RDAs: Don't throw the Baby out with the Bath Water.
The announcement yesterday that nine English RDAs will indeed be axed came after a long-running spat within the Conservative Party over the future of RDAs.
The announcement also represents something of victory for Tory Communities and Local Government Secretary Eric Pickles over Lib Dem Business Secretary Vince Cable.
The latter had only very recently suggested that RDAs in the West Midlands and North of England could survive in some form.
But, as noted by the Birmingham Post, Cable and Pickles have now written to council and business leaders, inviting them to replace RDAs with Local Enterprise Partnerships (LEPs).
While Pickles and Cable have technically left open the possibility that some partnerships could match existing regional boundaries, the lack of powers envisaged for these new LEPs has left many business groups worrying that policy and support for business and economic development will be fragmented.
This of course comes at exactly the moment when the private sector is being expected to create new jobs in place of those lost in public services as a result of the deep government spending cuts announced in the budget.
And when many have been calling for a rebalancing of the economy away from an over dependency on retail and financial services, one wonders how scrapping bodies which had been supporting manufacturing will actually help this along.
Indeed "don't throw the baby with the bath water" has been the cry of numerous business groups across regions including the West Midlands, North West and North East, especially at a time when most businesses have plenty of challenges as it is.
While the new government may dress this up as decentralisation, the changes outlined so far involve a substantial degree of recentralisation to Whitehall, away from the regional/level level completely.
Under the proposals, responsibility and policy for inward investment, industrial sector leadership, business support, innovation, and access to finance (including venture capital funds), will all be recentralised and in reality will shift back to Whitehall.
In effect this amounts to running an industrial policy from the centre. In this case it's doubtful that policy can be finessed to the degree that it is now, and a centralised policy will probably miss all sorts of opportunities that at the moment can be spotted more easily as much of industrial policy is effectively delivered regionally.
I doubt very much for example whether the Niche Vehicle Network here in the West Midlands was even on the radar of new ministers and Whitehall mandarins until we pointed it out to them a few weeks ago.
Similarly, in the North East, the development of the offshore wind sector and the low carbon area (which is seen as critical in the attraction of Nissan's electric battery plant) are seen as recent highpoints of an industrial policy delivered at a regional scale.
And while Local Enterprise Partnerships (or LEPs) will have responsibility for transport, housing, employment, enterprise and supporting business start-ups, there is a strong case for having some degree of regional spatial planning otherwise we will end up with a fragmented and piecemeal approach to planning.
Yesterday the coalition unveiled a ÃÂ£1bn, two-year regional growth fund for 2011-13 for projects that will aim to create private sector investment and jobs. Deputy PM Nick Clegg made big noises about this: "While we sort out the nation's finances we can also help to foster a thriving and more balanced economy so that no region or community gets left behind."
In reality this will probably mean a sizeable cut in funding for the regions as the ÃÂ£1 billion is likely to come from existing budgets, notably the RDAs' current funding of ÃÂ£1.4bn a year (which is already being cut substantially).
And the new LEPs will have to bid for funding against other private and public-private bodies, with ministers deciding where the cash goes. It isn't clear as yet what funding LEPs will get other than what they can win from the growth fund.
What's disappointing here is that the new government - after sending out hugely conflicting messages throughout and since the election campaign - has simply gone ahead and scrapped RDAs lock stock and barrel.
The message until now, in as far as we could decipher any clear message at all, was that local businesses would be consulted and where existing regional boundaries were supported then RDAs could in effect be reformed.
Here in the West Midlands local business groups have been pretty supportive of the work of the RDA Advantage West Midlands.
The same could be said for the North East. Last month the Northern Business Forum, which brings together business groups and local authorities in the North East, wrote to ministers setting out a shared desire for "one focused and strategic economic body" with responsibilities to include all the areas now set to be led nationally.
As reported in the FT yesterday, the CBI Chairman in the North East, Robin Bloom said of the new policy "It's a disgrace... the business community will not be prepared to put their name to policy which is written without any attempt to engage them."
As I've repeated in numerous blogs, I'm not opposed to reform or further decentralisation, but the wholesale destruction of any regional tier outside of London makes little business or economic sense.
In fact the previous Labour government had anyway indicated its intention to legislate for the creation of sub-regional authorities for economic development, to be known as 'Economic Prosperity Boards' which would build on the Multi-Area Agreements (MAAs). The latter aimed to encourage local authorities within a sub-region to work together on policy and implementation.
In effect there was a 'third way' on offer here, with decentralization from RDAs to more local groupings and join-up and strategic oversight by RDAs across regions. The latter is, I suggest, necessary to make best use of increasingly scarce public resources across the English regions. That opportunity may well now be lost, and with it could go a great deal of expertise
Of course, London gets to keep its Development Agency and will no doubt avoid the impending disruption in business support, industrial policy, planning and much more.
So much for rebalancing the economy, if that really is the intention of government policy.
PS There's a line of argument on how RDAs have supposedly 'failed' which I've heard a few times now - first from Vince Cable a few months ago - and again from a Tory backbencher today when I was down in Westminster.
It goes something like this: "when the financial crisis unfolded we expected the South East to be hit hardest as that's where the City is based. But it's the manufacturing regions like the West Midlands which have been worst hit. So clearly RDAs did little or nothing to build resilience in these regions".
This is a pretty poor argument. Leaving aside the counter-factual argument (i.e. that the West Midlands may well have done worse without AWM leading the Regional Task Force to ameliorate the worst impacts of the recession) this anyway misses two key points:
1. Most manufacturing is intricately linked with services and when you buy, say, a car then you actually buy a complex package of hardware and services. If you can't get the credit you can't by the car. The financial implosion effectively wiped out credit lines for individuals and firms, hence the collapse in manufacturing orders, which could be scaled back quickly. This downturn was amplified by a collapse in global trade. So the idea that manufacturing regions wouldn't suffer as much was baloney in the first place.
2. It ignores the fact that several hundred billions of tax payers' money was put at risk to bail out the banks through loans, equity injections, guarantees and the like. If this hadn't been forthcoming then there may (or may not) have been a banking collapse with much bigger losses of jobs in London than we actually saw.
So in other words, what this line of argument is saying is that it's OK to bail-out London based financial services, and hence the South East, to an incredible degree, but the already rather mediocre long term investment in the rest of England's regions will be scaled back even further.
As you can see, I'm not exactly impressed with this line of argument.