Public Bodies Bill [HL]

My Lords, there might be a change of tone with my contribution to this debate. This is a serious matter and I approach the topic with humility, but with a determination to demonstrate the reasons for the Government’s decision. It is a political decision; we make no apology for that. It is a political response to the economic situation in which this country finds itself. I hope that noble Lords will give me the opportunity to explain the origins of that decision and what the Government intend to do to maintain a programme of growth announced by the Chancellor of the Exchequer in circumstances in which the vast sums of money that were available to sustain the regional development agency structure are no longer available. I am not at all surprised at the passion that has been vented this evening. I am a provincial myself. I come from the east Midlands and I am very proud of my background. I have to say that I rather share the experience of my noble friend Lord Cavendish when it comes to the impact of the regional development agency for the east Midlands in my part of the world, but perhaps that is because I live in a relatively remote rural area and our problems are not at the top of the agenda. We have learnt to rely on our own resources probably a good deal more than other communities can afford to do. I agree with noble Lords that the RDAs did some good work in their time, but as I listened to the debate I have become more and more convinced that we are right to try to bring forward a new approach to this enormously challenging problem. Where I differ is on whether a regional approach is an appropriate one in the circumstances in which we find ourselves in 2011. The noble Lord, Lord Empey, speaking from his experience in Northern Ireland, pointed out the degree to which, during their time, the RDAs had access to highly significant budgets. When money is abundant it is easy to find supporters, even if the projects you fund are not necessarily the most appropriate for the growth of particular places. However, even before the last election there were signs that the situation was unsustainable. The funding to which the noble Lord, Lord Hoyle, referred is no longer available. The previous Government found that they had to reduce RDA budgets several times, including by more than £300 million in the 2010-11 financial year. When the present Government came to power, it was clear that the reductions in spending would need to continue. In our earlier debate, noble Lords criticised the regional growth fund for providing less money than the RDAs had at their peak. The fact is that spending at that level is no longer sustainable. We cannot return to a position where the eight RDAs outside London had a combined budget of nearly £2 billion a year, as they did in 2006-07, whether or not the bodies continue to exist. It would have been perfectly possible to have continued with the existing structure. This would have meant retaining bodies in each region with a wide range of responsibilities, but with seriously diminished resources. Since we are committed to the effective delivery of economic growth throughout the country, we considered that that would be irresponsible. Put bluntly, we need to ensure that we get more bang for our buck than we were getting from the RDAs. In our earlier debate, noble Lords referred to estimates made by PricewaterhouseCoopers that every pound spent by an RDA added £4.50 to the regional economy. I do not wish to cast those figures in doubt, but the same report showed that more than half of those benefits came from less than 20 per cent of RDA total spending. There was a long tail of projects that delivered little or no value to the regional economy. Nor was it clear whether the benefits of investment were spread equally throughout the region or were strongly localised. Finally, the fact remains that the gap in growth rates between the regions and the rest of the country, to which the noble Lord, Lord Prescott, rightly drew attention at the time when he took initiatives on RDAs, remained stubbornly wide for all the regions and all that money. Inequality in growth rates has not been reduced by the RDAs. In proposing changes to the delivery of local economic development, we have two guiding principles. The first is partnership. Although the RDAs have broadly representative boards, these were selected in Whitehall. The boards of local enterprise partnerships are chosen locally and directly involve local authorities and businesses with a stake in a specific area. The second is appropriate geography. As in our previous discussion, I refer to the south Midlands, where joint work on economic development was hampered by the borders of three different artificial regions. I live on the border between the east Midlands and the eastern region and it creates real practical difficulties.