age ofregions Meeting the Productivity Challenge

Edited by Natascha Engel

t THE SMITH INSTITUTE

age ofregions Meeting the Productivity Challenge

Edited by Natascha Engel

Published by the Smith Institute

ISBN 1 902488 50 4

© The Smith Institute 2002 THE SMITH INSTITUTE

Introduction 3 Natascha Engel, Smith Institute

The regional economic challenge 7 and MP, Treasury

Time for delivery 19 MP, Department for Trade and Industry

Your region, your choice 29 Rt Hon MP, Office of the Deputy Prime Minister

The way forward 37 Richard Samuda, KPMG

Closing the productivity gap in Yorkshire and Humber 49 Tom Riordan, Yorkshire Forward

Trade Unions delivering on productivity 61 Nigel Costley, South West RDA and TUC

A framework for action 71 Samantha Gemmell, East Midlands Development Agency

Producing a regional economic strategy 81 Dr Peter White, North West Development Agency

Glossary 87

Useful addresses 101

2 THE SMITH INSTITUTE

Introduction

Natascha Engel Programme Director, the Smith Institute

Since Regional Development Agencies (RDAs) first opened their doors in 1999, the Smith Institute has taken a keen interest in their work.

Ambitious in their aims, RDAs have sought “to co-ordinate regional economic development and regeneration, enable the English regions to improve their relative competitiveness and reduce the imbalance that exists within and between regions.” 1

It is always worthwhile to restate the five founding principles of RDAs to:

• further economic development • promote business efficiency, investment and competitiveness • promote employment • enhance development and application of skill relevant to employment, and • contribute to sustainable development.2

Arguably, these five statutory purposes are inextricably interwoven – one cannot succeed without the others.

And yet, it has been the function of each Regional Development Agency (RDA) to meet the five targets by addressing economic challenges at regional and sub-regional level.

The Smith Institute has been in the privileged position of watching Regional Development Agencies evolve. In the mere three years of their existence, RDAs have succeeded in finding the appropriate economic focus in their regions: from the broad five founding statutory principles outlined above to tightly targeted and ambitious Regional Economic Strategies (RESs), addressing the core challenges in their regions.

1 DTI website: www.consumer.gov.uk/rda/info/ 2 DTI website: www.consumer.gov.uk/rda/info/

3 THE SMITH INSTITUTE

Much of that tighter focus has been evident in the regional seminars partnered by the Smith Institute with many of the Regional Development Agencies. Many RDAs have used this pamphlet to showcase the outcomes from those seminars, including Yorkshire Forward, South West of England Regional Development Agency, East Midlands Development Agency and North West Development Agency.

The great trajectory travelled by RDAs has already been catalogued by the Smith Institute with the first publication in this series: Towards a New Regional Policy: Delivering Growth and Full Employment3, a pamphlet edited by Ed Balls and John Healey MP in the last Parliament.

It is fitting, therefore, that this collection starts with a joint contribution from Ed Balls and John Healey. Their chapter analyses the structural benefits devolved to RDAs and their partners after the 2002 Budget and Spending Review, and looks ahead to the next phase of RDA development after the submission of Regional Economic Strategy reviews.

Ed Balls and John Healey MP as well as Alan Johnson MP, Minister for Employment, Industry and the Regions, have been regular contributors to the Smith Institute’s RDA seminars in the regions.

Each seminar brought with it a unique regional flavour. Yet, whilst regions are distinguished by their differences, and while each region has a marked focus and branding, it has been the emergence of clear cross-cutting policy issues which has been of greatest interest.

Every region will lay claim to transport, skills, employment, training and rural/urban issues as being near the top of their economic development agenda. Whilst transport in the South West may focus on different aspects to the North West, it is of equal importance.

As Alan Johnson MP writes in this pamphlet, key to the success of RDAs will be their ability to share best practice – to learn the lessons of success, but also to avoid repeating the mistakes of others.

3 Ed Balls and John Healey MP Towards a New Regional Policy: Delivering Growth and Full Employment, the Smith Institute, 2000

4 THE SMITH INSTITUTE

Rt Hon Nick Raynsford MP, Minister of State for Local Government and the Regions, joins up government thinking on regional policy from the Office of the Deputy Prime Minister. He outlines the regional economic framework within the context of devolved government.

A final ‘big picture’ analysis is provided by Richard Samuda, a KPMG partner, who develops the case for joined-up thinking with clearer management frameworks and better management of change. He focuses on the relationships between RDAs and their Learning and Skills Council and Small Business Service partners as key stakeholders in the regions.

The second half of this pamphlet gives voice to the regions and demonstrates the unique focus brought by each region to addressing the productivity challenge.

Tom Riordan, Executive Director of Strategy and Policy at Yorkshire Forward, brings an in-depth economic analysis of the challenges facing the Yorkshire and Humber region and sets out a plan of action to address these through Yorkshire Forward’s Regional Economic Strategy up-date.

Nigel Costley, Regional Secretary of the South West TUC and a member of the South West of England Development Agency Board, makes a strong case for the deeper involvement of the trade union and labour movement in addressing the productivity challenge – through helping to deliver on the skills, equalities and partnership agendas.

Sam Gemmell, Chair of the East Midlands FRESA Forum and East Midlands Development Agency Board Member, refines this further still. Her focus is on the structure and delivery programme of the East Midlands Framework for Regional Employment and Skills Action (FRESA) identified as a key component in turning the regional productivity corner.

The concluding chapter takes us to the North West of England with a contribution from Peter White, Director Strategy for the North West Development Agency. The North West has been a leader in the area of science and developing the Knowledge Economy, and this is well documented in Peter White’s essay.

5 THE SMITH INSTITUTE

By bringing these contributions together in this second pamphlet, it is hoped that we will go some way towards promoting those incidences of best practice which have been the hallmark of Regional Development Agencies to date.

Given the enthusiasm, commitment and optimism which exist in the RDAs, this second pamphlet should, perhaps, have more aptly been entitled: Regions to be Cheerful, Part 2.

6 THE SMITH INSTITUTE

The regional economic challenge

Ed Balls Chief Economic Adviser to the Treasury

Ed Balls is Chairman of the IMF Committee Deputies’ and represents the UK as the Chancellor’s Deputy at the G20. He is a member of the Treasury Management Board.

He was a student at Keble College, Oxford and Harvard University, where he was a Kennedy Scholar and Teaching Fellow. He joined the staff of the Financial Times as an economics leader writer and columnist in 1990.

In 1994, he became Economic Adviser to the Shadow Chancellor MP and wrote a regular economics column for . From May 1997 to October 1999 he was the Chancellor’s Economic Adviser at the Treasury.

John Healey MP Economic Secretary to the Treasury

Before joining the Treasury this year, John Healey was Minister for Adult Skills at the Department for Education and Skills. He had previously served as a member of the Education and Employment Select Committee, and as Parliamentary Private Secretary to the Chancellor of the Exchequer. He has been MP for Wentworth, Rotherham in South Yorkshire since 1997.

John Healey worked in the voluntary sector from 1984 to 1990 with the Royal National Institute for the Deaf, the Royal Association for Disability and Rehabilitation and MIND, campaigning to improve rights and services for disabled people.

From 1990 to 1994 he worked in communications for Issue Communications, a campaigns consultancy, and the MSF union. He was Campaigns Director for the TUC from 1994 to 1997 and has also been a part-time tutor at the Open University’s Business School.

7 THE SMITH INSTITUTE

Introduction

The Smith Institute’s publication two years ago of Towards a New Regional Policy: Delivering Growth and Full Employment 4 showed just how much enthusiasm and appetite there was for progress on the new regional agenda, established in the Government’s first term, under the leadership of John Prescott and Gordon Brown. When we set out our thoughts in that pamphlet, we knew there was a real head of steam behind them, and real challenges ahead. We saw the key ones as: • Establishing a clear commitment to higher growth and full employment in every region of Britain • Enhancing resources and responsibilities for the Regional Development Agencies RDAs • Joining up delivery by RDAs and other agencies; • Targeting resources to tackle disadvantage and regional inequality and close regional divides • Measuring success and holding regional bodies to account.

Tough challenges indeed, but ones on which there has been real progress. So in this new Smith Institute pamphlet we can now set out the basic framework of the new regional economic policy, the progress we have made over the past two years in promoting what we have called a ‘new localism’ in regional policy as well as in public service delivery and the reasons why we now need to redouble our efforts.

We said in the original pamphlet that the first term report on RDAs might read “Slow start. Shows promise.” We’ve got good reason to update that now to “Much done, much more to do, time to deliver.”

In our view, there is nothing inevitable about regional inequalities – in incomes, employment or opportunity. The combination of stability and the new challenges and opportunities of the global economy and more mobile investment can close regional divides. With the right kind of backing from a new regional policy, each region is well placed to take advantage of these new opportunities.We can make a reality of full employment in every region of Britain.

4 Ed Balls and John Healey MP Towards a New Regional Policy: Delivering Growth and Full Employment, the Smith Institute, 2000

8 THE SMITH INSTITUTE

The New regional Policy

Regional policy in Britain does not have a good track record of success. The ambulance work of the 1930s, the top-down capital grants of the 1960s, and the laissez-faire of the 1980s are a legacy of wasted opportunity. This Government, as our actions demonstrate, is genuinely committed to a new regional economic policy for Britain. Working closely with the DTI and in particular with the Minister in charge, Alan Johnson, and with the Office of the Deputy Prime Minister, the Treasury is determined to make it work.

This new regional economic policy is based on two fundamental principles. Firstly, it aims to strengthen the essential building blocks of growth – innovation, skills, the encouragement of enterprise and investment – by exploiting the indigenous strengths in each region and city. Secondly, it is bottom-up not top-down, with national government enabling powerful regional and local initiatives to work by providing the necessary flexibility, accountability and resources.

Progress so far

The past two years have been very important for the new regional economic policy agenda for a number of reasons.

First, since the beginning of last year, the world economy has suffered the first synchronized global economic downturn since the 1970s with recession spreading from America across continental Europe to Asia. We know that in the past global downturns have tended to hit Britain harder – with higher inflation, deeper recessions and more jobs lost. It has usually been the poorer regions of Britain that have been hit the hardest. This time the situation has been different.

Manufacturing output and investment have suffered in Britain as world trade has ground to a halt. But because of the decisive action of the Bank of England in cutting interest rates seven times last year, supported by fiscal policy, the UK has steered a course of stability with Britain being the fastest growing major economy last year. Despite economic difficulties in America

9 THE SMITH INSTITUTE

and Europe, we are cautiously optimistic about the prospects for growth and jobs this year across the UK. While manufacturers and exporters have faced very difficult times, unemployment has continued to fall and manufacturing and business confidence is recovering across the country. This platform of relative stability in Britain allows us to focus on our long-term agenda for full employment and higher productivity.

Productivity in the UK – The regional dimension

The second important change over the past year has been the growing recognition in government that our employment and productivity goals require a greater emphasis on regional policy. This culminated in the Treasury/DTI publication Productivity in the UK – The Regional Dimension 5 last November. It set out our analysis of the causes of – and possible solutions to – regional differences in productivity. We identified the long-term problem, the five drivers that are the key to addressing it, and looked at the institutional framework required to release productive potential. This document shows that Britain has more regional inequality than any other EU country, and that if we were to raise the productivity of all regions to the average, then each person in the UK would be £1,000 a year better off. It also sets out the framework for the new regional economic policy and spells out the Government’s regional ambitions: to deliver full employment in every region. 60 per cent of the variation in income per head in Britain is explained by productivity differences between regions. Our long-term ambition is, therefore, to improve the economic performance of all regions 6, and reduce the persistent gap in performance between the regions.

Spending Review (SR2002)

Third, with Budget 2002 and the Spending Review 2002 (SR2002), the new regional economic policy took further decisive steps forward. As the Chancellor said in the Budget, meeting the Government’s goals demands that we move forward with policies for enterprise and fairness.

5 Productivity in the UK:3 - The Regional Dimension HMT/DTI, November 2001. For copies of the report, visit: www.hm-treasury.gov.uk or write to The Public Enquiry Unit, HM Treasury, Parliament Street, London SW1P 3AG 6 Measured by the trend in growth of each region’s GDP per capita

10 THE SMITH INSTITUTE

We know that to boost productivity and close the productivity gap demands new tax and spending measures to support enterprise, growth and jobs in the poorer British regions. We made progress in this year’s Budget – including an R&D tax credit for large companies, a new zero rate of Corporation Tax, cutting Capital Gains Tax, and introducing a new Community Investment Tax Credit to support investment in disadvantaged communities. In this year’s Pre-Budget Report we will set out the next steps to support enterprise, growth and job creation in every British region.

As Gordon Brown said in his conference speech this year: “So working in partnership with local authorities and Regional Development Agencies we will designate 2,000 new enterprise areas; not the old failed enterprise zones of the 1980s where property subsidies diverted large businesses from one area to another, but 2,000 new enterprise areas that encourage home-grown economic activity by cutting the cost of starting up, investing, hiring, managing the payroll, eliminating stamp duty, making it easier to start and grow a business and create new jobs.”

Further support for the RDAs to promote enterprise and job creation in the regions was a priority for this year’s Spending Review. For the first time, based decisions on a wider collection of information on regional needs and priorities – with RDAs and Government Offices submitting Regional Priority Documents to the Treasury.

SR2002 delivered substantial new resources and significant new responsibili- ties. The Single Pot will rise to £2 billion by the end of the Spending Review period, and Departments have worked together to ringfence these resources to give the RDAs a concrete, three-year planning framework.

The Single Pot is set to increase by an average of 4.5 per cent a year in real terms over the next three years. This is an increase of £375 million in 2005/06 (compared to 2002/03) and, given reductions in Single Regeneration Budget (SRB) commitments, an increase of £910 million in the ‘effective’ Single Pot over the same period.

Enhancing the role of the RDAs is not only about resources. The Spending Review also announced that the RDAs would have strengthened roles in

11 THE SMITH INSTITUTE

relation to transport, tourism, housing and planning, and, in selected regions, skills and business support. This allows RDAs, as strategic leaders, to co- ordinate regional policy better in the regions across a range of areas where public spending impacts on Regional Economic Strategies.

As a government, we’ve talked a lot about prudence, about the need to build a platform of economic stability and growth in the UK. But we also know that, for this growth to be sustainable, it must be shared. SR2002 built on the solid foundations for targeting resources and incentives at areas of disadvantage. It re-emphasised our commitment to improving outcomes for those who are most disadvantaged, through an extended and strengthened set of floor targets, showing how outcomes are to improve for the most deprived neighbourhoods and groups.

So the Treasury signed up for the first time in SR2002 to a joint Public Service Agreement (PSA) target to make sustainable improvements in the economic performance of all English regions, and over the long term reduce the persistent gap in growth rates between the regions. It is, by necessity, a two- pronged attack – while we must aim to strengthen the indigenous growth potential of all regions, the focus must be on the weakest regions, without constraining growth in the strongest.

Holding RDAs to account

Working in tandem with these efforts by central government, and using the new resources, responsibilities and autonomy they have been given, regional institutions will reasonably expect to be held accountable for what they are being asked to deliver. There has been progress here too. The Financial Memoranda and the Performance Monitoring Framework for the RDAs’ Single Pot have been approved and put in place; Regional Assemblies and Chambers continue to exercise their scrutiny functions and the regional agenda still looms large in parliamentary debates.

Perhaps the most dramatic of all progress was the publication in May of Your Region, Your Choice 7, the White Paper on elected regional government.

7 Your Region, Your Choice: Revitalising the English Regions, Office of the Deputy Prime Minister, May 2002 or visit: www.regions.odpm.gov.uk/governance/whitepaper

12 THE SMITH INSTITUTE

For the first time, regions are being given the opportunity to make their regional voice heard, delivering on our Manifesto commitment to provide for directly elected regional assemblies in those regions that want them. It is too early to say how many regions will choose to follow this route, but the opportunity is there for people in the regions to have a greater say over the issues that affect them – accountability in its representative democratic form.

Next steps in the new regional policy

The reality of the new regional economic policy is that decisions on the use of new resources must be based on regional priorities. With the Single Pot now in place, it is at the regional level that many of the key decisions will be made. So, in reviewing the Regional Economic Strategies, RDAs must focus on how to make the right decisions on quality and innovation; skills and workforce development; sustainability and productivity; and ensuring that all, and particularly disadvantaged communities, can share in rising prosperity.

RDAs will need to focus rigorously on priorities to meet their ambitious targets. They will need to deepen partnership working across their regions, within the sub regions and with the Learning and Skills Councils (LSCs), the Small Business Service (SBS), universities and local government. And they must make sure that all parts of their regions, the weakest as well as the strongest, are enabled to participate in a bottom-up strategy.

That means a big cultural change for central government – flexibility must be real not illusory. The RDAs too have a big task – to move from drawing up strategies to demonstrating first class leadership in implementing them. It means other regional and local economic players – the LSCs, SBS as well as local government – need to work as part of the RDA regional strategy.

In local government, too, the new regional policy requires a fresh commit- ment from stakeholders to work with central government and the RDAs and co-ordinate their efforts. We need to engineer a decisive shift away from the problems of the past, where for politicians and policy makers in local and regional government the atmosphere was all too often one of confrontation,

13 THE SMITH INSTITUTE

conflict between central and local government, a top-down and centralized regional policy and contradictory and overlapping requirements on local government.

The ‘new localism’ for local government is not just about cutting ringfencing, reducing plans and cutting bureaucracy. It is also about putting in place the freedoms and flexibilities that local government needs to be able to play their part in regional and local economic regeneration. So now is the time to ask how we can strengthen the role of local government in promoting economic development.

We are making good progress. The Regional Economic Strategies are being reviewed and further refined with regional partners, and shared regional milestones are being set. The first Frameworks for Regional Employment and Skills Action (FRESAs) will be published in the next few weeks, jointly produced by the RDAs and Learning and Skills Councils. With closer regional working between Business Links and the RDAs, with RDA management of Business Links being piloted and regional skills budget pooling due to be piloted from April next year, it makes little sense for regional provision of shared business services or skills support to be centrally directed from Whitehall.

But there is more work to be done. To make devolved economic decision- making work, we need to build wider public support in each region and develop a genuine cross-regional commitment to delivery. That is why as we develop regional policies that are locally generated and managed, we are matching regional flexibility with local and regional accountability – not only so that the RDAs are held to account for spending public money but also so that other regional, sub-regional and local players feel genuine ownership of and commitment to the economic strategy.

So it is critical that RDAs make sure that their whole region – business, trade unions, universities and colleges, Councillors, Members of Parliament and the wider community, feel that their voices are properly heard and their concerns are reflected in the development of policy.

14 THE SMITH INSTITUTE

Business engagement is absolutely essential. The challenge now for business is twofold. First, to take advantage of the productivity initiatives we are now putting in place – on innovation, investment, skills, and enterprise. And second, to get involved with the agencies that are driving devolution – to help lead and influence the new regional economic agenda.

We have established the agencies, we have given them funding, and we have given them the freedom to spend it where they see fit. The RDAs are powerful organisations, but they are empty without the imperatives supplied by the active engagement of the business community. Businesses need to take the lead on agency boards; they need to participate in consultations on skills, on investment readiness, on export channels, and on Regional Economic Strategies. They need to pursue a policy of enlightened self-interest and participate actively in shaping the economic development of their region.

The regional skills agenda

Nowhere is the need for business engagement with the new regional policy more important than with the skills agenda. Skills gaps, locally, regionally, and nationally, are a major impediment to improvements in productivity and sometimes, for the individuals concerned, a major barrier to social inclusion.

The UK compares well with other countries in terms of highly skilled workers, but has a much higher proportion of workers with low skills levels than other European countries. Over 30 per cent of UK workers (over 8 million people) have low skills, compared to less than 20 per cent in Germany. The Government has committed significant extra resources and set testing targets on workforce skills – launching Employer Training Pilots in the 2002 Budget and investing to improve workplace skills and expand Modern Apprenticeships to over 300,000 in 2004 in the Spending Review.

This is a national problem, but it has to be addressed locally. The problems and the priorities for Wrexham are not the same as those encountered in Rotherham or Wakefield. In the North West, employers are demanding higher level vocational qualifications from their workforce. In Yorkshire and Humber there has been a movement away from demand for industry

15 THE SMITH INSTITUTE

specific skills in favour of more generic and soft skills such as creativity, communication, problem solving, sales and management skills. The simple truth is that the regions have different skills requirements and that has to be reflected in their skills strategies.

It is crucial that the provision of learning opportunities in a region fit with its particular skills needs. To achieve this, RDAs have worked in partnership with local agencies to develop Frameworks for Regional Skills and Employment Action – action plans to address regional and local skills needs. FRESAs draw on regional labour market and skills information to pinpoint skills gaps, and help to ensure that the learning provision delivered through local LSCs is focused on tackling these skills gaps.

RDAs, as drivers of economic growth within the regions, have an obvious interest in developing human capital and building human productive potential. SR2002 proposes a pilot scheme for the pooling of Local Learning and Skills Council post-19 funding at regional level and co-management of these regional budgets between RDAs and LLSCs. RDAs have not been slow to take up the challenge.

The role of the trade unions

Trade unions have always played an important part in extending opportuni- ties for learning at work. As early as 1937, the TUC’s Youth Charter called for time off for technical training. In the modern workplace, trade unions have an important role promoting learning, reaching out to marginalised groups, and bridging the gap between their members and the mainstream of social opportunity. This Government is committed to further and to formalise the role of unions in promoting workforce skills.

Unions have a central part to play in enabling us to meet the demand for a skilled workforce, and in working within the new regional policy to identify needs at a local level. The TUC set out the role that trade unions’ can play in this new regional policy in their excellent publication Half the world away – making regional development work timed to set the agenda for the 2002 Spending Review.

16 THE SMITH INSTITUTE

On skills, for example, since 1998, we have provided financial support through the Union Learning Fund – with support currently standing at £9 million and set to rise to £11 million in 2003/04. We are committed to statutory backing for Union Learning Representatives – dedicated men and women who do so much to promote the collective interests of their members. The Employment Act 2002 gained Royal Assent in July – Section 42 grants statutory rights to Union Learning Reps.

As John Monks, General Secretary of the TUC, has said:

“Learning reps in many ways symbolise modern trade unionism. They are clearly benefiting union members, and acting collectively on their behalf with employers. But at the same time they are advancing an agenda that is clearly to the benefit of employers.”

Yorkshire Forward has been working with the TUC to identify regional skills priorities. It is exactly this kind of forward-looking, collaborative approach that RDAs should adopt – working with stakeholders to identify and enable local solutions to local issues.

Regional governance

This chapter began by stressing the importance of matching new flexibility with deeper accountability. Let us conclude by saying something about how the regions should address the challenge of the Deputy Prime Minister’s White Paper on regional governance, Your Region, Your Choice 8.

This White Paper makes clear that not all regions will want to go down the road of elected Regional Assemblies. So we have been anxious to ensure that the new regional economic policy – matching greater resources via the Single Pot with greater accountability through properly funded non-elected assemblies – can support a regionally balanced approach to economic policy, growth and jobs in all regions.

8 Your Region, Your Choice: Revitalising the English Regions, Office of the Deputy Prime Minister, May 2002 or visit : www.regions.odpm.gov.uk/governance/whitepaper

17 THE SMITH INSTITUTE

But the Government’s manifesto commitment is clear:

“that provision should be made for directly elected regional government to go ahead in regions where people decided in a referendum to support it.” 9

The White Paper sets out the detailed route map for those regions that want to go further.

The Treasury has worked closely with the Deputy Prime Minister and the Cabinet Office to draw up a package of further financial freedoms and flexibilities to match greater accountability. The aim is to ensure that we do so in a way that avoids introducing unnecessary new bureaucracy and protects value for money. For all regions, any decision to go further will depend on public support in a referendum.

For those regions that want to proceed, the prospects for the referendum will depend on the results that are delivered in the first phase of regional devolution – the new regional economic policy – that is now under way. And for those regions that do not want to proceed down that road, it is just as important that we make a success of new resources, powers and flexibilities for devolved economic policy that we have already put in place.

So while the debate about regional government needs to be had (and the debate both about whether to go ahead and about structures and organisa- tion will be a lively one), we must not take our eye off the ball on regional economic policy.

Now is the time to show that the RDAs can deliver. Whether or not regions decide to go further, we need to succeed in the next few years on growth and jobs and achieve our goals of full employment in every region and closing divides in incomes between the regions. That is how we can demonstrate the new regional economic policy is delivering for all the people of every region of Britain.

9 Labour Party General Election Manifesto 2001 p35 Regional Government

18 THE SMITH INSTITUTE

Time for Delivery

Alan Johnson MP Minister of State for Employment Relations, Industry and the Regions

Within DTI, Alan Johnson is responsible for Regional Policy, including Regional Development Agencies and Government Offices.

Alan Johnson has been MP for Kingston-upon-Hull West and Hessle since 1997. Before entering Parliament, he was General Secretary of the Communication Workers Union between 1993 and 1997. Having spent 20 years of his life as a postman, much of Mr Johnson’s previous work has been in employment law and the Post Office.

19 THE SMITH INSTITUTE

Time for delivery

The 2002 Spending Review gave new money, new powers and new opportu- nities to the Regional Development Agencies (RDAs) to tackle the issues that, in the past, have inhibited sustainable economic growth across England.

This chapter illustrates how, in a relatively short period of time, RDAs have evolved from a vision for tackling disparities between regions to strong regional bodies leading and co-ordinating the work of regional partners and stakeholders to address regional needs.

Continued decentralisation of government provides RDAs with more opportunities to deliver. This has increased the need for RDAs to share their experiences of adding value in the regions. Naturally, it took time for RDAs to establish themselves, but now that the building blocks are in place and the tools of delivery have been sharpened, stakeholders will be looking closely at the performance of RDAs and will expect them to make a tangible difference to the performance of their regions.

The birth of RDAs

Policy makers have been grappling with the issue of disparities in regional economic performance since the early 1920s. In spite of the many schemes, policies have hitherto failed to address local, sub-regional, regional and national economic disparities. These failures have hit the most disadvantaged hardest.

The results of ineffective policies were clearly visible in the 1990s: the gap between the economic performance of the southern and northern regions of England widening ever further. In 1999, regional GDP per head was around £10,000 in the poorest regions and nations of the UK (Northern Ireland, Wales and the North East of England). In the southern regions (South East, London and the Eastern regions) it was on average over £15,500.

The Labour Party recognised the urgent need for regional bodies in England that could build an understanding of regional strengths and weaknesses,

20 THE SMITH INSTITUTE

identify key partners and put in place practical measures to secure long-term prosperity. Plans for establishing the RDAs were published in the 1997 Regional White Paper Building Partnerships for Prosperity 10. After months of consultations, negotiations and debates the Regional Development Agency Act 199811 was passed and the first RDAs opened a year later.

Turning the vision for RDAs into a reality has been no easy task. It took time for the necessary building blocks to be put in place. A whole series of programmes, which had previously been administered by central government departments, were devolved to Regional Development Agencies. At the same time, RDAs had to encourage the right ‘can do’ attitude by all relevant stakeholders. RDAs developed relationships with (amongst others) Universities, Local Strategic Partnerships, Urban Regeneration Companies, community groups and local Chambers of Commerce to articulate a strategic vision for the regions: the Regional Economic Strategies (RES).

This year, six RDAs are reviewing their RESs to reflect the new regional and national priorities. We will be looking for these revised documents to show how regions intend to respond to the competitive pressures of the new century and to set out how the economic actors in the regions will work together to tackle these challenges.

Meeting the new challenges

As the RDAs have been evolving, so, sadly, have the problems that led to their introduction. Britain’s economy has moved beyond the stop/go instability of the past, but our businesses face increasing pressure to be more competitive in the global marketplace.

The strengths and weaknesses of a region can quickly change. For example, the global computer chip market has crumbled, and companies which were announcing the creation of new jobs when RDAs were first set up were suddenly announcing job losses in regions with already high unemployment. Gross Value Added per head in the North East (on a workplace basis) went

10 1997 Regional White Paper: Building Partnerships for Prosperity can be found on the website of the Office of the Deputy Prime Minister: www.odpm.gov.uk 11 1998 Regional Development Agency Act can be found at: www.hmso.gov.uk

21 THE SMITH INSTITUTE

from 82 per cent of the UK average to 77 per cent in 1999. This compares with an increase in the South East’s relative performance over the same period of 102 per cent to 110 per cent.

For regions to be robust enough to reduce economic disparities and respond to developments in the global marketplace, RDAs need to ensure that the economy is firing on all cylinders. RDAs must formulate and implement coherent strategies for economic development, co-ordinate the work of regional and local partners and stakeholders, and address competitiveness and enterprise issues.

The swift response to foot and mouth disease shows that RDAs have developed the capacity to provide innovative and effective reactions to regional and global shocks. This rapid response capacity at times of crisis needs to be repeated during less adrenaline-fuelled times.

Sharpening the tools of delivery

The Government has demonstrated its commitment to ensuring RDAs have the necessary tools to tackle the deep-rooted problems that have prevented some regions realising their potential.

Single Pot The 2002 Spending Review saw increases in RDA funding to make the Single Pot worth £2 billion a year in 2005/6 – £375 million more than in 2002/3, an average annual real terms increase of 4.5 per cent between 2002/3 to 2005/6.

Corporate Plans Attached to the real new money is a set of challenging targets that the RDAs are integrating into their new Corporate Plans. RDAs will use their Corporate Plans to outline their strategies and targets to meet the challenges set by their Regional Economic Strategies (RESs). With these and the Frameworks for Regional Employment Skills and Action (FRESAs), stakeholders will be given a clear appreciation of the RDAs' strategies for each region.

22 THE SMITH INSTITUTE

RDAs have been empowered by being given the flexibility to spend their budgets according to regional priorities. Breaking from the tradition of micro-managing expenditure by diverting existing funding streams into a single budget was a radical step for government to take and an important culture change for Whitehall. The DTI is charged with ensuring that government departments provide the freedoms promised by the Single Pot, at the same time as scrutinising and monitoring the spending of public money.

Sharing best practice

To share best practice, RDAs have focussed on project appraisal, monitoring delivery of spending and effective evaluation of results. The Best Practice Practitioners Group, comprising the RDAs, English Partnerships, Regional Government Offices, and relevant Whitehall departments, has been leading on the issue of best practice sharing. This group has made important contributions to formal guidance producing practice Advice Notes on various topics.

Lead RDAs RDAs often share best practice with neighbouring RDAs on matters such as transport, inward investment and cluster development on an ad hoc basis. Another important means of sharing best practice is through the RDAs that are nominated as ‘in the lead’ on particular issues (such as manufacturing or sustainable development). These ‘Lead RDAs’ help establish new networks of contacts on particular subjects that enable the efficient sharing of information.

The regular meetings of RDA Chairs with Ministers, chaired by Patricia Hewitt and me, help to develop communication networks. The September 2002 meeting between Ministers and Chairs, for example, initiated a more focused drive by the RDAs to share experience in supporting ethnic minority business.

We believe that much can be gained from RDAs sharing knowledge of what works well and what needs to be done better. RDAs need to consider further how to provide opportunities for the sharing of best practice. It is important

23 THE SMITH INSTITUTE

that RDAs can easily tap into the experience of others, whether in helping workers find new jobs after large-scale redundancies or developing longer- term strategies for diversification. Advantage West Midlands, for example, has experience of both – leading two task forces to tackle the BMW withdrawal from Rover and problems in the ceramics industry 12.

A structured approach to storing project information and best practice at sub-regional, regional and national level is needed. Instead of continually reinventing the wheel, economies of scale should start to be achieved by tweaking projects in one area so that they can give added value elsewhere.

Single Regeneration Budgets RDAs also need to build on and learn from the experience of Single Regeneration Budgets (SRBs) and legacy programmes. It is important that we learn from projects that have not delivered the anticipated outcomes to ensure better targeting of resources in the future. These lessons may be difficult to face up to, but it is paramount that they are learned and shared to prevent their repetition. RDAs must not be afraid to admit that they have benefited from collaboration with others or to analyse reasons why particular activities did not deliver the anticipated benefits.

Opportunities for RDAs to deliver

These are exciting times for the English regions. RDAs have new money and new powers to deliver the results their regions need. There are now more opportunities for the RDAs to demonstrate their value through strategic leadership in a variety of schemes and new policy responsibilities.

Tourism The 2002 Spending Review (SR2002) devolved a new role to RDAs: promoting tourism. In the long term, this will provide a real opportunity for RDAs to co-ordinate and improve the promotion of tourism in the English regions.

12 For details of Rover Group Taskforce, visit Advantage West Midlands website: www.advantagewm.co.uk

24 THE SMITH INSTITUTE

Skills Skills is one of this Government’s key priorities and the RDAs have the opportunity to show how they can drive the skills agenda forward by drawing local stakeholders together to work in partnership to produce regional Frameworks for Employment and Skills Action (FRESAs). Employer Training Pilots were also announced in the 2002 Spending Review which will see Learning and Skills Councils co-ordinating with RDAs to promote skills level 2 acquisition at work.

Business Links As well as the Learning and Skills Council-led Employer Training Pilot initiatives, RDAs will also be managing Business Links. These pilots will allow RDAs to demonstrate how their strong regional position can help improve the delivery, effectiveness and co-ordination of all business support at the regional and sub-regional level. Local Business Link operators will be able to concentrate on achieving the objectives listed