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


Examination of Witnesses (Questions 180-199)

PHIL HOPE MP, TOM LEVITT MP AND JONATHAN LINDLEY

29 JUNE 2009

  Q180 Chairman: Okay. We were told that other regional development agencies have that sort of expertise embedded within a member of their specific boards. Basically, if it's good enough, or deemed appropriate enough for other RDAs, why is—I'm not saying emda is an exception, but perhaps it is an exception. If that is the case, is that something that ought to be looked at?

  Phil Hope: Again, this is a matter for emda, rather than me, to say who it should have on its board, but you make—

  Chairman: Yes, but we are taking evidence off you. We're interested in your view. We will have the opportunity to talk formally again, and informally to emda, about this issue and perhaps other issues. So I am interested—I think we are interested—in what your take is on it.

  Phil Hope: My take is that it is very important that emda has a very open, transparent and purposeful engagement with the sector. The sector is diverse and covers a whole range of issues in terms of the way it goes about developing its strategy. I also think it needs to make sure that sustainability and sustainable development is a mainstream, embedded-across-the-piece part of everything that they can see that they are doing—in the same way as you might be rural-proofing future strategies—so making sure that sustainable development is integrated throughout. I don't have a particular view as to whether a particular person is appointed to represent that sector's interest. I can see advantages. I can also see disadvantages. If there was good practice, perhaps people could examine that and just see what works and what doesn't. The outcome is what really matters and what matters is an effective engagement as we develop the regional strategy for the future, and that it is mainstreamed and embedded throughout what that strategy contains.

  Chairman: Tom, you wanted to come in. Perhaps you have a view.

  Tom Levitt: I just wanted to put it in the context of the fact that the East Midlands was the first region to publish a sustainability strategy. We published it earlier this year, when Hilary Benn came to Long Eaton to launch it. It's not just about sustainability in environmental terms; it is also about the issue of adaptation to climate change. That process originally grew out of the Nottingham partnership of local authorities coming together to mainstream sustainability into the way they operate. It developed into this regional paper, the first regional strategy of its type to be published, with every local authority in the region—and emda—all signed up to it. So there isn't a problem getting the issue of sustainability up high on the agenda and it is one of Phil's priorities.

  Q181 Chairman: You say that there isn't a problem, but we've got specific evidence from organisations that they see it as a problem. I'd say it no stronger than that.

  Phil Hope: I understand that point, Chair, and I just wanted to say that maybe, historically, there have been concerns that the environmental lobby haven't felt heard in the past. That is why the thinking about the future of the regional strategy for the future, in which the first discussion is going to be about the process and making sure that those organisations feel they do have a voice in the development of the strategy, is so important. That is what the debate is going to be about this week, as we take the integrated strategy for the future forward.

  Chairman: Okay, well, we'll watch this space.

  Q182 Judy Mallaber: I put it to you that maybe the reason that emda was a bit in advance on environmental things was that, by accident, it originally had one of our leading environmentalists, Martin Doughty, on the board. Maybe we would not have developed the index of sustainable economic well-being, and this work, if we hadn't had an expert in that area on the board. I'll just leave that with you as a thought. You were talking about consultation. I am interested in your view on how well you think emda does in consulting and reaching out and talking to people—this broader network that you're talking about—other than those who are formally on its board. That raised another specific issue I wanted to raise with you.

  Phil Hope: I know that there have been criticisms of emda's consultation. I think it has listened to those criticisms and, in thinking about the future, is thinking about ways of engaging with a very diverse sector. emda, like the leaders' forum, for example, has a real challenge ahead in terms of the wide variety of organisations that will have an interest in the future of the new integrated regional strategy. When you think of the planning issues and so on, there is a huge number of organisations, whether it is from the environmental lobby—those people who are opposed to environmental change—or those people who support it: businesses and so on. The question is not, "Is there a one-size-fits-all solution to this?" which I don't think there is. The question is, can emda develop processes of consultation and engagement in the future in which the various views on a whole range of issues can be heard properly, an overview taken and then difficult decisions made about the right way forward for the future? That, I think, is the critical part of where we need to go from now on. I do hope that their forum, where they are discussing specifically what those processes might look like—because these people will never necessarily all agree with each other, but I think it's absolutely right that they have a real, strong opportunity to have their point of view heard, their evidence submitted, that proper evaluation and then conclusions reached based on evidence about what's best for the region. That, I think, is where we want to arrive at.

  Chairman: Can we move on to have a look at the issue of the regional economic strategy?

  Q183 Judy Mallaber: The question that arises from what we have just been saying goes on into the economic strategy. One criticism that we had when we had the business sector and the trade unions with us at the same time is that although you have trade unionists on the board, the union representatives there certainly thought that it wasn't just a case of consultation. They have a huge amount of intelligence about what is happening in business and where problems are arising in individual businesses that they often have before it comes to the attention of GOEM or emda. Is that something that you have discussed with them—how they can take that kind of intelligence into account in terms of us dealing with the credit crunch and the economic difficulties that we have at present?

  Phil Hope: There are two things. First, as Regional Minister, I meet with the trade unions—both the regional TUC and individual unions—on particular concerns, and I think that that's extraordinarily helpful to me. As well as having a regional TUC representative, as it were, on the regional economic cabinet, we take opportunities to think about and respond to particular issues as and when they arise. The rapid response service, for example, when a particular company experiences large numbers of redundancies, has been an absolutely critical part of the partnership working between the trade union movement, the business concern—Jobcentre Plus, for example—and, indeed, the Learning and Skills Council so that when something like that unfortunately happens, a service is put in place. Of course, a particular company can choose not to access that service, and I know that there have been difficulties with that in some cases, but broadly speaking, most businesses welcome the extra service, response and support they get when they're going through that difficult process of having to lose a number of jobs, and therefore the individual support that is given to individuals on retraining, redeployment and so on to help that business, and indeed to get as far upstream of that decision as possible, so that the business might make different choices in terms of its business decisions, which might mean that fewer redundancies are required when those things happen. So I think they have put in place a good package and a good partnership working when those events happen. Indeed, the trade unions—with their tendrils, as it were, sensitively picking up these issues and feeding into that—have been an important part of the process.

  Q184 Judy Mallaber: In the broader picture, what input did you have into the development of the regional economic strategy?

  Phil Hope: Me personally?

  Judy Mallaber: Yes, as a Minister.

  Phil Hope: Well, Regional Ministers didn't exist when the first regional economic strategies were produced, so I didn't have any input at all other than as a local MP with my own views. In terms of the development of the new integrated regime strategy, I'm concerned to ensure that there's as comprehensive a process as possible that really does take into account the views of all the stakeholders in the region and a proper debate on the way forward. The original regional economic strategy was well-written and well-researched and had the flexibilities in it to respond to the changing circumstances, so when the economic downturn arrived, it was not in a bad place as a regional economic strategy, but those were its priorities for the future in the first place. But, of course, since then, I think emda have been very good at responding to those particular concerns: for example, Business Link turning away from helping businesses to think about how to deal with problems of growth to providing services to help individuals and businesses cope with shrinking demand and deal with turnover and how they managed their finances, cash flow and so on. The thrive and survive workshops that emda sponsored have now been taken up nationally, I understand. So something that emda developed as a regional response has been seen as an example of good practice. The original regional economic strategy was well founded and was the right way forward. There has been a response here and now to the current economic pressures to respond to that and to develop and amend some of the priorities within that in the way that the organisation has worked. Now, of course, we need a new integrated strategy for the future that takes into account what has been going on in the economy and gets us ready for the upturn and the new industries—low-carbon technology and so on. Our region is a good place, in terms of the research base and companies we have, to respond very positively to that new economic landscape we are entering into.

  Q185 Judy Mallaber: What is the role of the Government office in influencing development of the strategy and the issues that Phil has been talking about in terms of economic circumstances?

  Jonathan Lindley: Our role in the current economic strategy was, first of all, to make sure that one was being developed and to make a judgment on behalf of Government as to whether the evidence that it was considering was full and proper. If you like, it was a sort of managerial oversight of the process, to ensure that it was happening and would generate a substantial strategy that was challengeable, representative and would help the region to develop going forward. Our role as we move into the new integrated strategy is again to make sure that the process happens—and that is not without difficulty sometimes. We will also make sure, on behalf of Government, that the right stakeholder consultation and involvement is taking place, so that it isn't simply the leaders' board, the emda board or the joint board strategy—that it is the region's economic strategy. If we have concerns that stakeholder involvement from the environmental lobby or sector, for example, which you raised, has not been properly taken into account, we would advise the Secretary of State not to sign it off. I do not believe that we will get to that position because we are working very well with all the stakeholders to ensure that we will get satisfactory arrangements.

  Q186 Judy Mallaber: I am slightly puzzled by what is happening with sub-strategic partnerships and why we keep turning structures upside-down. We will come back to some of that on accountability. May I pick that up here, because I have had a great deal of help with some of my local businesses from one of the people employed by the sub-strategic partnership to work with businesses. We have got advice and got Ministers involved in getting the banks off the backs of some of our local companies. I am not clear what is happening to sub-strategic partnerships and how it ties in to the new structures. Could you explain?

  Jonathan Lindley: They're evolving. The sub-regional partnerships are currently given money by the development agency and we believe that will continue to happen. It has happened now throughout the region. It did not happen originally because there were some questions about how strongly they were performing. They are now happening across the region and the intention is for that to continue, as I understand it. However, the Bill has not yet become enacted, so anything could still happen between now and enactment.

  Q187 Judy Mallaber: So we're not expecting when that Bill comes through for it to lead to substantial changes, because we are talking about putting authorities on economic prosperity boards. Is that just going to be the current sub-strategic partnerships on their current boards but just for the statutory function? How would that work?

  Jonathan Lindley: That is still for the region to determine. There isn't an expectation that they will simply stop being called sub-regional partnerships and start being called economic prosperity boards. They will have to be fit for their new purpose. However, some of them could be the same. There is not the assumption that they will either be the same or be different.

  Q188 Judy Mallaber: Is there some indication that they have not been working well or that they have been working well?

  Jonathan Lindley: No, I think it is an indication that the world is a changing place and that the new arrangements that integrate the strategic planning, both spatially and economically, will require a slightly different approach and so may require slightly different people sub-regionally.

  Q189 Judy Mallaber: Phil, you have highlighted a question about skills and learning, which obviously is an absolutely critical factor. This is another one where there are interesting structural issues. Originally, DIUS was not one of the sponsorship Departments of Government offices. Now I assume it is integrated because it is in BIS. Whether that has come in accidentally or on purpose, I am not clear. We also have the LSC operating separately, yet emda clearly has an important function in relation to ensuring that we develop our skills. How do you see those diverse organisations having to deal with this area working together? How does it affect our ability to focus on improving skills when we have not had DIUS involved originally and we have the LSC working separately?

  Phil Hope: I speak as a former skills Minister and I recognise the complexities of the skills architecture and the wiring, both in terms of the flow of funding and in terms of determining how you identify which skills are relevant for the future and how you ensure you raise skill levels across the board in the region. We have the problem of being, relatively speaking, a low-skill region. There is absolutely no question about it: all the partners—public sector employers, private sector employers and the third sector—have to work together in terms of their work forces to upskill the work force for the future, tapping into the resources that are available through the Learning and Skills Council, but also being guided by some of the economic priorities and the sector priorities that the regional economic strategy and the new integrated regional strategy will identify. Getting that mix right is complicated at national, regional and local levels. It requires that those partners with responsibility for various parts of the skills system work together so that if an ordinary business, let us say, wants to be able to upskill its work force, it should be able just to tap into a very simple, straightforward system of getting the resource it needs and maybe putting some resource of its own in as well, recognising the benefits, to raise the skills of its work force. Part of that will involve an analysis of its training needs as a company. Of course, there are training needs in one setting and then the economic situation changes and it has to re-equip or think through new products that it has to make that will require new skills. The combination—it is complicated—is about trying to put together the right mix of support and help for a business so that it can just get the resource and help it needs and the analysis it needs of what it is as a business. That may start off presenting itself as a training needs analysis and end up as a capital funding problem. A business needs to be able to walk through a single doorway—which is what Business Link is all about—to ensure that it gets access to the right resources for it as a business, for its future and its development. Behind that doorway, the Learning and Skills Council, the East Midlands Development Agency and the national bodies—you have sector skills councils and they set their priorities as well—need to work together. It is not easy just to draw a new diagram, because things have grown up for a purpose—to deliver to individuals and to businesses the kind of support they need. Things such as Train to Gain, for example, are a critical part of the new infrastructure, but so is emda, with its analysis of the broad sectors that we wanted to see develop in the future. This is about not trying to double-guess. It is about being responsive to businesses here and now, but it is also about thinking about the future, what that future might look like and therefore where skills development might need to focus itself, and not just at the lower skill levels—level 1, level 2 and level 3. It is also about engaging with the university sector for foundation degrees, higher-level skills and higher-level apprenticeships. There are a number of players that need to work together. That is the important point about how emda operates with the other bodies to ensure that those things are integrated.

  Jonathan Lindley: I just wanted to add that you will of course know that one of the members of the emda board is vice-chancellor of one of the region's universities, so he does represent that sector.

  Q190 Judy Mallaber: You will know that we met the university sector. You have probably seen the evidence, so you will have seen that they highlighted the fact that they employ 63,000 people in the region and they have a budget of £1.3 billion. They are on the regional economic board. Is there any reason why you have not met them, given their importance?

  Phil Hope: I will have met them on a number of occasions previously. Indeed, I met them only this morning at Derby University with John Coyne. We had a meeting of the regional economic cabinet last November—that long ago—when we were discussing what the right way forward was. We invited, at the end of the meeting of the cabinet, a wider group of stakeholders. Quite a few of the university representatives came to that seminar to talk about the specific contribution that the university sector makes, as well as all the other organisations—the private sector, FE, schools and so on—to creating a successful, strong region. Indeed, for the next-but-one regional economic cabinet, we have invited the university sector to make a presentation about the contribution that they feel they can make and that they need to continue to make. I am particularly interested in the relationship between the higher education sector and the business community, because I think we have some excellent examples of those partnerships, when universities offer incubation settings for small businesses to start up, for example. I met one at Derby this morning. Some people had come back to skill-up and do career changes, in this case around photography and that area of media and creativity, and the university actually helped them to set up a small business. They were saying to me that they had just qualified this year and they were now just launching their business on to the great and good, as it were. That is a good example of the creativity and the new ways of thinking that universities are using. Career development is no longer the milk round, with 21-year-olds leaving university with their degree and getting into jobs. Those days are long gone. Universities need to be out in their communities, working with businesses, the third sector and voluntary organisations, providing opportunities to think about how they are embedded within their local areas. I was at Derby, so I can speak about that from fresh knowledge. It is particularly rooted in the Derby and Derbyshire community in terms of how it operates. That isn't true of all the universities, but I do think it is an important part of a success strategy for universities in future.

  Q191Chairman: Can I just reinforce two points, because I think you are absolutely correct—I can tell you from direct experience—about the taskforce role that you referred to a little while ago? After 9/11, Rolls-Royce had a step change in engine orders and 4,500 people went. Everything swung into action absolutely brilliantly, including emda and Jobcentre Plus. I was very much engaged on a day-to-day basis with doing some of the work for some of the taskforces and some of the work that was undertaken in some of the working parties. It worked absolutely brilliantly well. It was excellent. Notwithstanding that, just to stress the point that Judy made, we received evidence from the trade unions from the manufacturing and engineering sector that they feel that they are big organisations in terms of the economic strategy for the whole of the East Midlands, but that they are frozen out of the process. As Judy was saying, they have a lot of expertise and knowledge to bring to the table, and they have antennae so they can tell what is happening in the manufacturing sector maybe months and months before it triggers off, but they believe that it is not being tapped into by emda, the economic board or anyone. They understandably feel a little aggrieved about that. You may wish to comment on that or think about it.

  Phil Hope: My response would be this: I have worked closely with most of the major trade unions—I am thinking of Unite, but I don't know whether that is the one you are thinking of—

  Chairman: Yes.

  Phil Hope:—in terms of their insights and contributions and the things that they see going on. Rather than picking one particular trade union, because that in itself can carry difficulties as we know, I have a representative from the East Midlands regional TUC on the economic cabinet—at the moment, that post is vacant because of some job changes that have been going on inside the regional TUC, but we will have a permanent person there in future. Working through the regional TUC has been the primary mechanism. I thought it appropriate to work with all the trade unions across the region, not just those in manufacturing, but those with many other concerns and issues about particular sectors. I suppose my response is working through the normal trade union, TUC structure.

    Chairman: I thought it was appropriate to lay down before you how strongly they felt.

    Can we move on to the issue of budgets and emda's budget?

  Q192 Sir Peter Soulsby: As I understand it, emda has got the expectation of a somewhat reduced budget over the next couple of years, which of course it has planned for—it is difficult, but it can plan for it. But last year, it had quite a raid on its budget, as did other RDAs, for the homebuy direct scheme, as I recall. Do you think that it is acceptable to have short-term raids on budgets of RDAs, and emda in particular?

  Phil Hope: I suppose the important thing was the Government needing to respond to something that they weren't expecting, which was the downturn in the housing market, and the need to ensure that we could put into the region resources to support and promote the housing industry, and affordable housing in particular. These were difficult decisions, I think, that the Government had to make at the time, but they were taken in response to the need to reallocate resources into, in this case, the housing sector because of—we all know what happened last year—the banks and so on, and the credit crunch, which meant that it was a real challenge for the housing and construction sector as a result of those changes. A decision was made to reallocate resources, not to take them away from the region, but certainly to reallocate them within the region to different purposes and different priorities, given the immediacy of the concerns at the time about what would happen if we hadn't reallocated the resources in that way.

  Q193 Sir Peter Soulsby: Don't you think it rather undermines the credibility of the commitment to the work of RDAs in general, and emda in particular, if they are seen as a source for short-term funding in a situation like that, rather than looking elsewhere for funding?

  Phil Hope: First of all, I don't think it would be fair to caricature what happened as being just dipping into somebody else's budget to solve a problem. There was a genuine need to look at where resources were being allocated at that time for that purpose. That was a one-off event. It was, as we all know throughout the country, something that came at us as a result of an economic storm from abroad that wasn't anticipated—I think we know that—and there needed to be a swift response at that time. It was a difficult decision—I am not saying that these are easy decisions—but you make a balanced judgement about what's the appropriate thing to do. This was felt to be the appropriate thing to do. That was an important part of deciding to intervene in the housing market in that way—stepping in and not stepping aside from the consequences for the construction industry, for the housing industry, and for individuals and their homes and families. So it was an appropriate thing to do. Moreover, emda, showing its flexibility and its ability to manage its budgets well, has managed to take those changes. It is now planning for a budget for the future, which we know is set to reduce by 5% over three years, in order to ensure that it works within its budgets, finding efficiency and savings, and allocating resources appropriately to manage its budgets well. They are still very large budgets. The Government are still completely committed to regional development agencies. I think that if regional development agencies hadn't existed, we would have been into a far deeper problem of unemployment and recession in the regions, not specifically in the East Midlands. I think any proposals about cutting and abolishing regional development agencies' spend in the regions in the way that others have suggested would be cataclysmic in terms of the regional economy in the East Midlands.

  Q194 Sir Peter Soulsby: I understand the point you made, but I think you'd accept what emda said to us, which was that the bigger the cuts and the shorter the notice, the harder it is to cope. Clearly it is something to be avoided, is it not?

  Phil Hope: I think it is something that every organisation hopes does not have to happen to them. These were exceptional circumstances at the time and exceptional decisions had to be made. It was difficult, but I was pleased with the way that emda responded so well to an immediate challenge of that kind. I understand the point that it would not be the ideal way of doing things, but these were exceptional circumstances that required an exceptional response, and I think, with hindsight, we can look back and say that it was the right thing to do. The wrong thing to do would have been to ignore the impact on the construction sector, the housing sector and people's homes, and just let everyone cope with a random series of changes. That would have been unacceptable. I know it was the view of another party that is not present today, but it is not the view of this Government.

  Q195 Sir Peter Soulsby: Can I take you to an aspect of emda's budgeting that it may be possible to have more control over? That is the flexibility that it has at the end of the year to take budgets from one year to another—end-year flexibility. That, as I understand it, was taken away from emda and, I assume, from other RDAs a couple of years ago. Is there any positive case to be made for that except that, I assume, it is what the Treasury demands?

  Phil Hope: I don't want to enter into too much of the Treasury's territory, because you normally get your wrists slapped if you do that as a Minister.

  Sir Peter Soulsby: I am trying to make a positive case for it.

  Phil Hope: What has been interesting is that we have been doing, I suppose, the reverse, which is bringing some spend forward. Spend allocated for future years has been brought forward in order to maintain—indeed, increase—public spending at a time when the recession is at its deepest. That has been a deliberate policy, particularly in relation to capital spend. The region has definitely benefited from that decision, not least in relation to, for example, the Department for Transport and the road infrastructure in the East Midlands. We have benefited from bringing forward the road spend. I hope that decisions by recently elected local authorities don't undermine some of those decisions, because if we don't have support for the tram system, for example, that undermines the case for the road building for Nottingham that we have brought forward. There are some really important structural, long-term developments in the region that we need to pay attention to. I think that that is right. I understand your point about end-of-year flexibilities—where we started—and about organisations valuing that. No doubt you will make your own representations to the Treasury on those grounds as well. The bigger story is less about that end-of-year flexibility. The more important thing is being able to respond quickly when we brought spending forward from later years. We should make sure that we make the best use of that resource here and now to support people through the downturn.

  Sir Peter Soulsby: Which is indeed very positive, but it is not a case for not restoring end-of-year flexibility. Mr Lindley is trying to get in.

  Jonathan Lindley: I was just going to make a point. It is a very topical issue because, of course, part of the bringing forward of capital expenditure as part of the fiscal stimulus package was the £174 million—or £170-something million—from the Department for Transport for the A46 dual carriageway. I believe that the first turf was dug for that yesterday, so it is actually stimulating right now in the East Midlands with a huge sum of money.

  Q196 Sir Peter Soulsby: But it is the case that the lack of end-of-year flexibility can be really quite perverse in the results that it leads to, is it not, Mr Lindley?

  Jonathan Lindley: That's a matter for Treasury officials, of course, rather than for me. I have to manage an annual budget like anyone else.

  Sir Peter Soulsby: Of course, there's no point in pressing that with you.

  Q197 Chairman: We have more than touched on the recent local economic climate. In terms of that, who took the lead in ensuring that businesses throughout the East Midlands were made aware of the financial support that was available? Who took on board that role—GOEM, emda or you, Minister?

  Phil Hope: I think that we all played a part in making sure that businesses did know. The first thing to do was to make sure that the services that businesses needed in terms of getting through a downturn were there and that they were responsive and changed to suit their needs. For example, Business Link through emda did a magnificent job in responding to the different circumstances in which businesses now find themselves. So, there were different forms of advice. There was a lot of outreach work that emda organised—not least the thrive and survive workshops that went on in late autumn and around that time. That made a big difference. As I said earlier, that has been a model that I know other regions are now using. The rapid response service that I mentioned earlier was something, again, that was co-ordinated through the partnerships between emda.

  Q198 Chairman: That's been around a long while. I am talking about under the current economic climate. Additional money has been made available. Who is responsible for it and how effectively was that information pushed out to businesses?

  Phil Hope: A major thing that we did was that we were the first regions to launch the real help now services and the new advice that was available for businesses and, indeed, families throughout the East Midlands. I was delighted to be with the Prime Minister when that launch happened—it happened to be in Corby in my constituency. We then did a major programme. We've published our own document as a regional economic cabinet, which has been widely circulated. That spelled out the various forms of help and advice that are now available. That has been proven to be very successful, because all the different partners have signed up to it, and it shows the linkages between people. My idea would be that wherever you are—wherever you enter into the system as an individual, a trade union, or a business wondering where the help is—you get steered towards the sort of service that you might need to suit your individual circumstances.

  Q199 Chairman: Are you pleased with the job that emda did?

  Phil Hope: I think emda did a very good job in responding flexibly and swiftly to the new economic environment in which many businesses were finding themselves.


 
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