkbride: Of their own volition, not that the Secretary of State agrees to an opt-out?

Ms Kelly: That is what I am told.

Q328 Chairman: Just for Julie Kirkbride's information -----

Ms Kelly: Ah - if the Secretary of State approves the local authority leaving; sorry.

Miss Kirkbride: Well, there we are; there we have it. For the comfort zone, if they do not want to, if the Secretary of State does not agree -----

Chairman: It says here; this is the final document, that it should be noted, however, that, once approval is established, membership changes, including authorities wanting to opt out or new local authorities wanting to join, will only be possible with ministerial agreement, paragraph 2.17.

Q329 Miss Kirkbride: When this new entity is created what powers will it have that will then be put into this new authority, the economic prosperity boards, that will then be lost by the existing local authorities for their own mandate?

Mr McFadden: I do not think it is powers that are lost. Why are they lost if they decide to co-operate?

Q330 Miss Kirkbride: Yes, if they decide to co-operate, okay, and I agree that some will want to co-operate, but the minute they co-operate what is it that that new body decides across these new authorities that will then not be decided by the local authorities that are in there? What if you then have a collective decision as opposed to individual local authorities decisions? What is their power to decide? Is it planning? What is it that they get?

Mr McFadden: That will depend on the issues on which they are co-operating.

Q331 Miss Kirkbride: Which are, Minister?

Ms Kelly: Planning is a choice. They could, for example, choose to collaborate in producing a plan which covered the area which the local authorities were a part of. Rather than all individually producing local authority plans they could work together to produce a plan.

Q332 Miss Kirkbride: So planning.

Ms Kelly: Planning is an area where they could choose to work together.

Q333 Miss Kirkbride: They could choose to do planning and once having got together to choose to do planning they could never not do planning other than collectively unless the Secretary of State decides they can?

Ms Kelly: Then there is a mechanism for local authorities to opt out and in those circumstances the Minister will need to decide.

Q334 Miss Kirkbride: Okay, so they can choose to do planning if they all want to get together. What else can they choose to do that is a local authority power at the moment?

Ms Kelly: The whole range of local authority duties. They can decide where they think it would be sensible for them to collaborate and direct those duties in a collective way rather than taking individual decisions.

Miss Kirkbride: But in doing this you must have an idea what it is that might be valuable for them to do and I am just trying to tease out of you what it is that you think it is valuable that they might want to do -----

Q335 Mr Oaten: Or what they are not allowed to do, is perhaps another way of getting at it.

Ms Kelly: There might be areas where they are supporting regeneration, where they are thinking about infrastructure at a level which crosses local authority boundaries. These are areas where you would expect local authorities to see some benefit in collaborating and taking decisions in a more joint way.

Q336 Miss Kirkbride: Could they take them on schools, for example, or is that not one of the things that they would put in?

Ms Kelly: I do not know whether they could not. It is less obvious in relation to schools that that is something that you need a sub-regional level of collaboration on. It is the same structure for transport. These things obviously have a dimension that exceeds local authority boundaries. Schools are probably more of a local matter. It is really about trying to find the right level to take decisions at. Some things will best be taken by local authorities for their own areas and that is how they will continue to do it, but where there is a benefit in collective decision-making then these structures will allow them to do that in a more structured way.

Miss Kirkbride: So transport and planning are the obvious ones, and economic regeneration perhaps. Okay.

Q337 Mr Oaten: I can see some merit in all of this but I am a little bit confused about the economic assessment duty. The cost of that is going to be around £7 million. We are also going to have these economic prosperity boards. Is there any direct cost associated with that and, if so, what is it and who is going to provide that? I guess part of me is just thinking, "Hang on a minute. There are a lot of small businesses out there really struggling. Are they going to be saying to themselves, 'They are setting up these two new things. They are going to cost this amount of money and all they are really going to be doing is sitting doing assessments and thinking about the problem'." Is there a slight sense in which business might thing, "Come on. We actually need some direct money here"?

Mr McFadden: I think there is a difference between the two things that you say. In response to Mr Wright I said that the economic assessment was a duty, and, as I said, where the Government puts a new duty it should give some funding for it. The economic prosperity boards are permissive and local authorities do not have to set these up if they do not want to, so they are bit different in terms of how they are viewed in that sense.

Mr Oaten: So they are funding themselves presumably out of business rates and council tax anyway.

Q338 Chairman: In fact, I think they are supposed not to impose any net additional cost on the councils. That is the intention.

Ms Kelly: You would expect theses to be set up where there was an efficiency improvement or something like that, but the intention is that they would not impose new costs on local taxpayers and councils themselves who are choosing to form a board but need to work out how to cover costs doing that.

Q339 Chairman: Before I hand on to Brian Binley, can I just say to you that we can devise these endlessly wonderful, beautiful structures which glisten like diamonds in the sun from Whitehall, but on the ground confuse all its foot soldiers like me. We are going to have local authorities, local authority leaders boards, local area agreements, multi-area agreements, economic prosperity boards, regional development agencies, the regional spatial strategy, of course, the core strategies. I could go on and on. There seems to be a bewildering array of organisations out there and structures and agreements which make it so difficult for all us mortals to understand what on earth is happening to them.

Mr McFadden: I do not know how you could say that architecture gave you that impression.

Q340 Chairman: I think there was a bit of irony in your answer just then, Minister.

Mr McFadden: If you want to put together a list like that I think you always can. People can say, "We have got parish councils, district councils, county councils", and so on. You can always do that.

Q341 Chairman: But we do know what they do. We are used to them.

Mr McFadden: Well, that does not necessarily always make it right, just because you are used to them. I think you can always put together a list like that. It goes back to what you said to me about the boundaries. Some of this is permissive but what is the overall idea behind this? The overall idea behind this is to have local authorities and regional development agencies working together better than they previously have, particularly on the economic development front. One of the advantages of having a single strategy rather than the separate strategies that we have had in the past is that we have had the RDA with its job doing the business in economic development, good, that is fine, I think they do that quite well, but it has not been aligned with what the local authorities have been doing through the planning framework and so on which can have a major economic impact. There is a potential economic gain here in the overall aim of this. While, yes, you can list every body involved in this and say that all looks over-complex, in the end there is quite a simple idea behind this, which is to get the different bodies, who are not the national government but at a smaller level than the national government in a particular region, working together for the economic good of that region. It is quite a simple idea in the end and we are asking them to work together to produce a single strategy going forward 10-15 years which takes into account the main things that influence this in order to advance that. Yes, there is a list but it is a simple idea.

Q342 Chairman: It seems to me if the EPBs did their job well they could replace the RDAs.

Mr McFadden: That is another thing which slightly clouds this debate sometimes, that everybody thinks they lose if something else is set up. I will give you a more common example, which is this city region debate.

Q343 Chairman: We are worried about that in Worcestershire.

Mr McFadden: If cities are advancing does that mean that regions are losing? I think that is an odd way to think about it. Most of our major regions have got one or two cities that are key drivers of growth. I tend to think that the whole region benefits when a city drives forward, including many places round about the city. I do not see this debate as a zero sum game at all where every time somebody is given a responsibility somebody else loses, or every time a new body is set up it means everybody else loses. What we are trying to do here is get an architecture together that reaches that central prize I talked about, which is people at the sub-national level working to ---

Q344 Chairman: I do not want to labour the point because you made the point several times, but what I am talking here about is helping understand what on earth is going on, how decisions are being taken in the organisations that affect their lives economically. One of the complaints we often hear about RDAs is they spend their whole lives co-ordinating all the other bodies out there to have a say in the issue. There is an industry of co-ordination now and it seems to me that another mechanism is being added. I had forgotten about city regions, I am grateful to you for adding it to the list for me. It is another thing to liaise with and more meetings to be held and highly paid civil servants talking to each other about very desirable outcomes.

Mr McFadden: In the end I think this is perhaps simpler than you suggest. This is about local authorities and the RDAs working together.

Q345 Chairman: A minister can veto a local authority walking away from that, I do not quite understand that, but I am sure it is an issue I am sure we will get a note about. Can I just one other factual question about EPBs. Can they cross-regional boundaries? The EPB I would like set up in Worcestershire is Herefordshire, Worcestershire and Gloucestershire because we have three counties, the Three Counties Choir Festival, the Three Counties Agricultural Society. Can they cross regional boundaries?

Mr McFadden: I do not see why not.

Chairman: That would be helpful. That would be good news. Thank you for that.

Q346 Mr Binley: I am beginning to see a nightmare on a big scale here, particularly in the relationship and working practices between the RDAs and LALBs. We have an Urban Development Corporation in my part of Northamptonshire, they are supposed to work with three local authorities and it has taken them two and a half years to produce a core strategy and it still is not out yet. This is the sort of problem I think you are creating. I just wonder how you see them working together. I wonder why you do not see the opportunity for division and dissent in this particular operation. I do not know to what extent this new arrangement will replicate regional assemblies quite frankly. You almost have the same thing back again in a different form and in a different name. I am, quite frankly, really very concerned about the future of my county and my so-called region on the basis of this particular relationship.

Mr McFadden: In the end, whatever structure you have, if people do not want to work together or take part in it you cannot force these things. This is about a structure which we believe can add value. We have been round the list of bodies, ho is taking part and so on. In any structure that deals with localities and regions, and the national government in the end, there are going to be a number of bodies involved. The success of it will be about the willingness of those taking part to work together for the benefit of their areas. I am a bit more optimistic than you ---

Q347 Mr Binley: Clearly!

Mr McFadden: --- that people do want to do that. There have been a number of examples of good cross-local authority working in the country. What we are trying to do through the sub-national review is to give a sharper focus to local authority emphasis on economic development and to bring together spatial issues with economic development issues in a way that has not been happening up until now. You took evidence from some RDA chairs at one of your previous meetings and they were telling you about the kind of clashes you can get where something might make sense economically and the planners say, "No, we have got a strategy that says you cannot do that". This should enable those issues to be talked through properly and sorted out.

Q348 Mr Binley: You are a great optimist and I wish you well with it, but I am fearful. I think your background in politics might inject a little fear into your mind as well, quite frankly. Talking about the spatial planning responsibilities, what support will you provide to both RDAs and local authorities to undertake their responsibilities, for example, staffing a secretariat and so forth, understanding the cumbersome nature of the LALBs particularly in some of the areas we are talking about?

Mr McFadden: My generous friends at CLG, apart from the answer to Mr Wright on the Economic Assessment Duty, have been funding regional assemblies. These bodies will not continue in the new set-up so funding that would previously have gone to them can go to support these new structures for some of the purposes that you have said.

Q349 Mr Binley: I hear you talk about money but I do not hear you talk about management ability and therein lies the real problem. You can spend as much money as you like, Minister, but you know very well that unless you have got the skills and the right people doing the job, and I have not seen evidence that we do have that in our regional authority anyway, and we certainly have not got it in our local government cadre, unless you have got that expertise this job becomes even more impossible and I do not accept the answer is just about money.

Mr McFadden: It is not just about money but you have got recruit the right people in any walk of life, I completely agree with that.

Q350 Mr Binley: I wish you well with that one too. I think there is an awful lot of wishing going on here for this thing to work properly. Can you give an assurance to the private sector allay their concerns that additional planning responsibility will not dilute the RDAs' focus on the needs of business, particularly over the coming three years and particularly recognising that budgets are being cut?

Mr McFadden: I talked to business a lot during the consultation period for the sub-national review. This is a reflection of the success of RDAs from a business point of view. They said, "We like the fact we have got an organisation here at the regional level which is business-led, is firmly focused on economic development and we do not want that to be diluted". I believe by combining the economic strategy with the spatial and planning work that will actually help business. If you ask any business person what one of their major frustrations is, they will often tell you that planning decisions do not seem to support economic development. That is one of the big gripes of business. By combining the economic strategy with the spatial strategy, I think that is an opportunity for economic gain and not one which will see a dilution in focus. I do not think that business will lose out from this, business has a great deal to gain from it.

Q351 Mr Binley: You have made my very point. Can I suggest that you look at the performance of the West Northants Urban Development Corporation in terms of the sustainable communities' project and you will see exactly what I am talking about in terms of lack of progress, lack of involvement with the business sector, lack of support from the local community. If you get that at the level you are talking about this programme is doomed to failure and I do not want to see that happen.

Mr McFadden: Would not those shortcomings that you are talking about be helped by making sure that the economic and spatial come together so you do not get that kind of gridlock.

Q352 Mr Binley: But we have got that together because we are in the business of supplying jobs as well and it is not working. I just ask you to look at it and get a handle on that because you might find better ways of doing what you want to do. Can I ask the means by which Government will monitor statements of consultation and engagement with stakeholders to ensure that relevant interests are involved, because this has not happened in the rather smaller example of the working together process that you are talking about at regional level?

Mr McFadden: I think it is section 69 of the Bill that asks those responsible for putting together the strategy, which is the RDAs and Leaders' Boards, to consult with the relevant bodies in their area. This was raised by a number of people during the consultation on the sub-national review. You mentioned business and they clearly want to and should be consulted, but they are not the only voice who should. There are environmental partners, social partners who should also be consulted. I think any region worth its salt is going to want to get buy-in to a strategy that is as big and as important for it as this and I believe they will do that and section 69 of the Bill asks them to do that. What we could have done, which we did not do, was produce a whole list of people you are supposed to consult with and ask them to go through a great tick box exercise. I think that would have been mistaken. Sensible people said, "Look, we will do this. Leave it to the regions to decide exactly how we do it, but we are used to working together in that way in our regions". That was the view that we took. Business and the other organisations I have mentioned should be consulted as part of the joining up of the strategy and I think they will be.

Q353 Mr Binley: Let us talk about the consultation document. How confident are you that the strategy can be agreed within the timetable set in the consultation document? Could you update us on what the decision regarding whether statutory timetables are required will be made.

Mr McFadden: We have set down our timetable and I hope organisations can meet that. Can I say before ---

Q354 Mr Binley: You hope!

Mr McFadden: Can I say before we start they definitely will that life does not always work like that, but we think it is a reasonable timetable.

Q355 Mr Binley: My concern is all of this will make it drag. That has been one of the thrusts of my questioning to you. If it does, are you going to set a statutory timetable? Are you going to force this issue through?

Ms Kelly: In advance of the Bill entering committee stage we are hoping to set out some further details about how we expect the policy to operate in a number of areas, including how this process for producing a single regional strategy will work. One of the things we are considering in that context is whether some form of timetabling, whether statutory or otherwise, would be sensible in order to make sure that we do achieve the objective in a streamlined and reasonably timely process. That is something we are setting out further policy on in advance of the Bill's later stages.

Q356 Mr Binley: My final question, Chairman, you will be relieved to know. Can you give us some insight into the role and membership of the Examination in Public panels?

Ms Kelly: Typically, the Secretary of State will appoint somebody who will chair the panel and typically it has been someone who ---

Q357 Mr Binley: That is a paid position, I assume?

Ms Kelly: It is a paid position.

Q358 Mr Binley: What sort of money is that? There would be a load of people in my area who want to know what sort of money that is.

Ms Kelly: I would have to give you details on what the figures are, I am afraid, I do not have them to hand, but it is a paid position. Then relevant experts as well to support in the process of testing the evidence.

Q359 Mr Binley: You must have thought about the structure of it already. Give me some idea how it might be made up? Where are you going to get the people from? Are you looking at it in terms of sectional interest, regional interest? How is it going to made up?

Ms Kelly: This is not a new model, we already do Examination in Public on our regional spatial strategies.

Q360 Mr Binley: I am aware of that.

Ms Kelly: I think we would be starting with that model and considering whether it needed to be adapted to incorporate the stronger economic growth focus that we expect the single regional strategy to have. There is a sort of tried and tested model that operates within regions and I guess we ---

Q361 Mr Binley: You are going to carry on in the same way pretty much?

Ms Kelly: The concept of Examination in Public is reasonably well-established and the Bill largely creates the same legal framework. Obviously we need to be sure that the panel doing the Examination in Public has the right mixture of skills and expertise to look at the single regional strategy in its entirety.

Q362 Mr Binley: Can you let the Committee have your projected costs in terms of that particular exercise?

Ms Kelly: I would have to come back to you with details on that.

Mr Binley: We would be grateful if you could.

Q363 Chairman: Can I just be a bit clearer about the Local Authority Leaders' Board, which is our final area of questioning. I am sure this is just a technicality, I do not understand local government as well Bernadette Kelly does, I am sure, but the list of those participating does not include unitary authorities. I suppose they count as district or county for legislative purposes, do they?

Ms Kelly: I think we said that the Local Authority Leaders' Board would be made up of a representative group of local authority leaders.

Q364 Chairman: 66(3) says hat these areas fall wholly or partly within the region:(a) a district council, (b) a county council, (c) a national park authority, (d) The Broads Authority. Do unitaries count as a district or county for these purposes?

Ms Kelly: I think they are counties for these purposes. I think the legal term is counties incorporates unitaries.

Q365 Chairman: There is a lot of flexibility given to the region here to decide who should compose the Leaders' Board, as I understand it, so it will be a regional scheme that suits the needs of that particular region?

Ms Kelly: It will be for the local authorities to organise themselves into a Leaders' Board and put forward proposals to the Secretary of State.

Q366 Chairman: This will not be without controversy because there is tension between upper and lower tier authorities.

Ms Kelly: Indeed.

Q367 Chairman: It will not be a straightforward exercise.

Ms Kelly: There may be tensions obviously in some regions, but what we hope is that there will be an incentive here for local authorities to work together to come up with a sensible proposition.

Q368 Chairman: The Local Authority Leaders' Board is now part of the decision-making process rather than scrutiny organisations?

Ms Kelly: Yes.

Q369 Chairman: So local authorities are out of scrutiny of regional activity, that is entirely up to parliament to do now?

Ms Kelly: The single regional strategy is not about scrutinising, it is about developing the framework.

Q370 Chairman: Originally it was thought that the Leaders' Boards would be doing a scrutiny job on the RDAs but that is no longer the case, that has now changed?

Ms Kelly: They are now jointly responsible with the RDAs, so it is a joint duty.

Q371 Chairman: So that is down to these regional select committees that we are setting up in the House. Any news of membership of them yet, Minister, do you know? Have you heard yet?

Mr McFadden: Not that I have heard.

Q372 Chairman: I am told that when this Government came to power there were 200 select committee jobs available to members but now there are 400. Do you think we will have a little bit of a practical challenge on our hands in actually finding the time to do all of this scrutiny work?

Mr McFadden: That is what is said. Let us see how it rolls out.

Chairman: Yes, let us see. I think that is one thing we will be revisiting.

Q373 Mr Wright: Can you just elaborate on what is meant by the investment planning approach?

Mr McFadden: This is really when an RDA may have money for a particular project and decides to partner with someone to deliver that at sub-regional level. That is what investment planning is around really. It need not be the RDA that directly carries out and spends the money. They can decide, and we are used to this in our constituencies, where the RDA ask another body to deliver a certain project. That is what that is about. The RDA will remain accountable for the money spent, of course.

Q374 Mr Wright: Would that be public or private or a mixture of both?

Mr McFadden: It could be both.

Q375 Mr Wright: So there is no criteria laid down in terms of the partnership approach?

Mr McFadden: It is all round the debate around delegation of funds and so on and investment planning is about spending money at the sub-region level but spending the RDA's money, so the RDA would remain accountable for the money that was spent but it might make sense in a particular project to do that along with a local authority, to do that with a university or another body.

Q376 Mr Wright: Some concerns have been raised about the new powers for the local authorities. There has been some concern expressed over whether or not the local authorities have got the skills and expertise to carry out their new duties. Can you comment in relation to those concerns? Obviously the local authorities have asked for a presumption that they have already got those skills and expertise whereas the opposing view is they have not got the skills and expertise there already. Who would be responsible for judging whether or not they are capable of carrying out their duties?

Mr McFadden: I think I said in response to your earlier question about Economic Assessment Duty that I thought most fair observers would say that there were some excellent local authorities on this front who carry out economic development functions very well and there are other areas where it has been a weaker performance. Part of the reason for having that economic assessment duty is to raise the profile and raise the focus of these issues in local authorities. Part of the whole rationale of this sub-national review in bringing together spatial and planning work with the economic work is precisely to focus local authorities more closely on that need for sustainable economic development, which is the phrase used over and over again in the SNR. If you are asking me is there an issue of capacity in some local authorities, I think the answer is yes, there is, but the structure of the SNR is designed to raise that by fostering a focus at the very local level through the economic assessment duty and at the regional level through the Leaders' Board and the single strategy.

Q377 Mr Binley: Will it be the Leaders' Board who will determine whether or not an authority has got the skills and expertise to carry out the extra duties they have got in terms of the arrangement with the devolved powers?

Mr McFadden: They have all got their economic assessment duty.

Q378 Chairman: There is a delicate balancing act here, is there not, between economic efficiency and democracy. I think the business community were all rather up for taking control of the whole planning system and dictating to people where houses and swimming pools, railways and roads should go, and I put to them that was not really what we did in a democracy and sometimes democracy has rather untidy outcomes. I know what the answer is going to be to this question but I still ask it. Do you think that democracy will be well-served by these new arrangements? Will these Local Authority Leaders' Boards encapsulate properly and make sure the balance between the legitimate concerns of local people and the legitimate expectations of business are properly met?

Mr McFadden: It is a serious question and it is at the centre of all this. The Government's thinking evolved on this as the consultation took place and the process went through. Some of the responses to the consultation said, "We think the local democratic voice is absolutely critical, perhaps on the planning issues and we want to keep that". At the same time, to go back to what Mr Binley was saying, you have got business saying, "Some of our experiences of planning have not been fantastic and we want a sharper economic focus". In the end what we have asked local authorities and RDAs to do is to work together on this. There is nothing more directly accountable than elected local authority leaders, they are there and it is their role in this to be that democratically elected voice. I think there is an accountability of RDAs because they are accountable to the elected government of the day for what they do as well, so I do not accept that they are free-ranging out there and answerable to no-one. The structure that we have set up asks the economic and the local authority to come together hopefully with the benefit from both points of view and what we want to see as the end result of this is a single strategy that better serves the needs of the region as a whole and a raised focus on economic issues from local authorities. We want both of them to be talking to their relevant partners in the region, be they business, social or environmental, in drawing that up and making sure there is proper buy into it.

Q379 Chairman: That seems a rather neat place at which to end the questions, unless my colleagues have points they want to raise or you, Minister, have points you have not made.

Mr McFadden: No, I am very happy to leave it there.

Chairman: Thank you very much indeed for your time and trouble.