Examination of Witnesses (Questions 184-199)
TIM GEBBELS,
RICHARD HUTCHINS
AND MICK
LAVERTY
29 JUNE 2009
Q184 Chairman: We have a great
deal to get through today, so we thought that it would be worth
starting a few minutes early. I welcome you to this meeting. It
is the first meeting of the Regional Select Committee that has
been held in the House of Commons. As you know, a number of evidence
sessions were held in the region, and they were very useful. We
hope that your evidence session today plus an evidence session
with the Regional Minister straight afterwards will be the concluding
evidence sessions of the inquiry. All being well, we shall be
able to get our report out in the next few weeks. We hope that
this will be the first of a number of sessions that we can have
with you both formally and informally, because Advantage West
Midlands's role in the region is crucial to the performance of
the region as well as to our work. Will you start by introducing
yourself and the members of your team?
Mick Laverty: I
am Mick Laverty, Chief Executive of Advantage West Midlands.
Tim Gebbels: I am Tim Gebbels,
Corporate Director, Strategy and Communications, Advantage West
Midlands.
Richard Hutchins: I am Richard
Hutchins, Corporate Director, Economic Development.
Q185 Chairman: We are going to
ask you a number of questions about the current economic situation
and its impact on the region. Perhaps by way of introduction,
I can ask you a broader question on the guidance that you have
been given by Lord Mandelson. In March, he asked all RDAs to "Reprioritise
and focus sharply on measures to help their regions through the
downturn and prepare for the upturn ... 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."
He was certainly of the view at that stage in March that there
needed to be a reprioritisation to address the changing economic
situation. How have you managed to respond to that so far, and
how are you reprioritising your priorities in light of the recession?
Mick Laverty: It is something
that we were in the throes of doing anyway. We were doing it because
very recently the Department for Business, Enterprise and Regulatory
Reform concluded an enormous evaluation exercise that had been
going for the best part of a year and a half. It sought to ask
the question of each regional development agency, "What have
you got for every pound that has been spent? What works well?
What works less well?" In the case of Advantage West Midlands,
the conclusion was a very positive outcome of a £7.45 return
in due course for every pound that we have spent so far. The report
gave us an enormous amount of detail within the overall portfolio
of our activity of what works well and what works less well, and
what you get an immediate payback for and what takes a bit longer.
We were in the process of looking at our corporate plan anyway
and learning the lessons from the evaluation study so that we
could redirect our resources more sharply to those activities
to help those communities and businesses that are suffering as
a consequence of the recession, and also to keep an eye on the
medium term. It would be wrong of us just to respond to the recession
without having one view on the underlying issues faced by the
regional economy. We were in the process of doing that when Lord
Mandelson's letter came out. We were very happy to do it. It was
very consistent with what we were thinking. One of the things
that our evaluation was showing was that some of the support for
businesses had a more immediate payback than some of our other
activity. In consequence, we have increased the amount of cash
that we are spending on business support activities over the two-year
period—this year and next year—and, in overall percentage
terms of the money available, we have gone from something like
42% spend supporting business activities to about 52%. We have
shifted our focus somewhat. That has meant invariably that other
areas have suffered. On what we call the "place agenda",
which is our physical regeneration activity, we focus on the 20
investment locations that we have agreed with our partner organisations.
Those 20 investment locations are where we have all agreed that
there is a priority to invest, because most of the investment
going around the region in places such as Longbridge and Sandwell,
with which you will be very familiar, requires a cocktail of funding
from a variety from partners. We are very happy to do what Lord
Mandelson asked us to do—we were in the process of doing
it anyway. How we have done will be reviewed, as will every single
project. We will make sure that every project that we are contractually
committed to goes ahead and that every project that we had approved
more or less goes ahead. We have tested the pipeline and outline
projects on which we were working with partners against the new
prioritisation framework and have decided whether they are in
or out. We are in the process of writing to those partners to
say whether their projects are in or out. As it happens, we said
that we will conclude the exercise by the end of June.
Q186 Chairman: Okay, thank you.
In due course, I shall probably ask you a little more about what
that means, both sub-regionally and sectorally. As for the actual
overall amount of resource that is available to you, part of the
thing about reprioritisation is responding not just to the changing
circumstances, but to the changing budgets as well, particularly
your budget. For the record, by how much have you had your 2008-09
budget reduced and what is expected for the 2009-10 allocation?
What is the impact? What areas are you having to reduce as a result
of those budget savings, as opposed to simply saying, "We're
shifting our priorities to new areas, because we think this is
the right way to cope with the changing economic situation."?
Mick Laverty: We have a three-year
corporate plan, which covers the period 1 April 2008 to 31 March
2011. That was agreed in May 2008. Since that was announced—that
corporate plan being agreed by the Department this time last year—we
have had £48 million in budget cuts and we have had to look
at our receipts again, because our ability to generate capital
receipts underpins our income as well. We have reduced our forecast
on the receipts that we can generate by about £21 million.
We have put a package of support together, to support companies
through the recession—we announced last September about
£60 million, beginning the refocusing already. In terms of
lost money, the figures are £48 million in budget cuts and
£21 million in receipts. The headline figure is that we have
lost nearly £70 million in resources. We had already done
some refocusing, and we are in the process of refocusing further
on the back of the information that we have now got from the evaluation
that shows us where the money is best spent. In terms of winners
and losers—if that is the way that you want to portray it—the
winners are more support for business and the losers are some
of the stuff around our place agenda. We have spent less on place
and more on business in broad terms.
Q187 Chairman: What are the consequences
of that?
Mick Laverty: The consequences
of that for the place agenda are that we have focused down very
sharply, mainly on the 20 impact locations that we agreed with
all our partners, the Homes and Communities Agency, the Learning
and Skills Council, the Highways Agency and local authorities.
We have all got together and said, as part of the Government's
regional funding advice exercise, "Which are the places with
the highest priority collectively for all of us?", because
most of the investments in those areas are a cocktail of funding.
So, outside those 20 impact investment locations, it is going
to be very difficult to support physical generation activity going
forward.
Q188 Chairman: And how is the
exit? Where you have to reduce your contribution, how are you
managing the exit strategies?
Mick Laverty: As I said earlier,
we have managed, because we have not overextended ourselves. We
can honour every contractual commitment that we had and pretty
well every approval that we had given to a partner—we had
approved a lot of stuff but not contracted it. We have managed
to follow through on those. The stuff that is suffering is what
is coming through, either outline approval or where we were just
in discussions with partners. We have tended, where we can, to
try and reduce the scope of a project. If it is an attractive
project, clearly we cannot reduce the scope of the project, unless
it is not performing. If it a project that we have not yet contracted,
we have a look to see whether we can reduce the amount that we
put in the project, for the same sort of outcomes that we can
get if we spend the money elsewhere. We have had some success
there, because there are things such as European regional development
fund funding, for example, and the rural development programme,
which is a rural European Commission fund that we can use instead
of some of our own resource, and there are one or two projects
that we have managed to work alongside organisations such as the
Higher Education Funding Council for England, to make sure that
a project goes ahead, but with a slightly different funding mix.
Essentially, having gone through all the projects to see whether
we can scale them back slightly, does it make sense to bring other
funding in? It has been more about, if I am honest, "Do we
proceed with the project at all?" You cannot partly do everything.
It is better to say, "These are our priorities and, unfortunately,
these aren't our priorities", therefore we won't do them
at all and will focus on these ones.
Q189 Joan Walley: What bothers
me is that this reprioritisation that has come about as a result
of the new business department is really penalising parts of the
region, like Stoke-on-Trent, isn't it? If the regional development
agency has got priorities that are partly place and partly business,
the way in which these priorities have been drawn up has not really
been with a full debate about where the 20 impact locations should
be. My sense, in North Staffordshire and Stoke-on-Trent, is that
the really important place locations—for example, the town
centre work in Burslem—are not really able to figure in
the priority list because of these changed priorities. So, what
can AWM do to make sure that areas that need it most do not miss
out most?
Mick Laverty: The first thing
to say is that North Staffs hasn't lost out. Stoke city centre's
business district and university quarters are part of the region's
impact investment locations. The amount of money we've earmarked
for those two schemes alone is approaching £50 million. That
is a significant amount of investment from Advantage West Midlands.
In the case of the university quarter, that cocktail of funding,
which is a multi-partner project, was anticipated to be nearly
£300 million. It is clearly disappointing that the further
education college did not get the go-ahead from the LSC. That
project will proceed in a slightly reconfigured way. Enormous
amounts of public sector funding are going in. To directly answer
your question, if we focus on 20 impact investment locations,
de facto, if you are not one of them, we are not focusing on you.
This is about choices. We have reduced resources, information
that tells us where our money is best spent, an instruction from
the Government to focus more on business spend and the results
of the impact evaluation, which tell us where we get the biggest
bang for our buck. We are doing all that. Unfortunately, with
limited resources, you can't do everything.
Richard Hutchins: Sub-regions
such as Stoke-on-Trent benefit from all the region-wide activity
that we take forward. That is through business support and Business
Link, for example, with the manufacturing advisory service and
so on. That support is available in all parts of the region. In
Stoke-on-Trent, for example, 2,802 businesses received help from
Business Link over the past year. There are specific projects
that directly impact on a sub-region, and there are region-wide
projects that benefit all parts of the region, including Stoke-on-Trent.
Q190 Joan Walley: I think that
through you, Chair, it would be interesting to have details of
how Business Link has actually helped and assisted businesses
in Stoke-on-Trent, and to have that on the record. My main concern
is that the business emphasis is at the expense of the place investment,
which also needs to take place. The removal of that funding is
affecting parts of the region hard, is it not?
Mick Laverty: To go back to what
I have just said, if you are reprioritising, you are reprioritising.
You cannot reprioritise and carry on doing everything. We know
where the money is best spent in terms of its impact. If we had
more money, it would be nice to spend it on all the things that
everyone wants us to spend it on, but unfortunately, there is
a limited amount of resource. Having looked at the evidence available
and the impact evaluation result, and having had a steer from
the Government, we have come to the conclusion that where we have
chosen to spend our money is where the Government, and the results,
tell us is the best place to spend it.
Joan Walley: That is AWM's decision though.
Mick Laverty: With due respect,
that is our proposition to the Department, which is in the process
of looking at our corporate plan. If it disagrees on where we
are planning to spend the money, I am sure that it will come out
and tell us. At the moment, that is our proposition to the Department.
It has not been signed off or agreed, but it is with the Department
for Business, Innovation and Skills at the moment, being looked
at by it and other partners.
Tim Gebbels: In terms of prioritisation,
it is broader than that. Specifically, in terms of the regional
funding advice impact investment locations, that work was done
by the joint strategy and investment board, which is a joint regional
partnership board that involves local authority representation.
It is a joint prioritisation agreed with local authority partners.
It is not a private decision made by us and recommended exclusively
to BIS.
Q191 Joan Walley: What you are
saying is that there is still some scope to influence that decision
making and the plan has not yet been signed off?
Mick Laverty: Yes.
Q192 Joan Walley: Could I just
ask, in terms of the region as a whole, which parts would you
say have been most affected by the downturn?
Mick Laverty: We have done some
mapping and set up a task force, as I'm sure you know. We were
asked to do that by Ian Austin, and the task force had to initially
focus on trying to identify the vulnerable sectors and communities.
We have done a mapping of the vulnerable communities in the region.
We have a list.
Q193 Joan Walley: Which are they?
Tim Gebbels: Let me have a go
at answering that because there are several dimensions to the
answer. If you are asking specifically about geography—
Joan Walley: Geography and sectors.
Tim Gebbels: Let me start with
the geography and then I will come on to the sectors. In terms
of geography, it depends which measure you look at. For example,
a useful measure to look at is unemployment. In terms of absolute
levels of unemployment in the region, you can see that those areas
that have traditionally had the very highest levels of unemployment
continue to see the largest absolute increases in unemployment.
Birmingham, the black country and Stoke are typically very badly
affected. Those were always areas of deprivation; they were always
affected; and they were always subject to a high degree of prioritisation
in terms of our work and other people's work. There is another
side to that, which is those areas that traditionally have not
suffered from those historical problems but which have suffered
very recently. If you look at the proportional change in unemployment
or claimant count—whichever measure you choose—some
surprising areas come out. Cannock, for example, has seen the
greatest proportionate increase in claimant count of any local
authority district in the country—a threefold increase since
the start of this recession. If you look across the region, there
are a number of rural areas and market towns, in particular, that
are suffering in that way, so geographically there are some usual
suspects, if I can put it that way, where there has always been
a focus of attention, and they are suffering badly, as you would
expect. And there are some unusual suspects where there have not
typically been severe problems, but they are arising now. So that's
the geography of the situation.
Q194 Joan Walley: And the sectors
that need most assistance.
Tim Gebbels: There is no doubt
that in our region—partly because of the predominance of
this sector in our region—the manufacturing sector has been
the hardest hit. The greatest impact has been on manufacturing
and that has had a disproportionate effect on our region above
other regions. Within manufacturing, there is no doubt that it
is automotive and the automotive supply chain, which typically
come under a metals and metal manufacturing sector classification.
That is by far and away the worst affected sector. I guess construction
would be second and then there are a number of other sectors that
are affected, including business and professional services, so
I think they would be in the top three in terms of sectors.
Q195 Joan Walley: In terms of
the MG Rover task force that you set up, what lessons have you
learned that apply to other sectors?
Mick Laverty: The first thing
to say is that the MG Rover task force was in a completely different
time frame and that it was a completely different problem. That
was a very well defined problem at a point in time when the regional
economy was pretty buoyant. We had quite a lot of resources compared
to what we have now. However, the lessons that we have learned
from the MG Rover task force that have applied to the current
task force is the need very quickly to get all the public sector
partners working together, collaboratively, so we all know what's
going on, and to set up very quickly. One of the things that we
did was the one-stop shop for all the advice, and the website
that we set up, Support WM, was an early manifestation of that.
I think that the key lessons are the partners all working together
and the need for a central focus for all the support available
to the businesses, individuals and communities.
Richard Hutchins: And to have
a very robust evidence base to work out where the vulnerable communities
and sectors are and to measure the impact of the work that we're
taking forward, which is what we have done.
Q196 Joan Walley: Finally, how
much of what you're doing is firefighting and how much is putting
long-term strategic delivery action plans in place?
Mick Laverty: We are very conscious
that the West Midlands economy has got some underlying structural
issues. They are set out very clearly in the regional economic
strategy, which was last produced in December 2007. Those issues
around skills, innovation, enterprise, worklessness and the need
to invest in infrastructure still remain, so we are very conscious
that what we need to do is make sure that we connect up all the
interventions we're doing now with the long-term strategy. A good
recent example is the graduate internship scheme that was launched
by the Regional Minister on Friday. That is tackling one of the
deficits mentioned in the economic strategy, which is the need
to retain more graduates in the region and the need for businesses
in the region to take on a graduate. There will be an issue of
worklessness, if we're not careful, for the graduates graduating
this summer because the jobs aren't there. So there's a fantastic
win-win that marries the current circumstances with the underlying
strategy, and in all our interventions that's precisely what we're
trying to do—make sure we keep the eye on the medium to
long term but marrying it up to a specific issue of the moment.
Richard Hutchins: I think that
it is a very good example of partnership working as well. I think
probably for the first time it shows how Advantage West Midlands,
most of the region's universities, and indeed the Department for
Work and Pensions and Jobcentre Plus have worked together, found
new or flexed funding and put it together as a package very quickly,
producing what Ian Austin launched on Friday, which is the internships
programme.
Q197 Mr Plaskitt: Looking at the
statistics, I just want to tidy up your budgeting situation before
we move off it. Again, referring to the tables, it looks to me
that between 2009-10 and 2010-11 your budget drops by £83
million. Is that right? You mentioned a figure of about £70
million before.
Mick Laverty: I am describing
the combined figure over two years. I think there has been a re-profiling
between the two years; we've agreed with Government to try and
accelerate activity into this year from next year.
Q198 Mr Plaskitt: Are these figures
right? In 2009-10 your allocation was £295 million and in
2010-11 it is £212 million. Is that right?
Mick Laverty: No. They are a part
of our overall budget. You would add to that receipts from capital
sales, European funding and one or two other add-ons that we are
very happy to let you have afterwards—I haven't got them
to hand. But no, those figures that you quoted aren't the entirety
of our budget for those two years.
Q199 Mr Plaskitt: But they are
the allocation?
Mick Laverty: They sound like
they are the single pot portion, which is part of the overall
allocation.
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