House of Commons Trade and Industry Committee Support to Businesses from Regional Development Agencies Fifth Report of Session 2003–04 Report, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 11 May 2004 HC 118 Published on 9 June 2004 by authority of the House of Commons London: The Stationery Office Limited £23.00 The Trade and Industry Committee The Trade and Industry Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Trade and Industry. Current membership Mr Martin O’Neill MP (Labour, Ochil) (Chairman) Mr Roger Berry MP (Labour, Kingswood) Richard Burden MP (Labour, Birmingham Northfield) Mr Michael Clapham MP (Labour, Barnsley West and Penistone) Mr Jonathan Djanogly MP (Conservative, Huntingdon) Mr Nigel Evans MP (Conservative, Ribble Valley) Mr Lindsay Hoyle MP (Labour, Chorley) Mr Andrew Lansley MP (Conservative, Cambridgeshire South) Judy Mallaber MP (Labour, Amber Valley) Linda Perham MP (Labour, Ilford North) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/parliamentary_committees/trade_and_industry.cfm. Committee staff The current staff of the Committee are Elizabeth Flood (Clerk), David Lees (Second Clerk), Philip Larkin (Committee Specialist), Grahame Allen (Inquiry Manager), Clare Genis (Committee Assistant) and Sandra Thomas (Secretary). Contacts All correspondence should be addressed to the Clerks of the Trade and Industry Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5777; the Committee’s email address is [email protected]. Footnotes In the footnotes of this Report, references to oral evidence are indicated by ’Q’ followed by the question number. References to written evidence are indicated in the form ‘Ev’ followed by the page number. 1 Contents Report Page Summary 3 1 Introduction 5 2 Autonomy and Accountability 8 The Impact of the Single Pot 8 Targets 9 3 Business Representation and Input 13 4 Partnerships 17 Conclusions 20 5 Clusters 22 Conclusions and recommendations 25 Witnesses 31 List of written evidence 33 3 Summary RDAs have been in existence since 1999 but are still coming to terms with the changes in their role resulting from their increased resources and the single pot. Despite the various criticisms that have been levelled at them, they seem to be having a positive effect. This is illustrated by the change of attitude by the BCC, who having been sceptical about their initial establishment, are now supportive of the RDAs.1 It seems that the Government is still coming to terms with the RDAs too. They have gradually devolved greater autonomy and resources to them. However, they have also sought to retain a degree of control over their activities through the system of targets. We believe that RDAs can play a valuable role in developing their regional economies and helping businesses located there. However, in order to do so they need the authority to implement their strategies. At the moment, we are concerned that the institutional clutter at regional and sub-regional level is hindering this: too many vested interests are limiting the scope and effectiveness of action by the RDAs. We would like to see the RDAs better able to exert control over the various areas on which they are judged. However, even if more roles are consolidated under the auspices of the RDAs, it is important that expectations remain realistic. Despite the increase in their resources, they still account for only a small percentage of the total public money flowing into each region. The policies that most affect businesses are determined at a national, not regional, level; and decisions on taxation or exchange rates are taken centrally. Even where regional factors significantly affect competitiveness, they may not fall within the RDAs’ remit: in the West Midlands, it was suggested that one of the most important issues for local businesses was problems with transport.2 For this inquiry, we concentrated fairly narrowly on the business support activities of RDAs. In the course of our investigation, it became clear that a number of the issues that we have identified warrant more detailed examination. We will return to these in due course. 1 Qq 26–27 2 Q 243 (AWM) 5 1 Introduction 1. The Regional Development Agencies (RDAs) were officially launched in 1999 to drive the economic development of their respective regions. They have five statutory purposes, established by the Regional Development Agencies Act 1998: x to further economic development and regeneration; x to promote business efficiency, investment and competitiveness; x to promote employment; x to enhance the development of skills relevant to employment; and x to contribute to sustainable development. 2. Initially the RDAs received their funding in discrete streams from several Government Departments, with each stream tied to the achievement of a specific goal or implementation of a specific policy. The exact parameters of the programmes that these streams were tied to were determined by the government departments which were funding them, with each requiring different forms of information and appraisal.3 Consequently, the RDAs had little autonomy. 3. The constraints imposed by the different funding streams led to a revision of the institutional and funding arrangements of the RDAs. In place of the programme-specific funding, money from each of the government departments involved is now pooled into a ‘Single Pot’.4 Since April 2002, rather than their policy agenda being imposed by Whitehall, the RDAs determine their own spending priorities, in accordance with the detailed policies set out in their economic strategies. This change in the funding arrangements for the RDAs was accompanied by a change in departmental sponsorship, from the Department of Environment, Transport and the Regions (DETR) to the DTI. 4. The greater autonomy that the RDAs gained as a result of these changes reflected a growing confidence on the part of Government in the potential of the RDAs to deliver marked improvements in the economic performance of their regions.5 But the introduction of the single pot has not meant that the RDAs have been left entirely to their own devices. A system of targets has replaced the individual funding streams and the performance of each RDA is gauged against their success in meeting them. This is discussed further in Chapter 2. 5. The greater freedom for RDAs has been accompanied by an increase in their budgets. Over the period 1999–2003, the total RDA budget has grown from £563 million to £1.7 billion per annum and is set to rise to £2 billion by the financial year 2005/6.6 3 Ev 111 (DTI), para 2 4 Department of Trade and Industry (DTI); Office of the Deputy Prime Minister (ODPM); Department for Education and Skills (DfES); Department of Culture, Media and Sport (DCMS) 5 J. Tomaney ‘New Labour and the Evoloution of Regionalism in England’ in J. Tomaney and J. Mawson (eds) England: The State of the Regions The Policy Press, 2002 6 Ev 123 (RDAs); HM Treasury 2002 Spending Review Cm 5570 (July 2002) 6 6. The RDAs initially inherited their staff from the Government Offices of the Regions (GOs) and from some of the other public bodies whose functions they acquired, such as English Partnerships. The staffing levels have subsequently risen. The RDAs now represent a significant tier of government. Agency Staff No. One North East 244 North West Development Agency 237 Yorkshire Forward 220 East Midlands Development Agency 124 Advantage West Midlands 164 East of England Development Agency 83 South East of England Development Agency 122 South West of England Development Agency 167 London Development Agency 77 Note: Staff numbers are staff-in-post averages (not full-time equivalents) taken over the course of the year ending 31 March 2001, as stated in the agencies' annual reports for 2000–01, except in the case of the LDA where the figure refers to the staff complement for April to June 2001. Source: HC Deb, 26 October 2001, col 418W 7. Given that the RDAs are increasingly prominent in developing the economies of their regions and therefore, collectively, have a central role in promoting profitability and competitiveness throughout the UK, we decided to investigate how the RDAs are using their increased autonomy and resources. In particular we looked at how well they are supporting business, especially Small and Medium-sized Enterprises (SMEs), in their regions. We do not list the multitude of different schemes they are undertaking to help business: accounts of their activities are given in the RDAs’ original written submissions to our inquiry,7 and their responses to our questionnaire, which are appended.8 8. Rather than giving details of their work, we address a number of themes that are common to several or all RDAs: the difficulties in adequately reflecting business needs and wishes; the necessity of working effectively with partner organisations to deliver business support and the problems arising from inconsistency of aims between them; and the strengths and weaknesses of cluster-based approaches to regional economic development. 9. To this end we used the North West, the West Midlands, and the East Midlands regions as case studies, taking evidence from the respective RDAs, as well as from some of the other organisations they work with to achieve their targets, the relevant Regional Chambers (or Regional Assemblies, as they have become known), which scrutinise the work of the individual RDAs, the TUC, and some of the business organisations whose 7 Ev 123–177 (RDAs) 8 Ev 177–208 7 members look to the RDAs for support.