House of Commons - The impact of the current economic situation on the North West and the Government's response

The impact of the current economic situation on the North West and the Government's response - North West Regional Committee Contents

4 The role of the NWDA

109. The Regional Development Agency (NWDA) is responsible for stimulating the economic growth and regeneration of the North West. As we have seen this includes managing Business Link Northwest (see para 75, Chapter 2), working with partners on the Regional Skills and Employment Board (see para 33, Chapter 2) and investing in businesses and communities. In this Chapter we consider the NWDA's priorities, performance and budget.

NWDA priorities

110. The NWDA's five key priorities or areas of work are: Business; Skills and Education; People and Jobs; Infrastructure; and Quality of life.[146] However, in March 2009 the Secretary of State for Business, Enterprise and Regulatory Reform (now Business, Innovation and Skills), Lord Mandelson, asked all the regional development agencies (RDAs) to "reprioritise and focus sharply on measures to help their regions through the downturn and prepare for the upturn". He explained:

I am asking the RDAs to focus, working with and through others: as an immediate priority, on providing assistance to business; for the medium-term, on stimulating the recovery and growth; and for the longer term, on restructuring and developing each region's strengths, supporting its growth and competitiveness in the future.[147]

111. Lord Mandelson also announced that RDAs would have to update him on:

[…] the immediate priorities they have agreed with their Regional Ministers and partners and stakeholders such as the Homes and Communities Agency and local authorities. These should be set out in Corporate Plan updates so that there is clear visibility of everything they will be doing for the region over the period.[148]

112. The NWDA sent its updated Corporate Plan, Corporate Plan Refresh 200-2011, to the then Department for Business, Enterprise and Regulatory Reform (BERR) before the end of May 2009. Since the revised Plan was a refreshed rather than a new document the NWDA agreed with BERR that the Plan did not have to be submitted to formal public consultation.[149] Nevertheless we asked the NWDA how it had gone about the process of developing the Plan. Mr Broomhead told us that rather than a full consultation the NWDA had decided to take advice from "about 20 partners".[150]

113. The NWDA's Corporate Plan Refresh was published on Friday 3 July. The Plan states that the NWDA's revised priorities are as follows:

NWDA investment will focus on support for business, with a direct or one step removed impact on business. In general, the NWDA will therefore only invest in the following:

Enterprise support and growth sectors (including tourism)
Innovation and its commercial exploitation
Capturing the benefits of globalisation
Development of enterprise skills and aptitudes—attracting talent and releasing potential
Creating high value jobs (or any jobs in deprived areas)
Creating the conditions for private investment to achieve sustainable economic growth and regeneration.

However, we will continue to use our staff resources and strategic influence to support the sustainable development of the region in its widest sense.[151]

Performance

114. Most of our witnesses were very positive about the work of the NWDA and the manner in which it had responded to the economic downturn, in particular the restructuring of Business Link to provide additional support to businesses (see para 75 above, Chapter 3).[152] Manchester Airport expressed some concern about what it described as "a tendency [of the NWDA] to become distracted from the key economic drivers for the North West, in its efforts to build consensus across the whole of the region",[153] but most witnesses took the view that the Agency had responded appropriately. Damian Waters of the CBI, for example, praised the Agency for acting quickly to reorganise its priorities:

What it did well was very quickly look at priorities, restructure some of its budget lines and try to put some real help out into the economy. […] That has made a difference.[154]

115. Where there were criticisms about delivery, the general view was that the Agency had been let down by central Government delay[155] (see for example Venture Capital Loan Fund, para 96, Chapter 3) or failure to give the NWDA a "more prominent role" (see the Enterprise Finance Guarantee scheme para 92, Chapter 3).[156] Private Sector Partners NW Limited , for example, told us:

We have been impressed by the NWDA's fast realignment of its people and other resources in offering support to private businesses. It has not been helped by the confusion and inertia of central departments of Government when translating statements into action.[157]

116. A couple of witnesses also argued that it was wrong to think of the NWDA as a delivery body.[158] For example, Alan Manning of the TUC told us:

[…]It is the role of a regional agency to take strategic decisions to marshal resources, and to mobilise resources. But for delivery, we are talking about sub-regional partnerships and more local mechanisms to ensure that we are getting services to where they are needed.[159]

117. The FSB argued that the NWDA should make more use of the private sector for support and advice. It suggested that lengthy consultation documents, as well as overly demanding job descriptions for NWDA Board members, might be putting off owners of small businesses from offering their assistance. However, overall it told the Committee that the FSB's relationship with the Agency and Business Link had "improved significantly in recent years".[160]

NWDA budget

118. As part of the Comprehensive Spending Review (CSR) 2007 settlement, the budgets for all regional development agencies (RDAs) for 2008-2011 were reduced by 2.5% (£320 million). In addition, the RDAs were tasked with achieving efficiency savings of about £350 million.[161]

119. Since the CSR 2007 settlement, RDA budgets have experienced further cuts. £300 million was diverted from the Department for Communities and Local Government's funding stream in September 2008 to finance the Government's Homebuy Direct Scheme; the Winter Supplementary Estimate 2008-09 made further reductions; and the Department for the Environment, Food and Rural Affairs' contribution to the RDAs was reduced by £17.088 million due to the Department's need to set a balanced budget for 2008-09.[162]

120.  The RDAs revised allocated budgets in 2008-09 are set out below, together with their indicative allocations for 2009-10 and 2010-11. As the table shows, the NWDA has the biggest allocation of all RDAs in 2008-09 and 2009-10, and the third highest budget per head (for 2008-09).
Allocated budgets for RDAs for 2008-2011

—  Total RDA Allocation by Region —  £ million —  £ million —  £ million —  Budget per Head (£)

—    —  2008-09 —  2009-10 —  2010-11 —  2008-09

—  Advantage West Midlands —  296 —  294 —  212 —  55

—  East of England Development Agency —  132 —  135 —  108 —  23

—  East Midlands Development Agency —  161 —  160 —  131 —  37

—  London Development Agency —  346 —  375 —  326 —  46

—  North West Development Agency —  385 —  397 —  305 —  56

—  One NorthEast —  245 —  249 —  195 —  96

—  South East England Development Agency —  161 —  165 —  133 —  20

—  South West of England Regional Development Agency —  170 —  156 —  125 —  33

—  Yorkshire Forward —  297 —  317 —  228 —  58

—  TOTAL [Single Budget][163] —  2,193 —  2,248 —  1,762 —

Source: www.bis.gov.uk

121. The NWDA's revised Corporate Plan states that the total cuts to its budget for 2008-2011 amount to £71.9 million. Of this, £54.3 million is due to the transfer of funding to the Homebuy Direct Scheme. The Corporate Plan suggests that this cut will impact predominantly on Agency investment in 2010-2011. It adds that the Agency's income will also be reduced in that year due to capital programmes being brought forward to 2009-2010. As a result of both of these factors, the Agency will only have £276.7 million available in 2010-2011for investments, compared to £381 million in 2009-2010.[164]

122. We asked the NWDA what funding cuts had meant for its work and its priorities. Mr Broomhead told us that the NWDA's revised priorities arose out of the challenges posed by the recession rather than the Agency's reduced funding but admitted that there would "clearly […] be areas of activity that the agency will not be able to support in the way we have done before". He added that the NWDA would therefore have to be "much more careful and rigorous about the way in which we assess our projects, looking for a very strong relationship with the HCA, particularly on physical regeneration, and with the Skills Funding Agency when it is created next year" and told us that he had written to the NWDA's regional partners to explain how the Agency would operate in future.[165]

123. We asked the Minister whether in light of cuts to its budgets the NWDA had sufficient resources to carry out its role effectively. He suggested that a number of factors meant that the NWDA's budget could be "more focused":

The cancellation of the referendum on the Regional Assembly, the refocusing of the regional structure and the development of the city regions and the local area and multi-area agreements meant that we could have a bottom-up approach.[166]

124. This view was reiterated by David Higham of GONW who told us:

When we look at the NWDA budget of about £400 million a year and the size of the North West economy, which is worth about £120 billion, focusing on the budget itself rather underplays the role of the development agency. The key issue for the development agency is how it uses its budget to lever in other forms of funding, and how it uses its leadership in the region to influence other agencies. […] While it is tempting to look at the budget itself, that gives a slightly misleading impression of the role of the agency. The agency continues to play a very important role in taking the region forward, and will continue to do so.[167]

125. However, the North West Business Leadership Team's submission to our inquiry expressed concern about the budget cuts:

Whilst readily understanding the political imperative for introducing schemes such as the Home Buy initiative last autumn, we regretted the necessity for this to be funded by a substantial reduction in the budget of the NWDA for two years. […] we believe that the strongest defence against regional economic problems is strong leadership behind a clear, long-term strategy. NWDA has demonstrated its ability to provide such strategic regional leadership and we would be concerned if its ability to fulfil this role were to be further diminished by any additional cuts during the current recession.[168]

126. We conclude that the NWDA refocused its priorities quickly and appropriately in response to the economic downturn. However, we are concerned about the impact budget cuts will have on Agency investments, particularly in 2010-11 when the transfer of funding to the Government's Homebuy Direct Scheme will hit the NWDA's budget hard. We recommend that the Government details the investment projects which the NWDA has had to cut or cancel as a result of this reduction in funding. We also ask the Government for a commitment that there will be no further cuts to the Agency's budget over the 2008-2011 period.

146 www.nwda.co.uk Back

147 HL Deb, 31 March 2009, WS 81 Back

148 HL Deb, 31 March 2009, WS 81 Back

149 NWDA, Corporate Plan 2008-2011 refresh for 2009-2011, 3 July 2009, p 2 Back

150 Q 90 Back

151 NWDA, Corporate Plan 2008-2011 refresh for 2009-2011, 3 July 2009, p 2 Back

152 Ev 102, Ev 55, Ev 83, Ev 45 and Q 2 Back

153 Ev 41 Back

154 Q 29 Back

155 Q 20 Back

156 Ev 45 Back

157 Ev 102 Back