The New Local Enterprise Partnerships: An Initial Assessment - Business, Innovation and Skills Committee Contents

Examination of Witnesses (Questions 1-42)



Q1   Chair: Good morning and thank you for attending this first session on RDAs and LEPs. I will start with a couple of questions. Could I just emphasise that obviously there has to be an element of time management here? Please don't every member of the panel feel that they are under a burning obligation to answer every question. If the points that you would like to make have already been made by another member of the panel, don't worry about not repeating them.

Can I just start with a couple of general questions? First of all, what functions of the RDAs do you think should be continued? One of the issues that have arisen from our search for evidence is the comments made by a number of organisations that RDAs in effect were obliged to take on various Government objectives which rather hampered their effectiveness in certain areas. What functions do you think should be continued through the proposed structure by the Government?

Sir Harry Studholme: Thank you Chairman. What we have tried to do is to allocate the questions among us, so hopefully the repetition point will not occur. In particular about the functions, would Steve like to answer that?

Mr Steven Broomhead: Thank you, Chairman. Over the context of the previous Government, I think there was certainly some mission creep for RDAs and there was an acquisitive nature to the functions that we had and now have, but to answer the question directly, I think major functions will be: business support; business finance; foreign direct investment, where we already work with UKTI; science and innovation, which are very important; enterprise; sector development, particularly the manufacturing industry and some of the new sunrise industries round the creative industries; and energy and low carbon—making sure, I think importantly, that we continue to focus on the rural agenda.

Q2   Chair: Thank you. Anybody wish to add to that? Could I just ask you maybe a tricky question? Do you think a local framework could work better than a regional one—the crux of the whole issue?

Ms Pam Alexander: Well, if I could address that one, I think it depends what it is that you are asking localities to do. Clearly there will be a big advantage in businesses working really closely with their local authorities, and indeed with social enterprise and their universities and further education colleges, to focus on economic growth and indeed on some of the economic underperformance indicators in areas. I think our concern is that there should be a framework which bridges the sub­regions that will be covered by each of the Local Enterprise Partnerships, particularly if there is not coverage across the whole of England and there might be some areas that are not getting the attention that others are getting.

So our concern, I think, would be that there needs to be operational flexibility of the sort that the Regional Development Agencies have had. We have taken some time to mature into an organisation which we believe has a good ability to integrate but also a flexibility to use our single pot funding as effectively as is needed for each different function. We believe that Local Enterprise Partnerships, too, will be on a journey and the way in which they develop from a focus not just on the fine grain, but also being able to deliver those national functions, which are crucial for the economic growth of the UK, is something which I think needs to be addressed very clearly.

Chair: Thank you. Jack Dromey?

Q3   Jack Dromey: Thank you, Chair. I would like to ask you first of all about how RDA functions can be delivered through smaller bodies and what challenges LEPs face in delivery. To take a couple of practical examples, the way on the one hand that the shock to the system in Rover between 2000 and 2005 was handled—diversifying the supply chain so that in the event of Rover's collapse in 2005, the supply chain did not collapse—and on the other hand, strategic business support for industries like nuclear, aerospace in certain key regions that you represent, and indeed the automotive cluster employing 150,000 in the Midlands. How could such functions be delivered through smaller bodies? What would be the challenges that LEPs would face in facing up to challenges of that kind?

Ms Pam Alexander: We don't know what these smaller bodies will look like yet, but one of the questions will be how well they relate to sectoral geographies as well as economic and political geographies, because you have given an example there of a sector, which Sir Roy, of course, has considerable knowledge of, where there are national and indeed international issues to be dealt with, as well as the local issues. I think in relation to supply chains, again, sectors do not very often focus just on one locality and therefore it would be really important that there is sufficient integration across boundaries to enable those issues to be driven forward and enough evidence and lessons from interventions in the past to work out what will really help to get supply chains support, or to identify those international, global competitive advantages which we can gain if we really drive through the most important sectors for the future.

Sir Roy McNulty: I think if one was looking at the West Midlands, where we understand there may be six LEP proposals, it would be very difficult for six LEPs separately to address either of those issues. A shock as big as the Rover collapse which spread right across the West Midlands. Major industries like automotive and aerospace, which again spread across the West Midlands, would not wish to deal six times with different bodies to address the macro issues that concern them. That point has been made very forcibly to me by people from the automotive sector and the aerospace sector. I think all of that points to the need—this is again, I believe, reflected in the LEP proposals—for some form of co-ordinating body to address issues that spread wider than the boundaries of the LEPs themselves.

Q4   Jack Dromey: Can I just tease that out further, Sir Roy, the case for retaining regional co-ordination? The CBI has said in its evidence to us that Government should not throw out the baby with the bathwater—indeed, a survey of CBI members says 65% would prefer LEPs to operate at regional level. What is the voice of business in the Midlands or indeed any of the other regions represented today?

Sir Roy McNulty: I can only speak about the voice of business in the West Midlands. They are crystal clear that they want some form of effective co-ordinating body to address issues such as you have described and a number of other facets of making and supporting the LEP structure.

Jack Dromey: Can I ask you one final question, which is—[Interruption.] My apologies, did you want to say something?

Mr Alan Clarke: Sorry to interrupt. Yes, it is just that there is a specific proposal from the North East of England from business organisations and all 12 local authorities to establish a North East economic partnership going forward to deal with the very functions that we talked about earlier, so the CBI, the Chamber of Commerce and the Federation of Small Businesses all support that. That was submitted yesterday to the same timetable as the LEP applications, so I think that is just a realisation in the North East that there is still a need to do certain types of economic activity at the regional level, complementary to the five LEP applications that have been submitted. That happened yesterday. Sorry to interrupt.

Mr Steven Broomhead: Certainly the businesses of the North West are looking for a degree of co-ordination and advocacy in Brussels and in other places for the North West's economy. One of the roles of the RDAs has been to be a regional referee round inward investment opportunities and certainly businesses are very clear to us that they would like to see a degree of co-ordination and advocacy in the North West.

Q5   Jack Dromey: There is just one final related question. I think you said that the voice of business is very clear about the desire for there to be continuing regional co-ordination. You spoke about inward investment as one potential function. Other key functions of regional co-ordination?

Sir Roy McNulty: I think issues such as we have described, which spread across a number of boundaries: transport infrastructure would be another good example of that. I think there are a number of functions which would be most efficiently provided on a shared services basis. It will make no sense for, say, six LEPs in the West Midlands each to have their own data collection activity collecting the same data over and over again and probably ending up with different results. There are specialist things like that which would make sense. Then thirdly and lastly, there is the important area of the various functions which are said to be going to be led nationally. Maybe that is right or maybe it is otherwise, but the important thing, I think, is where are those functions delivered? There needs to be a focal point for delivery of those functions at West Midlands level.

Q6   Jack Dromey: Indeed, that's what the CBI have said to us in their evidence to us in terms of the MAS functions—importance of regional delivery.

Sir Roy McNulty: Absolutely. To come back to the question I nearly answered earlier: what is the view of business? Business Voice West Midlands, which is the umbrella body for all of the business organisations in the West Midlands, I believe has expressed to Ministers their desire to see a strong co-ordinating body with a range of functions such as I have described.

Jack Dromey: Thank you.

Q7   Mr Binley: I just want to understand what the voice of business is and you have just touched upon it. My fear is that the CBI is pretty dominant in all of this and we are going to get the jobs growth in the main from SMEs, so I want to be sure, because one of the criticisms of RDAs is they did not go where the real action is, right at the coal face with SMEs. Are you including those in your review of the West Midlands view of business?

Sir Roy McNulty: Absolutely. Business Voice West Midlands encompasses, to the best of my knowledge, all of the significant business organisations, including the Federation of Small Businesses and the EEF, and I would not accept the proposition that the CBI voice is dominant. The CBI is a very important and capable organisation, but there is a consensus among that whole range of organisations, including the chambers.

Q8   Jack Dromey: The Chambers of Commerce and the IoD?

Sir Roy McNulty: Yes.

Mr Binley: I'm happy that you have confirmed that.

Q9   Chair: We have had various submissions proposing a certain number of LEPs as being the appropriate number for the UK. Would there be the need for a regional co-ordinating body if, overall, there was only a limited number of LEPs, say 15 to 20? Judging by the consensus emerging from the West Midlands, that is highly unlikely, but could you construct an argument on the basis of a limited number of LEPs?

Sir Roy McNulty: Well clearly at the extreme, if there was only one, then you have solved the problem, but I think most likely there will be at least three, maybe more, eventually in the West Midlands. I personally doubt if six is the optimum number. I think history shows, in the West Midlands certainly, the difficulty of getting those various configurations to co-operate. I think that is another reason why, in our particular case, to deal with the economic challenges we have, we need a strong co-ordinating body such as Business Voice West Midlands have proposed.

Mr Alan Clarke: Can I just add to that from a North East perspective? Sorry to interrupt. I think obviously from what we know, there are something like 50 LEP submissions or thereabouts, or there are likely to be. How you get down to 20, I am not sure, but if you look at regions like Yorkshire, who are not here today, they have a relatively small number of LEPs proposed—just four or five—but interestingly the business organisations have grouped together in that part of the country and said that they would like four strategic economic functions of the sort we have talked about already to continue. So even in a region with a small number of LEPs for the size of the population, I think there is an acknowledgment that there is a need for regional-level activity and that is in Yorkshire, as an illustration of the point.

Q10   Nadhim Zahawi: Sir Roy, you mentioned that six is not an optimal number. What would be an optimal number?

Sir Roy McNulty: I think a view will have to be taken as to what scale you need to really be effective in this role.

Nadhim Zahawi: I am asking for your opinion.

Sir Roy McNulty: I think if you use population as a yardstick, I cannot imagine that a LEP would really have sufficient clout if you have a population unit below 1 million. I know at least one of the proposals which has gone in is for a unit of significantly less population. I guess, ideally, probably a million-plus. Not more than two million because then the thing gets so big that it is really difficult for a grouping like a LEP to have traction.

Q11   Nadhim Zahawi: So help me with the arithmetic. What does that say for the West Midlands?

Sir Roy McNulty: I think three or four may be a better answer than the six which I believe are being proposed.

Q12   Rachel Reeves: I will make the point about Yorkshire and the desire there to have some sort of regional entity. That is certainly what I am hearing from businesses in my region. In the discussions you are having with the Department, are they sympathetic to having some sort of regional structure maintained? If so, how will that be funded? My understanding is that the funding for the day-to-day functions would not come from the regional growth fund money, so how would you propose that these community interest companies, or whatever they are structured as, would be funded?

Mr Alan Clarke: Two answers. The civil servants within BIS I think are positive about the idea of regional proposals, because although, quite rightly, they have talked about a national leadership of these big strategic economic interventions in a global market, they realise they can't all be delivered centrally from Whitehall and that you need other people to deliver it, and it is very difficult to deliver these things through 40 or 50 local organisations.

In terms of funding, I can talk only from the North East perspective. We have a number of assets—property, vehicles and so on—which bring in income each year which is invested back into economic development in the North East: on average, £6 million or £8 million a year. So although local authorities and business have not quite got to this point yet, certainly if I am asked the question, I would say that income from such a property portfolio, which is property in the North East developed in the North East, could be used to pay for the salaries of a new group of people. Then, obviously, the products that they are responsible for managing would depend on whether BIS have those products in the future and they could be delivered in a partnership with the national level as well, so that you have the global view of this competitive economic activity. I am not sure of the model in Yorkshire.

Rachel Reeves: Thank you, Alan.

Mr Steven Broomhead: I will also add, Chairman, that you are going to need some innovatory approaches to the funding of any regional body, because there is the wider issue of the uncertainties of the funding of the Local Enterprise Partnerships themselves around capacity support. That matter may be dealt with through the White Paper, which we understand comes out in October, and may be an issue that is contained within the comprehensive spending review, but certainly, as Alan said, you can use various funds which are managed at the moment on a regional basis—be it a JESSICA fund or a JEREMIE fund, or venture capital loan funds—to generate small amounts of income to help to fund streamlined regional co-ordination and advocacy structures.

Chair: David Ward.

Mr David Ward: Good morning everyone. It is a difficult process, this, because you have already touched on about 15 of the questions which I keep biting my tongue and saying that's coming up later on. But the comments that Alan has just made do make some assumptions about the transfer of ownership of assets, which is a question that is coming up later on. That's all.

Sir Harry Studholme: Do you want us to reply about the ownership of assets?

Mr David Ward: Well it is coming up later on. Do you want to move onto my question?

Chair: Yes, do.

Q13   Mr David Ward: Well again, it is one that has really been touched on quite a lot already, but it is to do with the overlapping of the LEPs, but if I can just take one part of it, which has been briefly referred to, and that is what I think is being described as horizontal co-operation between LEPs, which may of course be in different parts of the country. I just wondered if you have some views on that. Research is a good example in university collaboration.

Sir Harry Studholme: I think it is a really interesting point. When you start to talk about functional economic geography, geography is not simply what happens on a map or the boundaries of local authorities. It is happening at all kinds of levels. You touched on aerospace, for instance, where significant elements of our aerospace industry in the North West, a great deal around Bristol, some in Derby and stretching as far south as Yeovil, and how you align that against, say, the retail environment, which is clustered around specific cities. So at one cut there is a complexity, but that is seen even at the more local level. There is an example in the bids that have been put in surrounding Devon, which is in my part of the country. There is a bid from Somerset which correctly recognises that there are links between Devon and Somerset; but at the same time, there are strong links with Devon and Cornwall. s Devon, Plymouth and Torbay mentions Cornwall in their joint bid, but at the same time, Cornwall with the Isles of Scilly sees itself as a functional Local Enterprise Partnership zone. So your point about this overlap is a very astute one. Thank you.

Mr David Ward: It wasn't my idea, but thank you.

Q14   Rebecca Harris: The Department has listed a range of functions that the RDAs performed which they want to control nationally—inward investment, sector leadership and business support. I just wanted to know what your views were on that, which I think was touched on in the very first question; at what level you think delivery of those functions should happen.

Sir Roy McNulty: I will make a couple of comments. I have to admit that I personally struggle with what is proposed a bit; if this is localism then withdrawing quite a lot of functions back to Whitehall seems to me a slightly odd interpretation of that. Having said that, as I mentioned earlier, I would tend to put a greater emphasis on the delivery as opposed to the policy making. For a lot of these functions, which previously have been delivered by the RDA relatively close to the ground, we need to find a way—my comments earlier about the co-ordinating body are relevant to this—whereby delivery can be achieved closer to where the action is and not completely repatriated to Whitehall.

Q15   Rebecca Harris: Thank you. In theory, this is a great new future and the LEPs are going to be an enormous success, so this is almost an odd question, but do you think that there are risks in the abolition of the RDAs that England and the English regions will now be disadvantaged compared with Scotland and Wales?

Mr Alan Clarke: Can I say something about that from the North East, because we're obviously very close to Scotland when we're in Berwick? I think there is already a disadvantage even just in terms of in­year budget cuts which are taking place in this country; they are not happening in the devolved Administrations at the moment. Scotland, which I know a fair bit about, being just over the boundary, is still spending money on foreign direct investment, GBI grants, tourism promotion, etcetera in this year, when we in England have had to stop some of this activity. We certainly cannot commit any money beyond March 2011, so Scotland already has a relative advantage.

Also, to my knowledge, there are no known significant structural changes proposed in the devolved Administrations' approach to economic development. We all want LEPs to be a success with the new regional growth fund, but inevitably it is going to take time for them to bed down, to grow, to develop the expertise, etcetera. In the meantime, I think again the devolved Administrations will be in a relatively much stronger position. They were already well resourced and have significant political power anyway, so certainly from a North East perspective, being so close to Scotland, that is something that means major companies which we have been talking to about potentially looking at Scotland and the North East as a location, are now more likely to look at Scotland than the North East. I think it is a real problem now and it will continue for the next two to three years, from my experience.

Q16   Rebecca Harris: At the very least a teething problem, then, and they would keep many of those functions which we may be losing?

Sir Harry Studholme: Yes, to explore that further with the South West relative to Wales, even before the discussions we are having now, obviously there are challenges, for instance on inward investment, which is a very key instrument for relative economic development. If you can attract companies from overseas to, say, the North West or the North East, most of the inward investment successes derive from pre­existing relationships; they are existing customers who actually operate inside areas. Creating those relationships is absolutely key to, say, bringing in companies from Japan or from America. In this flux, those relationships have a risk of being broken down and we are already seeing our inward investment experts being approached by people from Wales and Scotland, so the very people with the relationships actually may well change. Does RDA abolition disadvantage England relative to Wales and Scotland? I think the factual evidence is that it may well.

Q17   Chair: I think it was Sir Roy who commented that he was having difficulty in understanding how some of these functions could be repatriated nationally. My understanding of the Government's argument is that there will be some functions co-ordinated nationally, including inward investment, sectoral leadership, business support, finance and training, but delivered locally. I am a little unclear what mechanisms exist to actually do this, and I would welcome any thoughts that you might have on it.

Sir Roy McNulty: I am equally unclear. As yet, I think we have had no explanation as to what exactly is envisaged, other than that they will be led nationally, which is, as I said earlier, an odd interpretation of localism. It is crucial that there are mechanisms for things to be delivered closer to the ground in the West Midlands, and I am sure the same applies to the other RDA areas, but what that mechanism is has yet to be described. I know it is the view of the business community in the West Midlands that that local delivery function could well be aligned with the co-ordinating body and be one of the functions of the co-ordinating body that I touched on earlier.

Q18   Chair: Could I just pick up on training and skills delivery, because we had conflicting proposals from different business organisations. Some did not feel that it was appropriate to be done through LEPs; others felt it was much better to be done through LEPs. Could you envisage a model where, if you like, skills and tailoring the skills agenda to meet the needs of local industry could be better done at LEP level?

Sir Roy McNulty: I do not think it is either/or. I think there are quite a number of things which local authorities are already doing, certainly in the West Midlands, which you could easily envisage a LEP doing. But there are other training and skills issues which run across a wider area. For example, not all of the LEPs that are proposed have a significant university in them, and those universities serve a much wider catchment area than any individual LEP that they happen to be located in. We tend to get fixated with either/or. The reality is that things need to work at several levels—at both a LEP level and at a West Midlands level.

Q19   Nicky Morgan: Good morning. On the different levels, we talked about the West Midlands needing a co-ordinating body and there are a number of functions that you would expect LEPs to collaborate with each other on, because there are certain things to be delivered. I thought it would be interesting to know how that works in the RDAs at the moment. Are there certain either sectors or particular programmes where certain RDAs are already having to work with each other because what is needed to be delivered an RDA cannot do on its own, and even perhaps where national Government has to be involved too? I am thinking perhaps inward investment could be one of those areas.

Sir Harry Studholme: Can I start by answering that and then we can go to the North West? I think there are a couple of good examples, for instance in aerospace or nuclear, where it does apply across the country. I am also conscious that in areas where—I was on holiday in Japan and therefore made a visit to various South West companies—as development agencies, we work closely overseas in making sure that there is a co-ordinated approach and there are relationships. Steve?

Mr Steven Broomhead: Aerospace is a good example where the RDAs have worked very closely together on the ASTRAEA project, particularly working with the prime BAE. If it had not been for that working together, that project would not have come forward. Another really good example is the Northern Way, where the three RDAs in the North have worked collaboratively for over five years around ensuring that the North's economy continues to grow. Obviously, rebalancing the economy, we note, is one of the Government's priorities and we hope with the new architecture of LEPs that the Northern Way, around the rebalancing of the economy, can continue in some way. The Northern Way has been very good in terms of focusing on transport issues, science and innovation issues and energy and environmental issues, and we hope that can continue.

Ms Pam Alexander: Can I just add a different dimension to that? As well as the geographical and sectoral, we have worked together on some key infrastructure projects—for example, we have worked closely with Advantage West Midlands on drawing European money into improving the rail gauge between Southampton and the West Midlands. So there are some key strategic infrastructure projects where we have worked together, as well as geographical projects, which would be mirrored in the South, in, for example, Milton Keynes, South Midlands or the Thames Gateway, and sectoral projects, which I think we would say is probably a route through into the link between the local and sub­regional and pan­regional delivery and the national delivery mechanisms that will be driven from the centre.

Q20   Jack Dromey: Can I follow Nicky's question in relation to inward investment? There has been an emphasis thus far in relation to the potential of the English regions losing out to Scotland and Wales. The Committee heard in July on this issue of the nationalisation of inward investment, as is being proposed, that the current track record of UKTI is that the bulk of inward investment coming to Britain through UKTI goes to the southern swathe of England. Can you comment on that, and what would be your fears in relation to the northern swathe of England were there not to be a strong regional function on inward investment?

Mr Alan Clarke: Yes. We have significant experience of working with UKTI. It is a very positive relationship in the region; their offices are actually within our offices, so they work hand in glove together. But UKTI themselves would be the first to admit that more than 50%—probably more than 60% or 70%—of the successful inward investment cases in the North East—are not started from a UKTI enquiry. There is, I think, an understanding that we generate our own enquiries, partly through international companies that are already based in the North East like Nissan, who are looking to reinvest all of the time, but they are in great competition with other locations for that. We also have a group of agents who operate internationally, representing the North for way beyond the life of the RDA—our Japanese agent has been representing the North East for 25 years, for instance—so there is long experience in the North East of dealing with inward investment. UKTI understand that; we do not stand on each other's toes, by and large, but certainly if we were relying on UKTI leads and enquiries, the North East would lose out heavily and we have the statistics to show that, with some independent evaluation that we had done. I am sure the same is true of the North West.

Mr Steven Broomhead: If I might add that the North West is the third largest region for foreign direct investment and has been for the last three years—to deal with your question about the focus on the South. In my own region, UKTI, whilst we have a strong partnership with them, produces only 13% of the total foreign direct investment into the North West. Obviously, with the changes that are coming along, we are, I think, somewhat concerned about the impact of those changes on foreign direct investment unless the architecture is made very, very clear.

Sir Harry Studholme: I think it is worth explaining the relationship between Regional Development Agencies and UKTI for inward investment, because there appear to be duplicated functions. In fact, if you are trying to encourage business into the country, you need both the relationship overseas and the relationship on the ground with the company, so if the company comes into England, it needs to be established—it needs to have links with the council on planning, if it is going to build anything. It needs a fairly complex relationship with the existing business networks, and it is that part of the equation that the RDAs have been very successful at providing. It is that practical experience on the ground, linked into the wider services for business. The operation overseas through the embassies, etcetera, is a very different role to the operation on the ground.

Sir Roy McNulty: If I might just add that I think this is another example of this conjunction of national level strategy or policy and local delivery, because supposing UKTI comes up with a lead with somebody who is interested in coming to the West Midlands, there are many issues, as Harry said, of land use, planning, local labour supply, training issues and so on, where UKTI will not hold the hand of the inward investor to work them through. You need a local delivery capability and I know that that theme is strongly to the fore in the LEP proposals from the West Midlands.

Q21   Mr David Ward: I am just trying to get a feeling for this. Are you just being too polite to say that you fear that we are in a baby and bathwater situation here?

Sir Roy McNulty: Well I don't think so, although the comment was made to me that there is not only a danger of throwing the baby out with the bathwater, but there is a danger of throwing the bath out as well—but that was a rather extreme view. I think with any major structural and organisational change such as we are looking at here, there are risks—as was touched on earlier; there are many risks. The risks can be mitigated; we can put in place measures to make sure that the risks do not actually materialise, and I think that is a very important element of this whole change process going forward.

  Chair: Can we just move on to this issue of the transition and risk? Nadhim Zahawi.

Q22   Nadhim Zahawi: Thinking about localism and collaboration, we have been talking about inward investment and probably the larger profile of companies. I have just a couple of questions. First, 97% of our region, the West Midlands, Sir Roy, is obviously SMEs and I would love to hear from everyone how you feel the RDAs have fared in terms of performance with SMEs. On co-ordination and collaboration, we all agree that it is taken as read that you need a strategic approach as well as the local approach and that LEPs will struggle to collaborate, but I understand that between the RDAs, you have produced something like 24 nanotechnology centres around the country, which is not a perfect example of collaboration or co-ordination and I would love to hear your thoughts on how that happens. Unlike nuclear and other examples of success, can you just talk about some of the failures of the current structure in co-ordination—two-tiered?

Sir Harry Studholme: As I take it, there are at least two questions there; one about SMEs and the second about collaboration and duplication. I think, to take the collaboration and duplication one, which is also almost two questions, it is a very interesting question, because for me the development of the Regional Development Agencies has been a journey. It started off as a process of bringing various non­departmental public bodies together; it was a consolidation of business-related activity that had previously been ensiloed. Part of that process was the consolidation and then there was the process of desiloing, of getting the synergies and the cost savings from that, and the ability to experiment. With the ability to experiment comes the risk of failure, and I think the question is not whether you fail; the question is whether you learn from your failure. I think the nanotechnology point is a point very, very well made. It is from learning those lessons that the focus on things like the advanced manufacturing centre, the composites centre that we are working on and the co-ordination in aerospace has come. It is an important point and it is probably a point that the Local Enterprise Partnerships need to learn, that the lessons have been learned in the past on this journey about how to deal with business.

On the point about SMEs, I think it is also an interesting question, because business is not one thing. You use the word "business", but it consists of everything from banking, to retail, to construction, to plumbers, to people who are farming—it is a very, very wide categorisation. What is important is the challenge of how you manage to capture that as widely as possible. We have talked a bit about large companies and the CBI. The SME question, certainly in most regions we relate well to the Federation of Small Business; other small rural activities would be the NFU. On the whole, it is a relationship which is really at the sort of level I would expect. We have a business forum, we have very useful meetings with those and meetings with other business organisations, which are on the whole positive but are occasionally critical. I view that as a really positive situation.

Sir Roy McNulty: Just to add a few comments on that, I have been the chair of Advantage West Midlands for a year and have spent a lot of time in that year talking to many businesses all around the West Midlands. To be straight about it, I think we all could do better in terms of support for SMEs. AWM has done many good things, and many of the people I have met have been extremely praising of the help and support they got, but across the board I do not think the picture is as good as it could be and part of that is because there are so many players in it. It is not only the RDA and Business Link; you have the chambers involved in support of SMEs, you have the universities involved, you have the local authorities involved, and I certainly do not blame any small business man who is thoroughly confused as to who is doing what and helping whom. I think the LEPs are an opportunity to straighten quite a lot of this out, and provide a much more comprehensible set of support mechanisms where each of those parties can do what they are good at, but we do not get the amount of duplication and cross-purposes that at times we can get with the present setup.

Q23   Rachel Reeves: Just building on Nadhim's and David's point on the transition and this question about throwing the baby out with the bathwater as well, there is a report by the Work Foundation, I think, that says that, in a way, this is the very worst time to abolish the RDAs, because of the economic situation we are in, with the fragile recovery. Certainly in my region, given the work that the RDA has done with Corus and with Lloyds Banking Group and HBOS to keep jobs in the region, my worry—I just want to see if it is shared by you in your regions—is that getting rid of RDAs at the moment risks a lot of uncertainty in the business sector about who the right people are to go to. Will some things fall through the gap? Then, a very specific question about the transition: I think in Yorkshire Forward, we have assets of around £62 million, which I think Alan touched on earlier. Have there been discussions about the disposal or the transfer of those assets? What would your preference be about what happened to your RDA assets?

Sir Harry Studholme: Can I split that into two questions? One is the question about assets and the second is the right moment question. I am not sure we are the best people to ask as to whether as turkeys we vote for Christmas or not, but there is in any large organisation, and it is true in business, a pendulum that runs from the centralisation, the economies of scale, the advantages of consistency, the feeling of control at the centre you get with the delegation of powers, the ability to make things happen, to respond on the ground, the choice and sensitivity to local issues and the fine grain. That balance you see endlessly in FTSE 100 companies. It is a constant change. Our job as government agencies is to make things happen. So the question to us is not when, but how—how to make things happen on the ground and how, as far as possible, to make sure that the work that we have been doing is carried on as effectively as possible for this country. The next question, on assets, is more complicated and I wonder if Steve would like to say something.

Mr Steven Broomhead: BIS have estimated there is about £500 million worth of assets within the RDA family at the moment. Again, we are awaiting advice and guidance from Government on those assets. To answer your question, in my own region, I think it is important and I would like to think that the assets of the North West agency can be retained in the North West for use by the North West. There are some assets that could be classified, potentially, as national assets—for Daresbury technology, the science and innovation campus, which has had £65 million of agency investment, may be classified and perhaps moved somewhere else. What I think it is very important to avoid is a fire sale of assets on behalf of the taxpayer, because we have invested in these assets. There are also some liabilities—things that have been passed to us over the years, such as former coalfield land. They will also need appropriate advice and treatment by Government. We await advice on that issue.

Sir Harry Studholme: Two points. First, when you start talking about assets, it is as important to start talking about liabilities. The creation of the development agencies took over pre-existing problems like coal mines—things that need things doing to them. That is a huge part of our work—how we handle the liabilities of the past—so it is not just about assets. The second thing is that we never acquire assets because they are simply a speculative thing. Assets relate to programmes, they relate to people and they relate to things that need doing for the economy. Those assets may be viewed differently in different contexts. When you sell them on, you lose that context, so in terms of the physical asset, there is a change as you sell them. The third point, really, is our assets are not just our physical assets. Assets are very much in the forms of know-how, expertise and hard­won experience. The consequences of making mistakes are that you have people who are less likely to make those mistakes in the future. The asset question is a really important question, but it is not just the £500 million of the valuation.

Q24   Nadhim Zahawi: To wrap those answers all together, what I am hearing from you is that you have learned a lot of tough lessons, you have been through a consolidation period and are coming out the other end. There is a lot of intellectual property inside your organisations. How do we safeguard that through the transition and is there an argument to be made for a transition period where you have residual RDAs and trial LEPs, where some of this stuff can be piloted, rather than a cut and an immediate restructure? Would that help in terms of that transition of know-how and IP assets, physical and otherwise? What is your view on the process—could there be a middle bit?

Sir Harry Studholme: Steven will talk about piloting.

Mr Steven Broomhead: There is a transition period until 1 April 2012 and obviously the Government will be making decisions about LEPs fairly soon. We will work very closely with the LEPs, in parallel, on transition issues around assets, liabilities, people, knowledge, etcetera, to make sure. Indeed, some of the projects and programmes may be transferred to the LEPs—some of the projects we have been able to fund this year, which the LEPs and local authorities in particular know about, we will be encouraging them to perhaps bring them forward to the regional growth fund to make sure that legacy is not lost. So I think there is a period that is being established for transition working. Whether it is long enough I think depends on some policy decisions and clarity which I hope will be in the October White Paper.

Sir Roy McNulty: I think it comes back again to managing risk. A transition period might be a way to manage it. There are other ways you can manage it: one is making sure you can retain the people with the specialist knowledge until the assets are transferred, or transfer the people with the assets, but what I think would really damage the asset transfer is if that know-how disappears, those people find jobs in the near term and have gone, and the whole history and the knowledge of the issues to do with some of these complicated sites has disappeared.

Q25   Chi Onwurah: I would like to question the feasibility of transferring some of these most important non-tangible assets. In the case, for example, of One North East, one of the successes has been the growth of the renewable energy offshore wind industry. This is a very technically complex industry—the technology itself, but also the supply chain and the manufacturing processes. I have criticised Regional Development Agencies for not having enough engineering and scientific and technology knowledge. Are you proposing and suggesting that that kind of detailed understanding should go to, for example, an engineering team in Newcastle, North Tyneside, Teesside, etcetera? How are you specifically going to hand that over?

Mr Alan Clarke: Yes, we have been involved in those discussions for the last 12 months leading up to this change of government policy with the local authorities in the North East—there are just 12 unitary authorities, so it makes the conversations easier—and with the business organisations and BIS as well. Interestingly, in the proposal that was put forward yesterday by the local authorities and business for a regional economic partnership, the assets around low-carbon vehicles, around the process sector in the south of the region and around new and renewable energy—NaREC is now a national facility with probably the thick end of £100 million having been spent on it through the RDA—there is an agreement that the sort of level of expertise to manage, further develop integrate and get the manufacturing benefits and the skills benefits should be done at the regional level and not at the local level. I think that is a grown-up realisation that it is horses for courses in terms of what is best done at different geographic levels. NaREC is specifically referred to as one of those things that the region would like to continue to do at a regional level but obviously with national dialogue. It is obviously a global industry we are talking about.

Sir Harry Studholme: That is a very good point, because it is not just a North East issue; there is Wave Hub in the South West; there is a manufacturing technology centre in the Midlands; there is Daresbury, Harwell, etcetera. So this is quite a key issue.

Q26   Jack Dromey: I have two questions on transition. First of all, on the issue of know-how, my colleague Nadhim talked about the immensely important intellectual property that you have built up. In the process of transition to the LEPs, are you losing that know-how, on the one hand; and, on the other hand, to manage better the transition, what steps do you think would be helpful?

Sir Harry Studholme: The simple answer is yes.

Sir Roy McNulty: We are beginning to. I am aware of one or two of our really good people who have had offers to go elsewhere and they will probably take them. What we need is a mechanism to incentivise, if you will, the people we need to stay right through to the end. That is not only people with specialist knowledge of some of the complicated sites or some of the complicated projects, but down to basics like IT people, or accounting people, who have to finally wrap the books up. We know what we need to keep, but we need a mechanism to make it worth those people's while to stay. Otherwise, they will, wisely, take the first good offer that they get.

Q27   Jack Dromey: Right. The other question is this: we are aware of the budget reductions that you are being asked to make of 60%, 40% and 20%. What is the impact of that now and the anticipated impact in the financial year commencing April 2011? Sir Roy, in the Midlands, what are you being asked to reduce your current budget by and what would the impact of that be on your programmes?

Sir Roy McNulty: I can provide you with the precise figure, but I think for us it is a reduction of about 30%. The impact is that we are basically almost completely out of doing any new business or any new projects. We are pretty well fully committed right through the period to the envisaged end date of the RDAs, so we are not doing anything new. We have quite a wide range of commitments which need to be met and projects need to be completed, but we are out of the development game, if you want to put it that way.

Q28   Jack Dromey: So in a transitional period of between perhaps one and two years, existing programmes are being continued, but any new requests for assistance cannot be met?

Sir Roy McNulty: Absolutely. We basically are pretty well fully committed on what we currently understand our budget will be and, as I say, I will provide the Committee with the precise figures for next year.

Mr Alan Clarke: Could I add a second answer to that, though? It does vary from region to region. We have a little bit more headroom next year deliberately to do some strategic things in the North East, but a whole series of constraints have been imposed on RDAs in terms of our spending. Some of it is common to all of the public sector, like the marketing freeze, but we have some very substantial additional constraints. One of them is that we cannot commit any money at the moment beyond March 2011, even for good-quality job-creating schemes. If you do have some headroom at the moment, you can spend money this financial year, subject to the new constraints, but you cannot commit money into next year. It might be clarified during the comprehensive spending review, but that is a real problem, because economic development is difficult to switch on and switch off within a matter of months. You really need a two to three-year horizon to do these sorts of things. I think that is a real problem in some regions; it certainly is in the North East.

Q29   Jack Dromey: But we were told by Ministers—the Minister of State told the Committee at the end of July that there would be guidance given in August on the interim financial and accounting arrangements. Has that guidance been given?

Mr Alan Clarke: We have the guidance, but it is very constraining. It is not particularly to help you; it is to stop you from spending money, essentially.

Mr Steven Broomhead: There are some other unintended consequences of these decisions. I will give you two: businesses were looking forward to receiving GBI grants for businesses, but we are unable to do that; and on the funding of tourism boards—a very important industry for the nation—we are unable to provide any resources now to support the five tourist boards in the North West in the future.

Q30   Margot James: Sir Roy, could I just go back to your answer about ongoing projects? I understand your position that the RDAs are not able to fund new projects in the current circumstances, but you did say that all existing projects were going ahead. I wondered if I could ask you to clarify that, or possibly make further investigations, because businesses in the Black Country which have been receiving and supporting other companies with ERDF funding have told me that certain projects, particularly in the IT support field, that are current projects have been put on hold. I am very concerned to hear about this and I wondered if you could get back to the Committee on that.

Sir Roy McNulty: A small number of projects were under discussion. In two cases which we had made a commitment, on further review and looking at our priorities, we decided not to go ahead. I can provide you with the details of those. I will make enquiries along the lines you have described and see if there are other cases that I am not aware of.

Sir Harry Studholme: But I think it is a fair point. It is a very tight environment and there is a line between what are legal commitments and what are moral and anticipated commitments. It is a very tightly constrained environment.

Q31   Luciana Berger: I am going to talk a bit more about funding and resources. You touched in quite a lot of detail on funding for current and pending RDA projects. My concern is about what will happen around EU grants and funding. I am conscious that there is a €1.3 billion uncommitted ERDF resource still available through the convergence and competitiveness programme. What is the panel members' impression of how that will or will not transfer to the LEPs?

Mr Steven Broomhead: The ERDF programme has been the responsibility of the RDAs for the last three years and it is a very important economic driver and investment opportunity. ERDF resources are not affected by the changes, except of course where the development agencies are unable to provide any new match funding to support those particular projects. That is where we are asking universities and businesses to come along, to see whether or not they can find those resources. So the ERDF programme is virtually two thirds of the way through now. I think all of us have met our commitment targets and I think it is a programme that is going well. In terms of its future management, again we await policy advice from the Government about the way it wants to manage this programme and any future programme. There have been some very helpful discussions between the RDAs and the CLG about these issues and whether or not the programme moves away from the RDAs before we are dissolved on 1 April 2012. Again, we wait to receive further advice.

Sir Harry Studholme: Again, it is a good question, because there are two sides of it. The first is that the inclusion of European funding in the Regional Development Agencies' portfolio has been beneficial in that it has allowed synergies between other aspects of business relationship to be used to ensure the better utilisation of those funds for the country. The second side of it is that these are incredibly complicated, highly audited funds from Europe and great care needs to be taken to avoid the fines and the consequences of the loss of competent administration.

Q32   Luciana Berger: Thank you. In the evidence that we have received, we have had a number of various alternative funding models be proposed for LEPs and I will list a few of them. There is the partial diversion of business rates to LEPs as a funding source; there is accelerated development zones; tax increment financing and bond issuing powers; and a regional infrastructure fund with recoupment of initial public investment through the planning system. Those are just a few; you might have some of your own. I wondered what your thoughts or feelings were on some of those and if you had anything else to add.

Mr Alan Clarke: Can I start on that one? I think we feel as RDAs that we would be very supportive of those approaches. I think at a time when public finances are very difficult and reducing, any innovative way of creating income to develop economic projects, etcetera, is critical. As a group of Regional Development Agencies, again going back to the earlier point, we have a whole range of people with the technical knowledge and skills in how to do some of these things. Some of them are around property, some of them are around access to finance, some of them are partnerships with the private sector, but there is a whole array across the whole of the country. We would be happy to offer that expertise to help.

The only other point I would make, though, in terms of the overall objective of the new Government to rebalance the economy, is that the ability to do some of these things varies massively through different parts of the country. So whether you have fairly positive values on property helps, and whether you feel you can get a significant uplift on property helps. In the North East, I think a site in the middle of Newcastle city centre that Newcastle council, through Science City, wants to do with the university has very great prospects for tax increment funding; but other parts of the North East where there is market failure would not offer this opportunity. I think it is an opportunity and we would be very happy to use our expertise to help, but it cannot be applied uniformly across the country. I think there is a whole range of experience that you have through the different regions in England, but I think it is a very positive step forward in a time when funding is going to be extremely tight.

Sir Harry Studholme: I don't know whether it is helpful to see them in a slightly different frame, when you talk about ADZs or bonds or whatever, but I think there are different ways to get funding. One is increasing public sector debt through things like bond issues and things which obviously need be repaid and there are issues as to how well that is spent. Using de­risking and taking out elements of projects which allow private sector investment to come in, which is a major part of how well RDAs have operated, is a very good way of levering in private sector money. Revolving funding is, again, increasingly used, particularly in the European funds, but also in the regional infrastructure funds that take money that is then repaid by developers to then be reused to create infrastructure in the future. Tax relief proposals are also a good mechanism, but you need to understand how you are targeting those.

Chair: Can we move on to Margot James? We are running a little over time, so brevity in questions and in answers would be very welcome.

Q33   Margot James: I have two questions here. I will ask the one about value for money for RDAs. What lessons do you think we could learn for the future auditing of LEPs? I have picked out from the research that PricewaterhouseCoopers provided the Committee to show that the cost of jobs created by RDAs was measured against widely different criteria. It came out on one measure at about £16,000 per job created and on another measure about £65,000 per job created. This is, at the upper end, quite alarming. What lessons do you think the Government should learn in applying value for money auditing to the new structures?

Mr Steven Broomhead: I think in making judgments about each LEP proposal in the next few weeks, Government should ensure that there is a performance management framework attached to each consideration and LEP proposal and evaluation. The PWC work was a very detailed piece of work evaluating over £2 billion-worth of agency investments over a five-year period and showed many things, including the issue that for every pound of agency investment it generated anything between £4.20 and £6.20 of net economic value. I think, in terms of the whole performance management arrangements and evaluation—indeed, RDAs have been inspected by the NAO twice during our 11-year lifetime—there have to be some questions raised about where LEPs are going to be using taxpayers' resource through the regional growth fund, what are the performance arrangements that need to be put in place?

Sir Harry Studholme: To quickly add a little bit to that, I think the performance management has been critical—those things we have learned from and moved on from. You have shown that there is a range of outcomes and one needs to aim for the better outcomes to get the better results. Clearly, some of the ones are about timing: when you redevelop a city centre or something, the short term may be very different from the long term and the impact more diffused. So some of it is about the ways in which you gather the information, which can be misleading.

Q34   Rachel Reeves: Obviously the Government are planning to set up this regional growth fund and I wondered what you thought the priorities should be for that. Then following on from Alan's point that most projects have a long time frame—you cannot just switch economic regeneration on and off—do you think that this two-year pot of money is sufficient, or do you think that that creates additional uncertainty about the timeframe of the projects?

Sir Harry Studholme: The stated objectives of the regional growth fund—to encourage private sector investment by providing support for projects with significant potential, etcetera and support in particular those areas and communities that are currently dependent on the public sector in a transition—are very laudable objectives and we would totally agree with those objectives. They reflect some of the existing tensions within economic development and they are tensions that have existed for decades, which are: do you address global competitiveness issues or do you address the issues of economic deprivation? Both are very important things for society to address. That is the first part of your question.

The second part is, as you say, that economic development is a long-term issue. One of the big challenges of the Regional Growth Fund, and this is where we need to work to minimise its impact (of this challenge), is that all of these funding sagas—and we have experience from European funding and city challenges—have a ratio of government activities (set up costs) against delivery. The Government's activities—the learning process—tends to be at the beginning as you set up the structures. You learn from the lessons of how you deliver these things. It will be a lot of hard work in trying to make the regional growth fund deliver.

Mr Alan Clarke: Perhaps just from my point of view, having managed some of these things and also been in some of these things over the years, two years is really not long enough, in my view, and it may well be that the growth fund will be extended in time when there is a comprehensive spending review announcement, but it takes an awful long time to set things up for people to bid, have the proper governance arrangements, determine who is accountable for the money, etcetera, let alone then the delivery and implementation. You are almost closing down the programme just as it is starting. City challenge was five years, Single regeneration budget was seven years, New Deal for Communities is 10 years and Development corporations were 10 years. Two years is far too short, in my view.

Mr Steven Broomhead: I think as well, given the fact that there are going to be many more LEPs and private sector organisations than the nine RDAs bidding for regional growth funds, which is actually one third per year of what the agencies' budgets are collectively, it is going to be very competitive. Most of the money, we understand, is likely to be capital, so if I can just go back to my point earlier about organisations which support local economic delivery on the ground, looking for capacity funding, revenue is going to be a very challenging situation.

Q35   Nicky Morgan: I have one question about the size of the bids for the regional growth fund, because there is a suggestion in the consultation document that this should be about £1 million or more. I just wondered how that sat with the typical size of projects that you as RDAs have invested in. It goes back to the point that Brian has made, and I think it is made by a lot of constituents, about support for smaller companies. For smaller companies, £1 million actually may be too much, but then that goes back to the point about what size of companies and your point I think, Sir Harry, about global competitiveness versus economic deprivation. Talking about economic deprivation, some smaller companies may not want £1 million; they may want a smaller amount. Is that worth investing?

Sir Harry Studholme: I think there is a difference between programmes and projects. You can create programmes which will deal with your issue of dealing with smaller entities and smaller grants within a programme. I am assuming that it will be possible to bid for programmes within a regional growth fund.

Q36   Chair: A number of business organisations made reference to the need to have an element of revenue funding in any allocation from the regional growth fund, on the basis that LEPs are unlikely to have the capacity to deliver without some sort of proportion of any grant or loan being used for revenue funding. Have you any views on that?

Sir Roy McNulty: I think that comment is absolutely correct. LEPs are going to be new organisations finding their feet with considerable economic challenges to deal with, certainly in the West Midlands. If, at the same time, they do not know whether from year to year they are going to have enough money to actually do the job, you have a very difficult recipe. It is highly unlikely that local authorities will have spare money to put in, and if your only source of funding is something that you have to keep on bidding into and you do not know whether you will succeed or not, I think some level of reasonable stability in funding going forward for several years is absolutely essential.

Q37   Mr Binley: I think it is even more vital than that. Access to capital has lessened over the past 12 months, just at the time when we are coming out of recession and we need to make sure that SMEs get moving, because most of us believe that is where the real job growth is going to come from. Could you help us by telling us how we might pressurise Government to ensure there is funding to help those companies who do not want £1 million? Some of them only want £10,000, for God's sake.

Mr Alan Clarke: Can I partly respond to that? We have had significant experience over the last few years of dealing with our regional banks and in the North East we have Northern Rock, which deals more with the housing market—it is a successful Northern Rock now—but we do meet with the banks as an RDA board, or the chairman and several board members and I have been doing so for the last 18 months. I think getting banks to behave differently is a long­term job. I realise that we do not want them to behave as they did in the past, because that would be wrong, but that is where most businesses get their finance from. We have JEREMIE funds in the northern region, certainly. We have a very substantial fund of £125 million which is beginning to get through to businesses that banks would perhaps not support, but we want them to provide the money as well, otherwise it is not additional. I think the banking issue is still a major one within all of this.

Q38   Mr Binley: It is a vital one. The pressure on banks is to build up their capital assets. The G20 said they have to have another £130 billion in the UK. This is in direct opposition to releasing money to subsidise SMEs. Could you think about that and come back to us? I think it is the issue of the day and we have to impress upon Government that they have a role in this as well. I am sure they are aware of that, but I think it would be helpful if we could press on it.

Can I go on to express the concern which a number of organisations have reported to us? First of all, the FSB is saying that it is absolutely vital that LEPs are private sector-led and do not become a form of local strategic partnership. The Institute of Directors believes there is a power imbalance between local authorities and business in the formation of workable LEPs. There is real concern that this is going to be a local government-dominated operation in certain areas. I recognise that it is patchy throughout the country. How can we encourage business to participate in LEPs? What more do we need to do, particularly if there is no dedicated funding stream available to them?

Sir Roy McNulty: I have spent a lot of time over the last year talking to businesses about exactly that, because my analysis of the situation, certainly in the West Midlands, is that business has not been sufficiently involved in economic development affairs. The simple bottom line from what many, many people have told me is that business is prepared to pitch in and provide the leadership that is envisaged in this case, provided it is a businesslike environment and a businesslike process and that the input and efforts which they are prepared to put in are seen to make a difference. If on the other hand, as you hypothesised, there is no assurance of funding and there is no clarity as to where the LEP is taking its strategy, then business will not be too keen to do it. So the thing has got to be set up right with a chance of success, in a businesslike way, then business, I think, will participate.

Q39   Mr Binley: Again, I repeat, could you help us with telling us how we might put pressure on about the funding?

Sir Roy McNulty: Well I know that in the West Midlands, the key issue for the business community is this co-ordinating body and its effectiveness, because they can see that if we had six LEPs in the West Midlands left to their own devices, that is not a recipe for success.

Mr Binley: I understand that point.

Sir Roy McNulty: That is the critical thing, certainly for business in the West Midlands.

Mr Steven Broomhead: I think the importance of private sector leadership is significant. That has been one of the great learning lessons from the RDAs and that needs to be replicated inside the LEP arrangements and to make sure you have an inclusive partnership between public, private and also, if I might say, the voluntary sector and social enterprise. That needs to be thought through in terms of the actual membership of LEPs.

Sir Harry Studholme: To answer one bit of your question, the cultural issue is a big thing; the difference between public sector and private sector culture. The RDAs have gone some way to bridging that with an approximately 50:50 composition of staff from the private and public sectors. Concerning the issue that you are raising about money and making sure that these funds continue, I think it is important to see the transition as not simply being about Local Enterprise Partnerships. LEPs may well be a small part of what is being transferred. The Local Enterprise Partnership letter that went round talked about planning, transport and housing, which have very little to do with the core business of Regional Development Agencies and it is those other functions that are very important to focus on as one re-ensilos some of those functions.

Mr Binley: I accept that totally. There is no sense in developing enterprise if you do not develop housing and infrastructure at the same time; the two have to go hand in hand.

Sir Harry Studholme: Yes.

Mr Binley: That is one of the big messages that I think LEPs are able to deliver.

Q40   Mr Binley: Let me talk about another point, which was raised with me by the chamber of commerce, which says, "In order to achieve effective co-ordination between LEPs, it is critical that central Government provides greater clarity over the division of labour between Whitehall, LEPs and any other economic development body." That touches on your point, Sir Roy, again. Is that happening?

Sir Roy McNulty: It may be happening but it is not visible to us as yet.

Q41   Mr Binley: Ah, that is pretty important. Can I ask also how we involve further and higher education and the third sector in LEPs? You are right—that social aspect is absolutely vital to their success and I am not sure we really understand how that is happening either. Do you?

Ms Pam Alexander: I think it is variable across the bids that we have seen so far in all of our regions, but I think that what is probably uniform is the understanding that skills are going to be absolutely at the heart of any success for a LEP. Therefore, I think universities are being involved, further education colleges are being involved and, as Steve has said, we do have a model in the RDA boards, where we have had a balance with a business majority but with local government representation and also with representation on every RDA board from the learning community and also from communities more generally. They will bring solutions, not just issues, and that is one of the key reasons why they must be involved.

Q42   Mr Binley: But you would recommend that this is a point we emphasise in our report, I assume?

Sir Harry Studholme: Yes.

Mr Binley: That is really what I wanted to get from you. I am grateful.

Chair: I want to draw this session to a close now, because we have another session. Could I say to any members who have questions that they are perfectly free to write to any of the panel themselves?

Mr David Ward: I am not going to ask this question, but I do not think we have mentioned the word start­up. We mentioned SMEs, but not start­up and I think it is something maybe we could ask outside.

Chair: Yes, we will be talking to business organisations in a subsequent session. Equally, of course, if on reflection you feel that you could add, or even wish to counter some of the comments that you made in response to our questions, do feel free to submit a supplementary memorandum to the Committee prior to the compilation of the report. Can I thank you for your attendance and co-operation and invite our next panel to replace you—the representatives of the LGA, NAO and TUC.

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