House of Commons - South East Regional Committee

South East England Development Agency and the Regional Economic Strategy - South East Regional Committee Contents

Memorandum submitted by HM Government (SE 04)

SUMMARY

Real Help in the South East

— The Regional Development Agencies (RDAs) are making a real difference to the economy. An independent study by PricewaterhouseCoopers has shown that, overall, every pound spent by SEEDA over the period 2002-07 has created an average of £5.60 in value for the region. Jobs created with assistance from SEEDA have contributed £2,639m to the SE economy during the same period. The recent BERR Select Committee also noted strong support overall for RDAs, particularly in relation to their business focus.

— Implementation of the Review of Sub-National Economic Development and Regeneration (SNR) will strengthen SEEDA's role, promoting more effective joint working between SEEDA and local authorities in delivering a new Regional Strategy for the South East that integrates spatial and economic priorities to deliver an environment that enables sustainable economic growth.

The role, responsibilities and accountability of SEEDA

1. The Regional Development Agencies Act 1998[3] sets out the roles, responsibilities and accountability of England's RDAs. Section 4(1) of the Act sets out the following purposes for each RDA, applying equally to both rural and urban areas:.

(ii) to promote business efficiency, investment and competitiveness in its area;

(iii) to promote employment in its area;

(iv) to enhance the development and application of skills relevant to employment in its area; and

(v) to contribute to the achievement of sustainable development in the United Kingdom where it is relevant to its area to do so.

2. Corporate Plans provide full details of how the RDAs will allocate their budgets to deliver progress in meeting the objectives set for the Agency by the region's RES, and how this activity will contribute to the targets that the RDAs have been set.

3. RDAs are not the only contributors to the economic development agenda in their regions. Other Government agencies play a key role—for example the Learning and Skills Council (LSC) and Jobcentre Plus (JCP)—as well as local authorities and the third sector. But the private sector contribution is also hugely significant. By way of context, BERR's Regional Competitiveness and State of the Regions Report (May 2008)[4] shows that, between 1998 and 2004, total investment by UK and foreign owned companies in the South East region averaged £12.9 billion per annum. SEEDA's budget between 1999[5] and 2004 averaged around £106 million per annum.

4. SEEDA is accountable nationally to Parliament through the Secretary of State for Business. Regionally, the organisation is accountable to its Board and through its annual public meeting to partners. Until recently, all RDAs were scrutinised by their Regional Assembly. The South East Regional Assembly dissolved in March 2009.

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

5. The RDA Act (1998) required the RDAs to develop a strategic vision for each of their regions set out in a Regional Economic Strategy (RES). Government issued statutory guidance (revised version 2005)[6] to the RDAs on how they should draw up their RES. The guidance applied five criteria for developing sound economic strategies—evidence, analysis, consistency, realism, and uniqueness—to ensure that each RES would make a clear and effective contribution to the REP PSA.[7]

6. The guidance recognises the RES as a document owned by the region and recommends alignment with other regional strategies including the Spatial Strategy and the Sustainable Development framework.

7. A report by the National Audit Office in 2006[8] noted that the inclusiveness of the consultation process that accompanied the development of the 2006-16 South East RES attracted near unanimous praise from partners and stakeholders.

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

8. As the representative of twelve central government Departments[9] in the region, the role of the Government Office for the South East (GOSE) is to promote the integration of Government policies and programmes at a regional and local level in a geographically sensitive way. GOSE supports 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). GOSE's corporate plan for 2008-11[10] explains how the Office supports the region's priority issues.

9. GOSE supports SEEDA in delivering the aims of the RES through membership of the RES Steering Group,[11] the aim of which is to support delivery of the RES targets and implementation plan, ensuring widespread ownership of the agreed actions. In addition to SEEDA, a number of other statutory agencies have a role in supporting relevant aspects of the RES. GOSE provides a clear national policy steer and has played an important role in ensuring that the RES and its implementation plan set a clear framework for economic indicators in LAAs and MAAs. For example, the South Hampshire MAA[12] is a key delivery vehicle for sub-regional economic priorities, reflecting effective joint working between SEEDA and local authority partners under the auspices of PUSH (the Partnership for Urban South Hampshire).[13]

10. Half of the 14 RES targets are led by SEEDA with the other half led by other organisations, but all are delivered by a range of partners working together across the region. By way of illustration, the LSC, SEEDA, JCP and local authorities are the key regional delivery partners for implementation of RES target 6.[14] Other stakeholders are involved through the Regional Skills for Productivity Alliance and associated networks. Local authorities have a particular role through "14-19 strategic partnerships" and Childrens' Trusts for raising levels of aspiration and achievement for young people. GOSE supports delivery of this target by:

— providing support to the Regional Minister's work on employment and skills;

— challenging and supporting the work of regional partners;

— negotiating challenging employment and skills targets in LAAs, which are aligned with the RES;.

— providing strategic direction to the European Social Fund Programme to ensure alignment with the RES; and

— helping facilitate ongoing delivery as LSC functions transfer to Local Authorities, the Young People's Learning Agency and the Skills Funding Agency.

The effectiveness of the RES for the South East in delivering against its targets including the degree to which the regeneration of areas of deprivation and the former coalfield areas has been successful

11. It is for SEEDA to inform the Committee on the impact of the RES in delivering its targets. This response is intended to set that information into the wider context of Government policy on these issues.

12. Overall, the South East is the least deprived region in England on the measure of Indices of Deprivation (IOD) 2007.[15] However, this masks considerable variation within the region. The IOD offer a general overview of deprivation across a range of issues. IOD 2007 showed that 318 Lower Super Output Areas (LSOAs) in the South East lie within the lowest quintile[16] nationally on the Index of Multiple Deprivation. The South East accounts for only 4.9% of the most deprived quintile of LSOAs in England, but nearly one third of the LSOAs in the least deprived quintile.[17]

13. Between the 2004 and 2007 Indices, the South East rankings shifted slightly towards the more deprived end of the scale with an increase of 47 (17%) in the number of LSOAs in the lowest quintile nationally.

14. As the map below shows, the most deprived areas in the South East lie on the south coast or in the major urban areas. It is however, noticeable that there are some more scattered pockets of deprivation generally in the region, including in rural areas, and often surrounded by relative affluence.

15. For context, the physical and economic regeneration addressed through the RES should be considered alongside social regeneration. The impact of broader Government regeneration investment in the South East since 1999 is set out in Table 1.

Table 1

EXAMPLES OF THE BROADER REGENERATION INVESTMENT ACROSS THE SOUTH EAST SINCE 1999

Funding Source	Timescale	Level of Funding	Geographic Coverage	Objectives and Impact
Neighbourhood Renewal Fund	2001-08	£2 million	Brighton & Hove; Hastings; Portsmouth; Southampton	To target Community Safety; Education; Health; Environment/Housing; Employment and Enterprise in the most deprived areas of the South East. Portsmouth and Southampton only received funding until 2006 because IMD score improved sufficiently.
Working Neighbourhood Fund	2008-11	£7.6 million	Thanet; Hastings	Combatting deep seated worklessness in most deprived areas as identified by 2007 IMD.
New Deal for Communities	1999-2011	£96 million	East Brighton; Thornhill (Southampton)	Resident-led initiative focussing on closing the deprivation gap in relation to Community Safety; Education; Health; Environment/Housing; Employment and Enterprise. MORI data shows good improvement in positive perception of local area, crime prvention and education for adults although tangible broad improvements in health, worklessness and youth education attainment are less obvious.
European Regional Development Fund Obj 2	1997-99	£12 million	Thanet	Scheme designed to address unemployment. 2,600 jobs created or safeguarded.
European Regional Development Fund Obj 2	2000-06	£26 million	Thant; Hastings	Objective 2 is aimed at the regeneration of areas of economic deprivation. It has created or safeguarded over 2,000 gross jobs (1,700 in net terms) and 270 businesses
Coalfields Regeneration Trust	2005-08	£396k	Dover	Key agency promoting social and economic regeneration in former coalfield areas. This includes initiatives helping people into work, supporting communities through helping find suitable training and employment. 65 local groups supported—many from voluntary/community sector.
Rural Development Programme for England	2007-13	£60 million	South East	Social and economic objectives. Now managed by SEEDa; expected to make a real contribution to delivery of RES objectives in rural areas.
European Social Fund	2007-13	£190 million	South East	Programme focuses on reducing workless ness among disadvantaged including those facing multiple barriers to work and developing a skilled and adaptable workforce.

16. Looking more broadly at the impact of the RDAs, PricewaterhouseCoopers (PwC) were commissioned by BERR in December 2007 to bring together the evidence on the economic impact of RDA spending.[18] The study looks at the impact of £580 million spent by SEEDA and reviews 25 evaluations covering spend of nearly £470 million by SEEDA between 2002 and 2007.

17. The report concludes that there is credible evidence that all RDAs have generated regional economic benefits which exceed their costs and add value to their regions. Overall, the average return of RDA programmes is at least £4.50 for every £1 spent during the life of the RDAs' programmes. While there are variations across programmes, generally business support programmes generate the highest economic impact relative to their cost; physical regeneration has significantly lower returns, particularly in the short to medium-term; and people and skills interventions also have lower returns- evaluation of the latter did not include productivity gains. At the regional level, PwC evidence to SEEDA shows that jobs created with assistance from SEEDA have contributed £2,639 million to the South East economy from 2002-07 and every £1 spent by SEEDA over this period has created an average of £5.60 in value for the region.

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

18. 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.

19. 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.

20. 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.

21. Implementation of those elements of the review that require legislation is now being taken forward through the Local Democracy, Economic Development and Construction Bill, which is currently proceeding through Parliament. 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 2009.[20]

22. The Government would specifically highlight the importance of the new Regional Strategy, being introduced through the LDEDC Bill, which will bring together existing regional economic, spatial and other strategies. The Regional Strategy 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.

23. A new South East England Partnerships Board (SEEPB) is being established jointly between SEEDA and a local authority Leaders Board[21] that will lead on the development of the SE Regional Strategy. Close partnership working between SEEDA and local authorities will be a feature of the new arrangements.

24. Pending the new legislation, and following the dissolution of the Regional Assembly on 31 March 2009, the Government has recognised the SEEPB as a replacement Regional Planning Body (in line with existing legislation).

25. SEEDA and the Leaders Board plan a number of delivery boards and working groups to help steer specific aspects of the new Regional Strategy. They are currently considering the detail around the roles and membership of these different groups and the relationship between them, working closely with delivery agencies and with social, economic and environmental stakeholders.

The effect of the financial and economic situation on businesses in the region including the effect on different sectors such as manufacturing, service industries etc

How effective initiatives such as Business Link are being in assisting businesses in the current climate, including helping them to gain access to funding both from Government funding streams and through the banking system

26. SEEDA is the Government's lead economic agency in the South East. They provide regular economic intelligence reports to Government via BERR and the Council of Regional Ministers.[22] GOSE provides the context and soft intelligence. SEEDA's evidence to the current inquiry will address the Committee's specific questions in this area. However, SEEDA works in the context of the wider Government response to the economic situation, and that response is outlined here.

27. The regional response to the current economic situation is led by the South East Economic Delivery Council (SEEDC)[23] which is jointly chaired by the Minister for the South East and the Chair of SEEDA. SEEDC provides a forum for business, the public sector and the third sector to agree collective action to tackle the specific issues currently affecting the SE economy. It also feeds local intelligence into central Government policy making, particularly through the Chairs' membership of the Regional Economic Council.[24]

28. The Government's response focuses on the impacts of the recession on individuals, local authorities and the third sector, as well as on businesses. The wide range of regional and national support available is set out in the "Real Help for the South East"[25] document.

29. In terms of business support, region-specific examples include SEEDA's £3 million Transition Fund for businesses facing difficulties in obtaining credit. The Continuing Employment Support Service, a joint SEEDA/JCP initiative provides support to workers facing redundancy.

30. Some of the key national support available for business is set out below. All figures are national except where stated.

HELP WITH BUSINESS FINANCES

Enterprise Finance Guarantee Scheme

31. Government will provide £1bn of guarantees to support up to £1.3 billion of bank lending to smaller firms. Over 230 businesses in the South East have been offered loans to date, with a potential lending value of almost £23 million.

Working Capital Scheme

32. The Working Capital Scheme (WCS)—will provide banks with capital relief by guaranteeing portfolios of loans and enable additional new lending to businesses.

Capital for Enterprise Scheme

33. 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. Several hundred businesses nationally have registered their interest.

More Time to Pay Tax Bills

34. The new Business Payment Support Service offers viable businesses in temporary financial difficulty a streamlined service for arranging to pay their HMRC tax bill to an affordable timetable. In the SE, around 17,000 time to pay agreements have been made to spread the payment of tax, amounting to £300 million. This is more than any other English Region.

Regional lending roadshow

35. On 21 April 2009, Ministers will be holding a roadshow with businesses and representative bodies in the South East, focusing on what Government has done to get banks lending again and the Real Help available for businesses facing the current economic downturn.

Help with Managing Businesses

36. 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.

Health Checks for Businesses

37. Small and Medium sized Enterprises can get a free review of their business with a professional business advisor. The "Health Check" offers a holistic review, looking at all key aspects of the business. Since October 2008 over 7,000 businesses have benefited in the South East. Key issues emerging focus on marketing activity on customer retention; identifying new markets and widening the customer base and maximising cash flow. Other key issues include: tightening payment terms & conditions; trying to reduce dependency/risk from reliance on one major supplier or contract; formalising HR policies and procedures; putting staff onto more flexible employment contracts; and reducing overheads.

38. Business Link advisors are the Government's "front line" in helping small businesses through the recession and ensuring those with growth potential can help accelerate the upturn when it arrives.[26] The South East has a team of Advisors directly supporting businesses. These staff are funded from the £24 million core Business Link funding and £6.1 million Skills Brokerage funding provided by SEEDA. In the 12 months to end December 2008, they supported more than 17,500 businesses to develop plans for growth. In the same period, the Business Link Customer Service Team (47 strong) worked with 142,154 customers (41% of the business base) via the phone, web, email and at small events. Of these, 93% were satisfied overall with the service received. In addition, the regional Business Link website has seen increasing activity with a peak of over 1,200 new registrations for the South East in January 2009.

Real Help with Training

39. 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 next year. 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 Job Seekers Allowance 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 focused support for small and medium-sized enterprises (SMEs).

40. Further funding of £190 million is available through the EU Competitiveness and Employment programme and the European Social Fund budget. This is focussed on extending employment opportunities by training for disadvantaged groups and in developing a skilled and adaptable workforce by supporting those already in employment. Funds are used to complement the other training activity such as Train to Gain and delivery in the South East is through SEEDA, the Learning Skills Council and Jobcentre Plus (on behalf of DWP).

Train To Gain And Business Link

41. As part of the Government's "Solutions for Business" initiative, the Train to Gain skills brokerage service has come together with Business Link offering a joined-up service to simplify access to information for employers and providing free, impartial advice to help them improve and grow their businesses, and encourage them to develop a more highly skilled and qualified workforce.

— The Index of Multiple Deprivation (IMD 2007);

— Income Deprivation Affecting Children Index 2007 (IDACI 2007);

— Income Deprivation Affecting Older People Index 2007 (IDAOP 2007).