House of Commons - East Midlands Regional Committee

East Midlands Development Agency and the Regional Economic Strategy - East Midlands Regional Committee Contents

Memorandum from the Government Office for the East Midlands (EM 15)

The Government Office for the East Midlands is pleased, on behalf of Government, to have the opportunity to present evidence in response to the East Midlands Regional Select Committee's Inquiry into the East Midlands Development Agency (emda) and the Regional Economic Strategy.

SUMMARY

(

— The Government Office for the East Midlands works on behalf of Government to support and challenge emda in the delivery of its role.

A Flourishing Region—

— emda was the first RDA to conduct a full impact assessment of its work since its inception in 1999. The report by Ecotec showed a return on investment of between £5 and £15 on every £1 invested. The recent national evaluation of the RDA's by PWC (Price Waterhouse Cooper) highlights a value added of £4.50 per every £1 spent across the network.

— The Sub-National Review (SNR) will strengthen emda's role, along with the role of the Local Authorities through the Leaders' Board, in developing and delivering, in partnership, a Single Strategy for the East Midlands to ensure sustainable economic growth and recovery for the future.

1. The role, responsibilities and accountability of emda

1.1 emda was established under the Regional Development Agencies Act 1998, which sets out the statutory purpose of RDAs.[12]

1.2 emda's mission is to: "Use our influence and investment to deliver a measurable improvement in the sustainable economic performance of the East Midlands".[13] emda aims to catalyse and co-ordinate regional economic development, growth and regeneration, enabling the region to improve its relative competitiveness and reduce the imbalance that exists within and between regions.

1.3 Since its creation, emda's responsibilities have increased to include the administration of regional development grants (2002), research and development grants (2005), Business Link (2005), the economic and social funding elements of the Rural Development Programme (2007), European Development Funds (2007) and the Manufacturing Advisory Service (2008), as well as additional responsibilities for tourism and the Olympics. This reflects Government's confidence that RDAs deliver in the English Regions.

1.4 emda's corporate plan provides full details of how it will allocate its budgets to deliver the objectives in the RES, and how this activity will contribute to the targets that the RDAs have developed with Government. emda's budget for 2008-09 was £166.6 million. emda has met or exceeded all its annual targets in the past three years (figures are given at Appendix one).[14]

1.5 At the national level, emda has led RDA engagement in national policy development in a number of policy and delivery areas including manufacturing, European policy work and the transfer of the ERDF programmes from the GOs to the RDAs, international trade and investment and construction. In the region, GOEM and emda worked effectively to ensure the timely and efficient transfer of the East Midlands ERDF programme resulting in a successful call for projects and allocations of some £79 million in 2008.[15] In its lead role on manufacturing, emda manages the Manufacturing Advisory Service (MAS) network on behalf of BERR and has improved the return on investment from marketing since taking on this role.

1.6 emda is currently the lead RDA for the Department for Business, Enterprise and Regulatory Reform agenda (BERR).[16] emda has recently concluded its period as lead RDA for the network ("Chair of Chairs"). In this capacity, emda worked hard to raise the profile of the RDAs' contribution to economic development in the regions and to raise the profile of the East Midlands. Its work led, for the first time, to a specific chapter in the Pre-Budget Report that highlighted the contributions made by RDAs.[17]

1.7 emda is accountable nationally to Parliament through the Secretary of State for Business. Regionally, the organisation is accountable to its Board and to partners and the public through a range of consultation and partnership events, including its annual public meeting which regularly attracts 300-400 attendees. Current proposals will place RDAs under a Duty to Involve local communities where appropriate in the design and delivery of their programmes.[18] emda is currently scrutinised at the regional level by the East Midlands Regional Assembly's Scrutiny Board which meets four times a year. Regional Assemblies will cease in their current form by April 2010. Local Authorities will retain individual powers of scrutiny, but it is envisaged that regional scrutiny will be replaced by the work of the Regional Select Committees and the creation of Regional Grand Committees.

1.8 The role of RDAs continues to change. To ensure continued focus on addressing the regional impacts of the economic downturn and as a result of the recent national evaluation of RDAs, Government has asked RDAs to prioritise:

— assistance to business as an immediate priority;

— stimulating economic recovery and growth for the medium-term; and

— restructuring and developing each region's strengths, supporting its growth and competitiveness in the future for the longer-term.

2. The process by which the RES was drawn up and the level of involvement of regional stakeholders

2.1 RDAs are tasked with producing Regional Economic Strategies (RES) which are reviewed every three years to ensure they remain relevant to the changing needs of each region's economy. The current RES covering the period 2006-20, A Flourishing Region, was published in July 2006 following a comprehensive evidence gathering and consultation process over a period of 18 months.

2.2 Development of the RES was the product of a significant consultation exercise, which saw emda organise over 100 consultation events, reaching around 1,400 regional stakeholders and partners. emda was the first RDA to invite members of the public to join the consultation through an advertising campaign ("Have Your Say") on billboards and public transport. This was supported by a dedicated website which received over 20,000 hits. emda held roadshows in 11 public venues across the region, including city centres and tourist attractions. They received 495 written contributions from a wide range of regional stakeholders, as well as close involvement throughout from GOEM.[19] To ensure regional ownership the RES development process was underpinned by a working group of key delivery partners who met regularly to discuss key policy content and agree the development process.[20] The 2007 National Audit Office report cited the positive views of partners on the engagement process and wide buy-in to the evidence base.[21]

2.3 The RES is underpinned by a robust evidence base, with contributions from a range of regional partners.[22] The evidence-base was assessed and peer-reviewed by a team of researchers and independent academics to ensure it provided an accurate portrait of the region. Government Departments and GOEM were also involved in this process. The evidence base is available for regional partners to develop their own strategies and contributions towards RES delivery.

3. The effectiveness of the RES for the East Midlands in delivering against its targets

3.1 Whilst the RES contains a performance management framework, it is not a delivery document for emda. The targets set out in the RES are projected economic data for the region, based on forecasts made before the recession. It is for emda to inform the Committee on the impact of the RES in delivering its targets. This response sets that information within the wider context of Government policy on these issues.

3.2 The key mechanisms for delivering the RES are:

— Sub Regional Investment Plans (SRIPs) of the Sub-Regional Strategic Partnerships (SSPs). From 2009-2010 the SSPs are largely being replaced by local authority-led programme and delivery structures in line with the ambitions of the Sub-National Review (see section 6 below).

4. The effect of the financial and economic situation on businesses in the region, including the effect on different sectors and the impact on local employment, and how well emda is meeting needs in the challenging economic climate

4.1 The structural changes that the East Midlands has experienced over recent years, resulting in a more diverse business base, mean that the region should be in a better position to withstand the recession than it has been during previous economic downturns. However, despite this diversification, the impacts of the present situation are now being felt beyond sectors such as finance and property where the initial impacts occurred. Significant job losses are now occurring in manufacturing and regions like the East Midlands with above average employment in this sector are now being hard hit. Workforces across the private and public sector are being slimmed down and working patterns are changing in line with shrinking workloads and budgets.

4.2 The monthly Labour Force Survey (LFS) data for March 2009 indicates that the latest quarterly employment rate (75.9%) is beginning to decrease, but the rate in the latest period is not significantly different from a year ago (75.6%). The Jobseekers Allowance (JSA) claimant count was 105,200 in March 2009, up 5,200 on the month and up 52,400 on the year.[24] There are proportionately strong flows onto JSA from the up to 24 year's old age category.

4.3 The impact of the worldwide recession has been discussed extensively at the Regional Economic Cabinet (REC),[25] chaired by Phil Hope MP, the Minister for the East Midlands. The Cabinet brings regional partners, including emda, together to tackle the impact of the downturn and prepare the region for recovery. The Chair of emda is the Deputy Chair of the Cabinet, its Chief Executive is also a member and emda supports the REC with regular updates on the economic conditions in the region.

4.4 Working with GOEM and departments including CLG and BIS, emda has prioritised and focussed its activity to support businesses in the region and to bring forward regeneration and capital schemes where possible. In particular, it has:

— delivered an intensive "Survive and Thrive" campaign across each of the major conurbations in the region to engage with businesses face-to-face and offer practical advice. Over 2,000 individuals and businesses attended these successful events and we understand that they gave overwhelmingly positive feedback;

— launched in August 2008 a £1 million Resource Efficiency Grant to aid businesses to make their resource use more efficient and thereby reduce costs. This grant offers capital support of 50% up to a maximum of £10,000 to help businesses to introduce new methods and techniques to reduce their energy, waste and water costs;

— delivered a series of events to raise the profile of resource efficiency in the region. The programme focused on linking cost savings and the improvement of business processes through the sustainable use of natural resources and minimisation of waste; and

— worked with GOEM and English Partnerships to identify key regenerations schemes that can be brought forward to maximise economic impact, including the redevelopment of Derby's Cathedral Quarter, the development of a new Business Quarter in Leicester and the re-development of Nottingham Railway station.

4.5 Government is taking decisive action for small and medium businesses with the launch of a package of support to address their cash flow, credit and capital needs under the Real Help for Business Now banner (see Appendix two).[26] Other financial measures will also help enable banks to continue or resume lending to viable small and medium business during the current economic downturn. RDAs have a key role in ensuring that the right support is available for businesses wherever they are. emda will also support Building Britain's Future—New Industry, New Jobs, which was launched on 20 April in Loughborough, to ensure that business in the region can come through stronger, taking advantage of the upturn.[27]

4.6 Business Link is the Government's key means to deliver support direct to business. In the East Midlands, 91% of customers are very satisfied or satisfied with the service received. Since October 2008, this service has included free personalised "Health Checks" to identify problems early and survive the current financial climate, using qualified experts to help draw up business action plans. The latest figures show that 5,113 businesses have benefited from health checks in the East Midlands.

4.7 As part of the Government's Solutions for Business initiative, the Train to Gain skills brokerage service has come together with Business Link from 1 April 2009 to provide comprehensive information, diagnostic and brokerage service, making Business Link the main route to all government support for business. Within the East Midlands, the provider for Business Link was already managing Train to Gain, making the region well placed to deliver this new integrated service.

5. The changes to regional policy proposed in the Local Democracy, Economic Development and Construction Bill and the potential effect on the work of emda

5.1 In order to maximise the impact of economic recovery and growth in the regions the Government announced the outcome of its Review of Sub-National Economic Development and Regeneration[28] which included proposals to bring together economic and spatial planning in the regions and place a joint duty on the RDAs and the newly created Local Government Leaders' Boards to take forward the creation of new single strategies for the English Regions. These strategies will provide regions with an ability to better align activity across thematic areas and more effectively prioritise the expenditure of public and private sector investment.

5.2 These proposals are set out in the Bill (see appendix 3 for more details).[29] Policy documents giving further detail on local economic assessments, regional strategies, sub-regional co-operation and the duty to promote democracy, petitions and the Duty to Involve were published in January.[30]

5.3 We judge that emda has already developed positive and constructive working relationships with local authorities, the Regional Assembly and GOEM on matters of housing, planning and transport as they relate to economic development. It participated at each stage of the preparation of the draft Regional Spatial Strategy (Regional Plan), including the Examination in Public. It has reached agreement with the shadow Local Authority Leaders' Board on arrangements for a joint Board to oversee the development and delivery of the new single strategy.

5.4 In terms of new sub-regional delivery arrangements, emda is already part of the steering group that developed the Leicester/Leicestershire MAA and is now working with the partnership on the delivery of this agreement. However, it has provided more limited support for the development of sub-regional working around the Sheffield City Region, which includes parts of the East Midlands.

6. The role of other Government agencies such as the Government Office for the East Midlands, and of partnerships between Government agencies, local government and the private sector, in delivering the aims of the RES

6.1 The process of developing both the RES and the RES Implementation Plan has facilitated partner commitments to joint working towards the coordinated delivery of regional economic priorities.

6.2 As the representative of twelve central government Departments[31] in the region, the Government Office for the East Midlands (GOEM) promotes the integration of Government policies and programmes at a regional and local level in a way that makes sense for local places. GOEM supports and challenges the development and delivery of regional strategies and priorities, helps influence policy development among sponsor departments, and works in partnership with local organisations in communities throughout the region. This includes negotiating Multi and Local Area Agreements (MAAs and LAAs).

6.3 GOEM works in partnership with emda and other regional stakeholders on a wide range of initiatives that support the aims of the RES. These include a regional procurement partnership, the simplification of business support products, building a culture for enterprise in the region, integrating employment and skills, securing regional benefits from the OIympics and the regional Employment, Skills and Productivity Partnership.[32]

6.4 GOEM has also worked closely with emda to ensure priorities contained in the region's nine Local Area Agreements are consistent with the RES. This has been tested by analysis conducted by GOEM on behalf of BERR and HMT.

6.5 emda has worked closely with Jobcentre Plus, the Learning and Skills Council (LSC) and other private sector partners as part of the Large Scale Redundancy Support Group and the Midlands Engineering Industries Redeployment Group in responding to redundancies in the region.

6.6 The Homes and Communities Agency, which was established on 1 December 2008, is already working closely with emda. The two agencies have recently worked together on the prioritisation of regeneration activity within the region, identifying critical schemes which require additional support.

6.7 Projects that demonstrate emda's robust approach to working with regional partners and the private sector include:

— Blueprint, Avenue Coking Works, and the Sherwood Energy Village with English Partnerships;

— BioCity with the two Nottingham universities;

— Boston Masterplan with Boston Borough Council;

— Chairing the Regional Risk Finance Forum, which brings together banks, investors and the public sector to align activities to ensure that the contributions made by the Finance and Finance Risk sectors are maximised for the benefit of the regional economy.

6.8 Independent evaluations have commented that emda provides strong regional leadership and attribute much of the success in emda's delivery to its effective partnership working arrangements.[33]

7. The way emda's resources are divided between rural and urban parts of the East Midlands, and whether the division is appropriate

7.1 The Government does not prescribe how emda should divide its resources between urban and rural areas in the region, but expects that account is taken of the needs and interests of all parts of the community in developing and delivering policies and deciding on spending priorities. This mainstreaming approach means that the Government expects emda to understand the nature of the rural as well as the urban economies in the region and to take appropriate and equitable steps to support both.

7.2 emda is working with partners on the Regional Rural Action Plan, and with GOEM is supporting the Regional Rural Affairs Forum refreshing the Plan to reflect pressures on the economy

7.3 The Department for Environment, Food and Rural Affairs (DEFRA) is devolving around £60 million of Rural Development Programme for England funding to emda over the period to 2013 to deliver the social and economic objectives of the Programme and make a real contribution to delivery of RES objectives in rural areas.

8. How well emda is performing on sustainability

8.1 The Government expects emda to contribute to sustainable development across its statutory, corporate, regional influencing and grant-making and investment functions to promote a strong, healthy and just society, and ensure we live within environmental limits.

8.2 emda's statutory obligations in this area include: carbon reporting;[34] having regard to conserving biodiversity;[35] the duty to promote equality;[36] and the forthcoming requirement to monitor and manage effectively equalities and diversity impacts.[37] emda also has a devolved responsibility for the design and management of the European Regional Development Fund Operational Programmes and for reporting on the ERDF OP cross-cutting theme of environmental sustainability.

8.3 In terms of policy compliance, BIS guidance to RDAs on Regional Economic Strategies (2005) requires RES development and implementation to be based on the sustainable development principles set out in the 2005 UK Sustainable Development Strategy, and to be tested through application of a full sustainability appraisal.

8.4 Under the BIS Sponsorship Framework, emda has to demonstrate how sustainability principles have been applied in supporting delivery of the REP PSA. emda is also subject to BIS Guidance on Appraisal, Delivery and Evaluation which requires sustainable development to be considered in programme and project design.

8.5 In delivering against the four UK priorities for sustainable development, emda has:

— Prioritised economic inclusion and social enterprise through projects such as the Genesis Social Enterprise Centre and Sherwood Energy Village;

— Commissioned a wide range of studies on the economic impacts of climate change to inform the evidence base for the new single integrated regional strategy.

APPENDIX 1

emda OUTPUT TARGETS

	2007-08		2006-07		2005-06
Output Name	Achieved	Target range	Achieved	Target range	Achieved	Target range
1 Job creation: The number of jobs created or safeguarded	11,236	7,826-10,350	9,803	7,391-9,775	8,193	5,184-7,014
2 Employment support: The number of people assisted to get a job	6,149	3,600-6,000	5,786	3,375-5,625	4,260	1,388-2,313
3 Business creation: The number of new businesses created and surviving 12 months, and businesses attracted to the region	2,594	1,703-2,554	2,382	1,661-2,431	2,208	1,621-2,431
4 Business support: The number of businesses assisted to improve their performance	25,296	17,000-25,000	21,022	6,666-9,600	7,869	2,684-4,026
4a The number of businesses within the region engaged in new collaborations with the UK knowledge base (HE/business collaboration projects)	656	261-435	487	252-440	400	248-414
5 Regeneration: Public and private regeneration infrastructure investment levered (£m)	166	65.8-109.7	135	64-107	88	62.6-104.4
Percentage of which is private	59%	58%-82%	81%	58%-82%	89%	58%-82%
5a Hectares of brownfield land remediated	105	102-171	117	100-167	107	98-163
6 Skills: The number of people assisted in their skills development as a result of RDA programmes	21,981	13,333-19,200	17,710	12,500-18,000	14,562	8,000-12,000
6a The number of adults gaining basic skills as part of the Skills for Life strategy that count towards the Skills PSA Target	1,683	337-561	474	329-548	650	321-534
6b The number of adults in the workforce who are supported in achieving at least a full Level 2 qualification or equivalent	2,419	674-1,123	1,508	547-1,095	701	641-1,069

APPENDIX TWO

EXAMPLES OF REAL HELP NOW SUPPORT[39]

ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)

Government is providing £1 billion of guarantees to support up to £1.3 billion of bank lending to smaller firms (annual turnover of up to £25 million, looking for loans of up to £1 million for a period of up to 10 years). As of 8 April, the EFG scheme has nearly £250 million of eligible applications from over 2,150 firms that have been granted, are being processed or assessed.

WORKING CAPITAL SCHEME

Government will provide banks with up to £10 billion of guarantees covering 50% of the risk. This secures up to £20 billion of working capital credit lines for companies, and frees up capital which the banks must use for new lending.

CAPITAL FOR ENTERPRISE SCHEME

A new £75 million fund (£50 million of Government funding with £25 million from Banks). Professional fund managers will provide equity investment which can be used to pay off existing debt to free up capital for day to day cash flow and for investment for the future for viable companies. Over 250 businesses have registered their interest.

BUSINESS PAYMENT SUPPORT SERVICE

This offers viable businesses in temporary financial difficulty a streamlined service for arranging to pay their HMRC tax bill to an affordable timetable. In the East Midlands over 10,200 agreements to spread the payment of tax have been reached, worth £177 million.

The Chancellor of the Exchequer announced in Budget 2009 that this service would, from 22 April, be extended to take into account whether a business is likely to make a loss for the current year when deciding how much time HMRC can give a business to pay its Income Tax or Corporation Tax on profits from a previous year. Businesses can take advantage of this enhanced service if:

— they are genuinely unable to pay immediately or enter into a reasonable time to pay arrangement;

— the tax they owe is Corporation Tax or Income Tax on the previous year's profits; and

— they are likely to make a trading loss in the current year.

REAL HELP FOR SKILLS

It is vital that businesses continue to invest in skills, to survive the recession and prepare for the upturn. To support this, the Government has rescued and expanded apprenticeships; there will be over 250,000 starts nationally in 2009-10. It has increased the training support available to people who are unemployed: £100 million for 40,000 extra places on employability programmes for those who are unemployed or under notice of redundancy; and £83 million for 75,000 high quality training places for those claiming JSA for over six months to help them quickly back into sustainable employment. There is also continuing support through Train to Gain with £925 million invested for 2009-10 and new support just for small and medium sized enterprises (SMEs).

HELP WITH MANAGING BUSINESSES

The "Top Ten Tips" campaign offers practical help to businesses to their cut bills by quite simple changes in the way they use resources like energy and water, and how they handle waste. This complements "Improving Your Resource Efficiency", one of the new suite of products launched under "Solutions for Business", which provides businesses with a range of specialist support and advice available nationally, and regionally and accessed though Business Link.

APPENDIX THREE

KEY POLICY CHANGES RESULTING FROM THE REVIEW OF SUB-NATIONAL ECONOMIC DEVELOPMENT AND REGENERATION (SNR)

The Government published the SNR in July 2007, setting out a framework to allow central and local government, and their partners, to work together to support the private sector to increase prosperity in all parts of England.

There was a good response to the consultation on the Government's proposals, held between March and June 2008. Over 500 responses were received, which, on the whole, supported the principles and reforms contained in the SNR.

The response to consultation, published in November 2008, explained that the Government had decided:

— To legislate to create a duty on county councils and unitary authorities across England to carry out an economic assessment of their area, underpinned by statutory guidance;

— To refine its plans for producing the regional strategy and ensuring appropriate regional governance arrangements; the Government will, in each region, give the RDA and a board of local authority leaders joint responsibility for the regional strategy, including its drafting, implementation planning, sign-off and monitoring; and

— To legislate to create duties on county councils and unitary authorities to promote democracy and to operate a petitions scheme, and to create a duty on certain public authorities to secure involvement in the exercise of their functions.

These measures are now being taken forward within the Local Democracy, Economic Development and Construction Bill.

— To further economic development and regeneration

— To promote business efficiency, investment and competitiveness

— To promote employment

— To enhance development and application of skills relevant to employment

— To contribute to sustainable development