Written evidence from the East of England
Development Agency
1. EXECUTIVE
SUMMARY
1.1 This evidence is set within the wider
context provided by the joint submission from Regional Development
Agencies, and demonstrates that the East of England Development
Agency (EEDA) is taking the lead working towards ensuring a smooth
transition of RDA economic functions and highlights risks to delivery
that must be addressed.
1.2 This submission also seeks to present
a case for continued investment in economic growth in the East,
identify best practice and lessons learnt from the current roles
and responsibilities of EEDA, and provide evidence of key issues
in determining the most effective and efficient LEP system.
2. INTRODUCTION
TO THE
EAST OF
ENGLAND
General picture
2.1 The East of England is one of the most
dynamic and fastest growing areas in the UK. Our thriving economy
is due in large part to our heritage of research—we invest
three times more than the UK average on commercial R&D (and
EEDA's record in investing in commercialising from that base shows
a return of £12 for every £1 invested). The region also
demonstrates a high level of entrepreneurial spirit to develop
and capitalise on ideas and inventions, collaborate and act innovatively
to bring products to market (as is evidenced by the success of
EEDA's Proof of Concept/Market products). The region has more
manufacturing businesses than some other "traditional manufacturing"
regions of the UK such as the North East, is at the centre of
the UK's offshore renewables opportunities and attracts thousands
of visitors every year; our tourism industry is worth £5.2
billion and employs over 200,000 people.
Key strengths
2.2 The key regional economic strengths
include:.
— An economy worth £110 billion per
annum.
— The region is one of the three net contributors
to the UK economy at around £6 billion year on year .
— Home to one in every nine UK businesses:
over 430,000 in all.
— More entrepreneurs per head of population
than the UK average and better businesses survival rates.
— We account for £1 in every £5
of venture capital invested in the UK.
— The UK's `ideas region' with business
investment in R&D 3 times higher than the UK average.
— Home to world-class universities and
research institutes.
— The most successful and largest life
sciences cluster outside of the US.
— The world-renowned Cambridge technology
cluster, representing more than 1,400 companies and employing
43,000 people.
— The largest ICT R&D facility in Europe
and over 365,000 ICT specialists .
— A food and farming industry worth £8
billion per annum.
— Developing supply chains in six priorities
sectors: offshore wind, bio renewables, low carbon vehicles, built
environment, environmental technologies, and advanced manufacturing..
— A low carbon innovation industry already
worth in excess of £10 billion.
— The experience and capability to service,
support, and develop the offshore wind supply chain, drawing upon
advanced specialist engineering skills and counting with over
500 companies already operating in the offshore energy supply
chain.
2.3 Critical challenges: the East of England
economy also faces a number of critical challenges. Despite its
achievements, the region only receives around 87% of the average
public spending per head for England. Spending on Economic Affairs
stands at only 80%, transport at 77% and enterprise and economic
development at 42%.
2.3.1 Unemployment: in the year to March
2010, the East of England has experienced the largest absolute
contraction in employment of the English regions and 40% more
people are claiming unemployment benefits than in the North East.
2.3.2 Skills: we have one of the weakest
skills bases in the UK—compounded by the region receiving
the lowest levels of further and higher education spending in
the UK. The East of England's performance is significantly weaker
on higher level skills, with poor progression rates from Level
2 to Level 3. Only 26.8% of the working age population are qualified
to NQF Level 4 compared to 30% in both England and the UK. Around
1.8 million adults in the East of England region need to improve
their basic literacy skills to reach Level 2. Business recognises
that the underlying skills base is a limiting factor in further
economic development.
2.3.3 Infrastructure: much of the region's
utilities infrastructure is at, or nearing, capacity and much
of the region's local water resources are fully developed and,
in some cases, overcommitted. Water stress is already a big issue
and is forecast to be a limiting factor in the future. Power is
frequently a limiting factor.
2.3.4 Broadband: there is an emerging
digital divide in the region with 40-50% of the region's population—particularly
in rural areas—unable to access higher speed broadband.
This already is a limiting factor.
2.3.5 Transport: demand for transport
in the East of England is growing and poor transport links are
imposing additional costs. Transport constraints are currently
creating an economic cost of £1 billion per annum to the
UK economy, and unless immediate action if taken this figure will
rise to £2 billion a year by 2021.
2.3.6 Housing: housing affordability
in the region has deteriorated rapidly over the past 10 years
and the East of England is one of the least affordable places
in the UK to buy a home. Increasing the supply of housing—particularly
affordable housing—is a key issue for the region. However,
the recession has seen a dramatic fall in housing completions
and recent Government announcements regarding the abolition of
regional housing targets could result in lower levels of house
building in the future. This is forecast to be a limiting factor.
2.3.7 Relative poverty: 450,000 households
in the region are affected by relative poverty compared with,
for example, only 266,000 households in the North East.
2.4 The East of England has significant
variations in economic performance that LEPs will need to address,
such as:
— Income inequality: high rates
of income inequality—in 2009, average and lower-quartile
incomes were below the England averages for 5 of the 11 upper-tier
authority areas in the region, with Norfolk having similar levels
to those in the North East.
— Income deprivation: income deprivation
in urban areas—for example, Luton has high rates of income
deprivation with over 21% of the population being income deprived,
38% of which affects children; Great Yarmouth is also a low wage,
low productivity area with high rates of benefit dependency—it
has the sixth highest percentage of people earning less than £7
per hour of all local authority areas in England, has almost 60
per cent of its job vacancies in the lowest-paid occupations and
is ranked 21st of the 326 local authority areas in England in
terms of the percentage of its working-age population claiming
means-tested benefits.
— Child poverty: high concentration
of child poverty in areas—for example, in Norwich and Luton,
more than 30% of children live in households deemed impoverished,
well above the national average of 22%.
3. NEED FOR
CONTINUED INVESTMENT
IN THE
EAST
3.1 The East of England faces significant
challenges and continued investment is essential to deal with
rapid population growth forecast for the region, and to secure
continued and sustainable economic growth.
3.2 The coalition Government's aim to rebalance
the economy is based on the belief that the East of England, along
with the South East and Greater London are less reliant on public
investment than other parts of the country. Whilst understanding
the rationale for supporting communities currently over-dependent
on the public sector to make the transition to private sector
led growth and prosperity, the bulk of funding schemes such as
the Regional Growth Fund should be targeted at support for growth
and additional private sector employment across all regions.
3.3 Specific allowance must be made for
those areas and communities located within more dynamic economies
which nonetheless face growth challenges. In short, the economic
rebalancing role proposed for the Regional Growth Fund should
be as much about growing the size of the private sector cake as
it is about ensuring a more equitable distribution of it. With
the right investment and support the East of England has been
forecast to grow its economy from a current £110 billion
pa to £135 billion by 2020 and £168 billion by 2030.
For the benefit of UK plc this must not be put at risk through
investment starvation.
3.4 Furthermore, regional performance indicators
in the East of England significantly hide marked local variations
in performance. Certain localities in the region are more vulnerable
to public sector jobs cuts than others. For example, those local
authority areas with public services employment comprising 30%
or above of total employment include:
| Public service %
of total employment
|
| Cambridge City | (44)
|
| South Norfolk | (36) |
| Chelmsford | (33) |
| Southend-on-Sea | (32) |
| Bedford | (32) |
| Ipswich | (31) |
| Colchester | (31) |
| Cambridgeshire | (31) |
| Tendring | (31) |
| Huntingdonshire | (30) |
| |
3.5 In terms of economic prosperity and performance,
whilst the East of England ranks 4th amongst UK regions and nations,
numerous local areas perform well below the UK average in terms
of average GVA per head, and this includes the whole of four of
the six counties in the East of England:
| | GVA per head
| GVA total |
| | % of UK
average (2007)
| Shortfall
per head | Shortfall to
EoE & UK
|
| £ |
| | £m |
| UK average | 20,430
| | | |
| Thurrock | 15,717 | 77
| 4,713 | 707 |
| Southend-on-Sea | 15,728 |
77 | 4,702 | 761
|
| Norfolk | 16,573 | 81
| 3,857 | 3,242 |
| Essex | 17,032 | 83
| 3,398 | 4,677 |
| Bedfordshire | 17,429 | 85
| 3,001 | 1,221 |
| Suffolk | 17,529 | 86
| 2,901 | 2,058 |
Total lost to EoE and UK plc
| | |
| 12,667 | |
| | |
| |
| | |
3.6 It is clear that these under-performances against
the UK average cost the East of England and UK plc c £12.7
billion per annum—worth around £700 million into the
Exchequer every year. Every single 1% point we can add to the
average GVA per head in these local areas would add around £125
million to the UK economy, and hence around £7 million into
the Exchequer every year.
3.7 Therefore, the sum which this is worth investing
to get, and the return on investment that should be sought, is
straightforward to calculate depending on the discount rates applied.
For example, we know that we get a return of say £4.75 on
every £1 invested by EEDA in the East of England; we should
therefore invest £150 million per annum in seeking to secure
further sustainable economic growth in these areas alone, and
seeking to bring them up to the national average GVA.
3.8 Businesses in the region have been critical about
being excluded from the National Insurance exemptions announced
in the Emergency Budget, particularly—but not exclusively—in
more deprived coastal areas. If start-up rates remained the same
as in 2008, the cost to businesses in the East of England of not
being exempt from the employer NICs holiday would be £260
million per year. This would put business start-ups at a disadvantage
in deprived areas of the region where there is an acute need to
stimulate job creation, such as in Great Yarmouth (Norfolk), which
has a high unemployment rate, low business start-up rate and one
of the highest rates of working-age people on out-of-work benefits
in England.
3.9 The exclusion of the East of England from the NIC
exemptions could also result in a fall in business start-ups in
areas of the region that border the East Midlands, such as Peterborough,
where the business start-up rate is below average (46.8 per 10,000
adults in 2008, compared to the England average of 54.2 per 10,000
adults), the claimant unemployment rate is above average (4.4%
in July 2010, compared to the England average of 3.5%) and the
increase in unemployment since the start of the downturn has been
well above average (1.9 percentage point increase in the claimant
unemployment rate between July 2008 and July 2010, compared to
the national average increase of 1.3 percentage points).
3.10 ESF, EU and other flexible funding streams should
be focused on "wrap around" services that complement
mainstream provision and address specific local needs. An analysis
of mainstream and ESF worklessness provision undertaken by EEDA
showed that in broad terms there has been a re-focusing of resources
on the work preparation stages of the employment pathway, with
lower levels of funding for engaging with clients and assessing
their needs.[41]
4. FUTURE DELIVERY
LANDSCAPE: CHALLENGES
AND OPPORTUNITIES
FOR LEPS
BASED ON
EEDA'S "LESSONS
LEARNT"
4.1 Natural Economic Geographies
— The East of England is distinctive from other regions
in that it has no core city, with 52 local authorities at county,
unitary and district level. This poses challenges to the future
delivery mechanisms as there is a need to work across local authority
boundaries on wider strategic issues.
— For the labour market, housing markets, and travel
to work areas the natural economic geographies are different and
will change over time. Therefore collaboration across and between
identified LEPs will potentially be more important than the initial
identified physical geography. Collaboration is essential to address
deficits in strategic infrastructure, skills and funding; secure
growth in innovation demand side interventions and supply chain
development and international investment where critical mass is
required to access market and provide the necessary scope of knowledge
and talent.
4.2 Flexibility and ability to respond to economic shocks
— LEPs will need to show significant flexibility. This
has been demonstrated by the flexibility required of RDAs to respond
to the credit crunch and recession, large business closures and
physical challenges such as floods, and their ability to deal
with significant in-year budget cuts.
— In response to the recent recession for example, EEDA
put in place a package of initiatives to support businesses and
individuals in the region to counter the effects of the downturn.
Some of these include: changing the Business Link contract to
increase intensive support; provided 9,500 free "health check"
service for businesses to enable them to take a critical look
at their key areas such as finance and administration, making
over £6 million of additional finance available; increasing
funding to the Manufacturing Advisory Service (MAS-East) by £1.32
million; increasing funding available for redundancy support;
bringing forward capital funding from 2010-11 to 2009-10 to provide
a fiscal stimulus, particularly for the region's ailing construction
industry alongside investments in Business Link Gateway, Resource
Efficiency East, East of England International, TakeITon, Access
to Finance and Women's enterprise.
— RDAs have also been valued as a key source of economic
intelligence to inform the Government's response to the downturn.
Working closely with public, private and third sector organisations,
including regional representatives of major banks and business
groups, regional Bank of England agencies, Business Links, local
authorities, regional Jobcentre Plus offices, regional skills
partners and Citizens Advice Bureaux, RDAs have collected intelligence
and shared feedback on policy interventions with Government.
4.3 Coordination, integration and co-investment
— Collaboration is required to ensure that the right
investment decisions are made at the right time and in the right
place. This reduces duplication of effort, improves leverage and
secures partner mobilisation. LEPs will need to be set up to face
this challenge.
— The East of England Forecasting Model is a prime example;
it was developed in response to an identified local need. Developed
and steered by local authority members, EEDA delivered a custom
built economic forecasting model that meets local needs and offers
a value for money tool to provide economic forecasts for upper
and lower tier authorities and the ability to run scenarios.
— Working with partners, EEDA has also developed a shared
understanding on future priorities for the region through the
East of England Implementation Plan (EEIP)—a delivery plan
for the Regional Economic Strategy and Regional Spatial Strategy—and
local Integrated Development Programmes. These set out the joint
investment priorities for the region in a clear and transparent
way showing where different partners are responsible for delivery
and identifying funding sources. Developed alongside the RFA2,
the EEIP reflects the wider aims of the region and provides the
longer-term context.
— LEPs will need to have the capacity and capability
to deliver services and initiatives on the ground themselves and
to contract out—and performance manage—delivery to
partners. The LEP system must recognise strategic policy making
and collaboration whilst securing effective delivery.
4.4 Ensuring Value for Money
— LEPs will need to ensure critical mass as there are
returns to scale in economic development services. These returns
include increased ability to develop expert and specialist services
as well as to deliver "mass product" type services.
There are also returns to scale in terms of cost effectiveness,
minimising overheads, and delivering "once and for all"
initiatives and approaches.
— LEPs must not offer worse value for money than RDAs,
and RDAs have delivered good value for money. The 2009 PWC report
on the impact of RDA spending evidences substantial returns on
investment (for the East of England a return of £4.75 for
every £1.00 spent) based on evaluation of at least 60% of
spend, with significant longer term and potential benefits. The
remaining proportion of investments show significant other types
of benefits, for example skills interventions, carbon reduction,
and brownfield land redevelopment, which currently cannot be easily
converted to GVA terms.
— Business Link also provides an example where returns
to scale have meant less funding spent on overheads and more funding
spent on frontline services to businesses. Business Link was first
created in 1992 as a "one stop shop" for business support
from Government and by 1997 there were 89 Business Link Partnerships.
Following the devolution of responsibility for the administration
of regional Business Link services to the RDAs in April 2005,
there are now 15 Business Link providers across the nine regions
resulting in streamlined service and efficiency savings.
— There are examples of where expert capacity has been
deployed at a regional scale for the benefit of every local economy
in ways that are cost effective, efficient, and of high quality.
A prime example is the EEDA-funded regional economic intelligence
function which underpinned the Regional Economic Strategy and
the delivery of the regional intelligence observatory, Insight
East. This has provided a consistent and up to date economic evidence
base; monthly updates on performance during the downturn, recession
and recovery; in depth assessments of innovation, skills, international
performance and the impact of recession; and face to face briefings
and tailored work for local issues and circumstances.
4.5 Acting on Local Need and Managing Resources Effectively
— Successful LEPs will need to manage often disparate
objectives, priorities and funding streams operating within the
parameters and processes of available resources in order to meet
genuine needs and fully exploit available opportunities.
— RDAs have successfully identified strategic priorities,
combined funding from a variety of government departments, the
single pot, ERDF, ESF, TSB, Higher Education Funding Council,
the private sector and other sources. They have met process, audit
and appraisal requirements of these various funding sources whilst
achieving significant levels of economic impact. LEPs will need
to migrate their way through this complex territory, or face losing
financial resource with which to make economic impact.
— It is important to deliver high-quality evidence-based
policy making, evaluation and investment planning. Alignment is
required between national, sub national and local partners to
deliver economic plans and investment which connect areas of need
with areas of opportunity.
— Economic analysis and evidence is critical in underpinning
prioritisation. The Transport Economic Evidence Study (TEES) for
example, completed in 2008, established the costs of congestion
in the East of England, where transport constraints are having
a particular constraint on regional productivity and the wider
economic benefits from introducing transport interventions in
areas of need. The study raised the profile of the region's transport
requirements with national and European Government and has supported
business case development for major improvements to the region's
transport infrastructure. The resulting study meant the region
was able to prioritise, from an economic perspective, where and
what type of transport intervention the region should pursue.
LEPs must be set up to face and deal with such cross-boundary
challenges.
— LEPs will need to lever in significant public and
private sector funds including from Jobcentre plus, FE Colleges,
HEIs, Highways Agency, Health Services and others. For example,
EEDA's initial investment of £3.7 million to secure the Essex
University Campus site in Southend-on-Sea leveraged further investment
of £14 million from the then Office of the Deputy Prime Minister
under the Communities Plan, £1.5 million from HEFCE/LSC and
£1 million from the ERDF in the University development as
a whole. The University enjoyed a 75% increase in its intake when
the new campus opened in 2007.
— LEPs present an opportunity to innovate in terms of
investment and project delivery vehicles. Financial tools such
as Accelerated Development Zones and Transport Innovation Funds
should be welcomed as means of delivering investment in an era
of reduced public expenditure.
4.6 Capacity and ability to negotiate central government
funding allocations
— Expert capacity can only be developed or maintained
at a supra-local scale, but benefits every local economy in cost
effective, efficient, high quality ways. Areas include economic
intelligence, policy advocacy and development and prioritisation.
LEPS must be set up to face and deal with this challenge.
— The delivery of a national Bioscience Campus for example
demonstrates the need to use expertise on innovation, project
management and green book appraisal to secure critical investment.
EEDA has approved £4 million funding towards the creation
of a new £37 million Bioscience Campus in Stevenage in partnership
with GlaxoSmithKline (GSK), the Government, The Wellcome Trust
and the Technology Strategy Board. EEDA worked with GSK for 18
months to develop and secure funding for this project—the
UK's first open innovation campus for drug discovery and development.
It is estimated this initiative will create up to 1,500 new jobs
locally—most of which will be high-skilled—with the
potential for hundreds more to follow in the supply chain.
— Expert capacity is also required to deliver strategic
prioritisation of large scale infrastructure projects. EEDA led
the production of the second round of Regional Funding Advice
(RFA2) which included advice and recommendations to Government
on priorities for funding streams related to economic development,
housing, transport and skills. Underpinned by robust and clear
evidence of prioritisation and analysis of deliverability, the
process enabled each region to inform the Government's investment
priorities up to 2011 with indicative funding assumptions to 2019.
The RFA2 submission emphasised the importance of delivering against
existing commitments whilst being as flexible as possible in responding
to the recession. It set out how the region would re-profile and
re-prioritise investment within each funding stream to respond
to current challenges and opportunities in the region.
13 August 2010
41
Review of East of England ESF and mainstream worklessness funding:
final report, EEDA (June 2010). Funded by ESF Technical Assistance
funding. Back
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