Saturday, 30 October 2010

The Government is giving up on growth

John Denham MP, Labour's Shadow Business Secretary, responding to the Government’s Local Growth White Paper, said:

“Just when action to promote jobs and growth is essential, the Government has shown it has no real plan for regional growth. The Regional Growth Fund is a pathetic fig leaf to cover the absence of any plan for growth.


Regional funding has been by cut at least two-thirds, all key decisions are being centralised in Whitehall, the new Local Enterprise Partnerships are a shambles and leave areas of the country with no effective development organisation, and the voice of business is being ignored on everything from planning to investment and to skills.”

“Regional funding has fallen from £1.4bn a year to £1.4bn over three years and is now expected to pay investment in transport and housing that previously enjoyed dedicated budgets.”

“It is clear that the Government has no plan for growth.”

Notes:

Giving up on Growth

The Government has shown they have no plan for regional growth or jobs:

· Money for regional growth has been cut from £1.4bn a year to £1.4bn over three years - a two thirds cut.

· The much heralded ‘Regional Growth Fund’ (RGF) is actually a huge cut in support for regions. Current spending of around £1.4bn a year through RDAs will be cut by two-thirds - to £1.4bn over three years under the RGF.

o The total budget of the Regional Development Agencies for 2010/11 had been set at £1.4bn for 2010/1 - http://www.bis.gov.uk/policies/regional-economic-development/englands-regional-development-agencies/rda-finance-and-governance

o The Spending Review confirmed that the Regional Growth Fund will pay out £1.4bn over three years from 2011 (Spending Review, Table 1, pg. 10)

· The RGF will also have to pay for investment in transport and housing that previously had dedicated budgets; and will include private bids as well.

“The Department for Transport is contributing around a third of the funding for the £1.4bn Regional Growth Fund. Bids for local transport schemes that unlock sustainable economic growth will be eligible for submission to this fund.”
Department for Transport, Transport Spending Review Press Notice, 20 October 2010 - &&&&&&http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=202&NewsAreaId=2&ReleaseID=416118&SubjectId=3

“To support growth we will give Local Authorities the freedom to borrow against tax revenues and will also provide access to a Regional Growth Fund to fund capital projects which could support housing growth and market renewal schemes.”
Letter from Housing Minister Grant Shapps, 20 October 2010 - http://www.communities.gov.uk/documents/housing/pdf/1746957.pdf

· The DfT contributions to the fund are £165m in 2011-12, £100m in 2012-13 and £200m in 2013-14. This is a total of £465m, 33% of the total value of the fund (&&&http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=202&NewsAreaId=2&ReleaseID=416118&SubjectId=3). The DfT was not a contributing department to current RDA funding.

· The Local Growth White Paper confirms that the Regional Growth Fund will be also used for housing and transport; and cover bids from private sector and social enterprises.

4.14Some projects that the Regional Growth Fund might support include investment where we have a comparative advantage and infrastructure provision to remove barriers to private sector led economic growth. This might include part-funding research and development, training or productivity-boosting technology.
4.15Infrastructure provision might include interventions to improve housing supply; services such as energy and transport; or land remediation and improvements to the physical environment, where it can be demonstrated that these would unlock specific business investments that lead to sustainable employment.
Local Growth White Paper, Department for Business, Innovation and Skills, pg. 33

· Great chunks of England have no Local Enterprise Partnership (LEP). This leaves black holes for growth in some of the most disadvantaged parts of the country. Places like Hull – 11th in the deprivation index, Blackpool (12th in deprivation), Blackburn (17th) and Burnley (21st) have no LEPs. The bidding for the Fund has opened without all the LEPs in place.

· And the BIS Minister said there will be gaps.

“Speaking at the Northern Regeneration Summit in Manchester today, Prisk admitted that in the short-term, there would be "some gaps" in England not covered by a LEP, the emerging council and business-led bodies with which the coalition Government intends to replace regional development agencies, are given the go-ahead.”
"There may be in the short-term some gaps," Prisk told Regeneration & Renewal.
Regeneration and Renewal, 12 October 2010

· LEPs will receive no central funding to meet their set up costs.

"If local authorities consider Local Enterprise Partnerships to be a useful vehicle, they may well wish to contribute. We are not allocating government funding to get them off the ground."
Vince Cable, BIS Select Committee 26 October 2010

· And Page 15 of the Local Growth Paper confirms that they will expected to cover day-to-day running costs - putting most deprived areas at huge disadvantage in bidding for money for growth.

· Meanwhile, Regional Development Agencies are being shut with a wind down cost of £1.4bn.

“Regional Development Agencies will require a further £1.4bn-plus of state funding over the next four years despite their abolition in the spending review, officials have just confirmed.
Financial Times, 25 October 2010 - http://blogs.ft.com/westminster/2010/10/the-14bn-cost-of-winding-down-the-rdas/

· The result is months of chaotic shambles with LEPs not operating at the time they’re needed to cope with the huge economic dislocation across England, including hundreds of thousands of jobs going in both the public and the private sector (Sectoral and regional impact of the fiscal squeeze- PriceWaterHouse Cooper report, October 2010 http://www.ukmediacentre.pwc.com/Media-Library/Sectoral-and-regional-impact-of-the-fiscal-squeeze-Full-report-70a.aspx)

· All decisions are intended to be taken in Whitehall, none in the regions and with no business input.

· The private sector alarmed and frustrated about lack of focus for LEPs, made worse by infighting between Government Ministers in BIS and CLG. They fear that the risk is ending up with LEPs at best fledging and at worst toothless.

· Richard Lambert, Director General of the CBI, said in an interview to the Financial Times last week that “so far, it has been a bit of a shambles”.

· And once again the Government has cited the creation of Technology and Innovation Centres - to sit between universities and business. (Vince Cable’s statement to the House 26/10/2010 on the Local Growth White Paper)

· These had been set in train by the Labour Government, showing that the Government has no new ideas and no plan for growth. (The Current and Future Role of Technology and Innovation Centres in the UK - A Report by Dr. Hermann Hauser, http://www.bis.gov.uk/assets/biscore/innovation/docs/10-843-role-of-technology-innovation-centres-hauser-review)