Economic development organisations in England
4. Government Offices (GOs) were set up in 1994 to
co-ordinate the work of some central government departments in
the regions. The GO for the North East (GO-NE) for example, described
its role as "the voice of central Government in the region".
GOs are assisted centrally by a Regional Co-ordination Unit, which
assesses the local impact of proposed regional initiatives. The
functions of GOs have broadened in the past two years. A recent
PIU report, Reaching Out - the role of central government at
regional and local level, emphasised the role of GOs in delivering
joined up government and co-ordinating policy. It recommended
that they should have "a strongly enhanced role in supporting
and evaluating local performance on strategic and cross-cutting
Government Offices also control the expenditure of large amounts
of money, including Regional Selective Assistance (RSA). They
have a role in information gathering for Whitehall departments.
As we saw in our inquiry into Vehicle Manufacturing in the
GOs also provide the essential link between local and regional
initiatives taken in response to a crisis, and the steps being
5. GOs seem unsure whether they are an outpost of
Whitehall in the region or a representative of the region to Whitehall.
There is a deliberate policy of overcoming departmental divisions
at GO level. Government Office South West (GOSW) told us that
they try to maintain a "generalist" image in the region,
but work within defined departmental structures to Whitehall.
It was our impression that the functional organisation of the
Offices continues to reflect departmental divisions.
REGIONAL DEVELOPMENT AGENCIES
6. Regional Development Agencies were set up the
by Regional Development Agencies Act of 1998. They have been fully
operational since April 1999. There are nine RDAs in England.
The statutory function of an RDA is:
(a) to further the economic
development and regeneration of its area;
(b) to promote business
efficiency, investment and competitiveness in its area;
(c) to promote employment
in its area;
(d) to enhance development
and application of skills relevant to employment in its area;
(e) to contribute to
the achievement of sustainable development in the United Kingdom
where it is relevant to its area to do so."
The RDAs were formed from the existing English Partnerships
regions. There is still some debate about their boundaries. Departments,
including MAFF and DfEE, have different regional boundaries. The
PIU report urged these departments to consider "how the existing
territorial boundaries of field staff might better reflect GO
7. The three regions we visited were quite different
in character. The North East is by and large a coherent
region with a strong regional identity. This produced higher initial
expectations of the RDA than could, at least initially, be met.
The East Midlands was formed by adding Lincolnshire, Northamptonshire
and Rutland to the three core counties of Derbyshire, Leicestershire
and Nottinghamshire. It is in some ways an awkward mixture of
town and country; and not politically united. It has achieved
some local credibility through its role in balancing the competing
claims of the urban, rural and coalfield parts of the region for
European structural funds allocations, and in assisting in the
emergence of regional planning guidance. The South West region,
although possessing clearer geographical boundaries, also suffers
from identity problems. Unreliable, and in some cases non-existent,
rail and ineffective road links create an understandable reluctance
on the part of those in, for example, Dorset to look towards Plymouth
or Exeter for regional leadership. We detected few signs of an
inclusive regional identity. An RDA which can be seen to produce
the goods for all its constituent parts, in terms of financial
and other benefits, may thereby be able to establish a viable
8. RDAs are responsible for creating a "regional
economic strategy" for the next ten years. We have seen,
and been briefed on, the regional economic strategies in the three
English regions we visited. They have been the outcome of a consultative
process involving a variety of regional partners; in itself the
consultation may have had a positive effect. Several are admirably
focussed on specific areas where the RDA thinks it can make a
difference. They provide a ready-made regional interpretation
of national policies for the regional and local arms of new national
organisations, in particular the Small Business Service and the
Learning and Skills Councils.
9. RDA strategies tend to be broadly aspirational.
The British Chamber of Commerce expressed reservations about the
realism of these plans:
"All regions, for instance,
want to be in the top 10% of EU regions for GDP per capita. It
may be that the South East can do this over the ten year timescale
of the Strategies, but will all regions be able to reach this
standard? A fear we have is that the ten-year timescale of these
strategies makes it very difficult for anybody to be held to account
for their delivery and some clear interim targets are needed."
10. RDAs have not had to make hard choices, for example
between regional airports or ports competing for funds or support.
They have no mandate to decide between competing infrastructure
projects or to prioritise road schemes; or to put the interests
of one 'cluster' above another. They have limited discretionary
funding and management of grant programmes. As the ambit of their
responsibilities grows, so will the requirement for an executive
11. The 2000 Spending Review announced an increase
in funding for RDAs, from £1.2 billion in 2000-01 to £1.45
billion in 2001-02 and over £1.7 billion in 2003-04. Of this
funding, only a small proportion is discretionary. From April
2002, funding will be from a Single Budget with contributions
from DETR, DTI and DfEE. The Government announced in the 2001
Budget Statement that
"RDAs will be given
full financial flexibility within their capital and current budgets.
They will also be allowed full 'end-year flexibility'
freedom to carry their resources forward from one year into the
next. This increased flexibility is to be matched with increased
accountability. RDA Objectives and Targets for meeting strategic
goals under the Single Budget have been agreed."
We had heard some criticism of the inflexibility
in the existing funding arrangements, and of the fixed division
between capital and revenue expenditure.
12. DTI proposed to fund RDAs to the tune of £16.9
million in 2000-01. £10 million of this was for inward investment,
£4 million for the Competitiveness Development Fund, and
£2.7 million for the Regional Supply Network. Funding of
RDAs under a new Regional Innovation Fund is to start shortly.
DTI's funding of local broadband schemes is also to be channelled
Structure and Relations
13. We found relations between the Government Offices
and RDAs to be generally good despite the potential for tensions.
GOs are committed to making RDAs work. Boundaries between the
bodies can be blurred at times. Where there is shared responsibility,
as, for example, in the promotion of inward investment, those
within the organisations seemed to be aware of the system. Users
of these services may be less clear. The PIU report identified
this as a weakness:
networks are complicated and fail to give a clear means of communication
down to or up from the local level and fail to provide a clearly
identifiable accountable body for Government action across the
region on issues where different policies interact."
Complexity is not necessarily a weakness; but it
can hinder effective co-operation and communication. Confusion
among users remains the greatest danger, especially during a time
of change-over. It is probable that lines will be more clearly
drawn as the various bodies become accustomed to their roles.
We heard suggestions that it would be useful for one body to be
clearly designated as a "lead" agency where there are
14. Regions comprise a number of sub-regions, many
on county lines. Some of these sub-regions are defined 'areas'
of long standing. Others are new, and are beginning to define
their identities. Some RDAs have ideas for eventually devolving
some of their funding to sub-regions. We heard accounts of how
RDAs had helped bring together the constituent parts of some sub-regions
into constructive economic partnerships. The Small Business Service
(through Business Links) and the Learning and Skills Councils
are also based around sub-regional or county-level units.
15. RDAs are notionally "accountable" to
the Regional "Chamber", generally referred to as an
Assembly, typically composed of a mixture of elected members from
local authorities, representatives nominated by the social partners,
and others. A Regional Assembly expects to be consulted on strategy.
It has no say over business plans or budgets. In March 2001 the
government announced £5 million funding for the Regional
Chambers to enhance their scrutiny role.
We did not pursue the question of plans for the evolution of Regional
Assemblies. Enthusiasm among the business community for more active
assemblies evidently varies from one region to another.
Small Business Service
16. The Business Link network was set up in 1993
as a network of 80 "one-stop shops" for small businesses.
By the late 1990s, the Government recognised that the quality
of service provision varied across the network, and decided to
create a central agency, roughly modelled on the US Small Business
Administration. The Small Business Service (SBS) was launched
in April 2000 to provide a single Government organisation to help
and represent small firms. It has assumed responsibility for the
administration of several DTI-led schemes including SMART and
17. The SBS took over in the regions from Business
Link in April 2001: Business Link (BL) will remain the brand name.
There has been a major shake-out of the BL network. The new structure
is based on a contract, with each BL run privately and offering
"franchised" services overseen by the SBS. In the North
East, for example, there will be four new BLs: one a company replacing
the old BL; another a merger of two existing BLs; one a revamped
version of an existing BL; and the fourth an old BL operation
that has been taken over by a private operator. The process has
been turbulent in some areas.
18. The SBS has a brief to reach out to micro businesses.
In the last period for which figures are available, just over
50% of businesses assisted by the SBS fell into this category.
However, in evidence, David Irwin, Chief Executive of the SBS,
admitted to us that penetration of the microbusiness sector is
far lower than that of others:
businesses employing more than 50 is a fraction under 50 per cent.
The penetration amongst micros is somewhere in the order of 3
The SBS hopes to see the number of microbusinesses
helped rise in line with the aim outlined by Hâf Merrifield
of the SBS:
"the new Business Link
network...should explicitly promote [itself] as offering services
to all businesses rather than concentrating on those larger businesses
with growth potential."
19. The SBS regional offices will, we understand,
all be co-located with RDAs. This reflects the desire on both
sides for a close working relationship. As David Irwin pointed
"We are aiming to work
very closely with the RDAs. Clearly they are relatively new organisations
and we are even newer so we are still feeling our way a little.
There is a particularly important relationship between Business
Link operators on the ground and the RDAs and we are trying to
ensure that wherever the RDAs are setting up, for example, sub-regional
partnerships...they are involving the Business Links in those."
20. There are general hopes that the refreshed network
will have a clearer customer focus, and will benefit from its
wider remit and the reduced number of outlets. We heard some criticism
of the absence of a clear national strategy for business support,
the bureaucracy of the new contract regime, and the loss of commercial
flexibility. The British Chambers of Commerce remarked to us that
Chambers were surprised:
"to receive the first
drafts of SBS contracts which focussed very much on inputs, with
page upon page of financial, operational and information requirements
that would tie-up resource that should be customer-facing. This
seemed inappropriate from an organisation that has the function
of championing against red tape in Government."
The SBS told us that they had not realised the length
of time that would be required to negotiate the Business Link
contracts, nor the complexity of the discussion. As the organisations
they were working with varied in size and experience, and often
required assistance from the SBS during the negotiation period,
it had been a difficult time. David Irwin admitted:
"We have learnt that
perhaps we should have devoted a bit more time and started a bit
earlier with some of the contracting."
21. The new service will have to show improvement
on its predecessor in reaching businesses run by those in the
ethnic minorities and rural businesses. Some of those we spoke
to with experience of Business Links in the past remain sceptical.
Peter Waller of the SBS told us when visiting RDAs he had found:
"some confusion at times.
I thought they were saying 'we have problems with the SBS' and
it turned out although they had issues with the SBS it turned
out to be a particular franchise they had been talking to."
Developing the local network into a stronger, more
coherent collection of agencies may prove effective at improving
Learning and Skills Councils
22. In 1999 the Government announced in its White
Paper Learning to Succeed the creation of a national network
of Learning and Skills Councils (LSCs), to take over the training
tasks of the existing Training and Enterprise Councils (TECs).
Their areas of responsibility match those of Business Links. They
did not come into full operation until April 2001; we were not
therefore able to see them at work during our visits. The process
of splitting up TECs who had run joint services with Business
Links has left some casualties, as we heard on our visit to Plymouth.
But RDAs seemed broadly confident on the future performance of
LSCs from what they had seen so far.
23. The British Chambers of Commerce were concerned
about the loss of the TECs role "in engaging local businesses
in wider economic development and regeneration".
They comment "RDAs have been given very modest additional
funding to seek to cover this gap, but one of our Chambers cites
that it amounts to less than 20% of the funding the TECs were
ploughing into local economic development and regeneration."
It remains to be seen if the loss of enterprise funding hitherto
available from TECs will be made good from other sources. The
BCC were also critical of the low level of private sector involvement
British Trade International
24. British Trade International (BTI) was set up
in 1999 to take lead responsibility in Government for trade development
and promotion in England. In May 2000 it became responsible for
inward investment. In Scotland, Scottish Enterprise is responsible
for both Scottish Trade International and Locate in Scotland,
both of which cover the whole of Scotland. There are BTI offices
in each region which act as "partner" agencies to the
RDAs. BTI offices will generally be co-located with RDAs. On 6
June 2000, jointly with the Foreign Affairs Committee, we heard
oral evidence from Sir David Wright. He told us then:
"...we have just
appointed nine international trade directors in the English RDAs.
They will run the export development counsellors who will sit
in local business links and those export development counsellors
will be expected to be both responsible and active in searching
out new companies to assist."
We heard of the pooling by the West and East Midlands
Development Agencies of their inward investment efforts, through
joint British Midlands offices in Japan and the USA. We have seen
at first hand, and reported on, the duplication in the recent
past of inward investment efforts overseas by regional agencies
and sub-regional agencies.
The new structures could ensure that the overall inward investment
effort is better co-ordinated. Sadly, we also heard of the continuing
desire of some sub-regional and local authorities to pursue their
Economic development organisations in Scotland
25. There are a number of differences between the
structure of economic development in England and in Scotland.
In Scotland, there are two enterprise networks consisting of an
overarching body supported by local agencies; and they are responsible
for training as well as economic development. The Enterprise and
New Towns (Scotland) Act 1990 set up Scottish Enterprise (SEn)
and Highland and Islands Enterprise (HIE) as non-departmental
public bodies. They were formed from the amalgamation of the Highlands
and Islands Development Board, the Scottish Development Agency,
and the Training Agency and their responsibilities are split geographically.
HIE, however, has an additional social remit which allows it to
support projects which enhance the quality of life in the Highlands
and Islands, rather than just on the grounds of economic benefit.
SEn is supported by a network of 12 Local Enterprise Companies
(LECs). The majority of projects, programmes and services funded
by SEn and HIE are delivered by LECs. We visited Scottish Enterprise
and one of the LECs, Scottish Enterprise Forth Valley at Stirling,
during our visit to Scotland.
26. Scottish Enterprise receives the bulk of its
funding from the Scottish Executive's Enterprise and Lifelong
Learning Department. In 1999-2000 SEn's funding totalled £453m,
predominately grant-in-aid, £5m voted loans, and £50m
business receipts. SEn itself spent around £93m in 1999-2000,
allocated £335m to LECs, with an additional £23m spent
Scottish Enterprise Forth Valley explained to us how individual
LECs bid in for funding from SEn on an annual basis. This
obviously creates problems for long term planning: the issue is
under discussion between SEn and the Scottish Executive. Scottish
Enterprise Forth Valley had attempted to deal with the problem
by generating reserves to be used, if necessary, to finish projects.
27. The Scottish Enterprise network is going through
a number of changes following a series of consultations and inquiries.
In September 1999 the Enterprise and Lifelong Learning (ELL) Committee
of the Scottish Parliament announced an inquiry into the delivery
of local economic development services in Scotland. Following
the publication of that Committee's interim conclusions, the Scottish
Executive launched a consultation on the future of the Enterprise
Networks in February 2000.
In the ELL Committee's Report, published in July 2000, they were
critical of the existing arrangements.
They concluded that:
"There is congestion
within the field of local economic development in Scotland. There
is confusion, overlap, duplication and even active competition
between the many agencies involved."
The Scottish Executive published its response in
December 2000 and its first comprehensive statement on the enterprise
networks in February 2001. A Smart Successful Scotland, Ambitions
for the Enterprise Networks sets out the Minister's aspirations
for the network.
Scottish Enterprise described their new priorities as: becoming
more customer focussed; harnessing e-business; and operating more
efficiently. As part of this, the network is undergoing a number
of changes, including creating shared resources for services such
as marketing, finance and legal services to replace the individual
arrangements that grew up around each individual LEC.
LOCAL ENTERPRISE NETWORKS (LECS)
28. LECs were originally set up as private companies,
limited by guarantee and run by independent boards of directors.
The ELL Committee recommended in their Report that:
"Local Enterprise companies
should significantly change their character. They should: change
their status from private companies to public bodies; open up
their boards to other non-business members; increase the level
of transparency in their activities; and consider the introduction
of membership systems."
From April 2001, they became wholly owned subsidiaries
of either SEn or HIE; their staff are in effect employees of SEn
or HIE. This, combined with the current changes, has resulted
in a number of job losses throughout the network. Whilst in England,
there is a move towards commercial delivery of business advice,
in Scotland it is moving back into public management. LECs have
their own economic development plans, agreed with other partners
such as local authorities and with SEn. Scottish Enterprise Forth
Valley had a budget of £22.1m in 1999-2000. Of this, £3.3m
was spent on administration and marketing;
it is expected that this will fall to around £2m when the
shared system is in place.
LOCAL ECONOMIC FORUMS
29. The ELL Committee recommended that Local Economic
Forums should be introduced to each LEC area to create a simpler,
more cohesive structure for local economic development in Scotland.
In March 2001, the Scottish Executive published national guidelines
for Local Economic Forums. It stated:
"The role of Forums
should be to agree a local shared vision and programme of action
for the streamlining and improvement of service delivery. The
opportunity for each Forum is to add value to local economic development
activity. Its main initial task will be to eradicate wasteful
duplication of business support services and enhance overall service
The LECs will facilitate the setting up and servicing
of the Forums. Each Forum must include representatives of the
private sector, local government, the Enterprise Network, tourism
agencies and the local learning sector.
SMALL BUSINESS GATEWAY
30. One area of concern highlighted by the ELL Committee
was the advice given to SMEs. This reflects English concerns.
In July 2000, the Small Business Gateway was launched. Under one
brand, it will "encompass all front line services in the
SEn area, including Business Shops and Enterprise Trusts".
It will also provide information and advice to start-up companies.
out - the role of central government at regional and local level,
Performance and Innovation Unit, published February 2000 (hereafter
PIU Report), p34, Conclusion 1 Back
Manufacturing in the UK,
published February 2001, Third Report, Session 2000-01, HC 128 Back
Development Agencies Act 1998, 4 (1) Back
Report, conclusion 55 Back
p 5, para 5.4 Back
2001, HM Treasury, March
2001, HC 279 Back
Report p8, para 19 Back
Deb, 9 March 2001, Col 367W Back
is defined as a business with fewer than ten employees. Back
13 Q27 Back
14 Q27 Back
15 Q38 Back
p 3, para 2.8 Back
17 Q9 Back
18 Q39 Back
p 4, para 4.5 Back
20 ibid Back
and Industry Committee Minutes of Evidence for Tuesday 6 June
2000, British Trade International,
HC 550-i, Q50 Back
355, paras 19-21; Trade and Industrial Relations with Japan,
Eleventh Report, Session 1997-98, HC 568 Back
Report, p2 Back
notice SE0303/2000, 10 Feb 2000 Back
into the Delivery of Local Economic Development Services in Scotland,
1st Report, Enterprise and Lifelong Learning Committee, SP Paper
Paper 109, Final conclusion 1 Back
Smart, Successful Scotland. Ambitions for the Enterprise Networks Back
Paper 109, Final conclusion 13 Back
Enterprise Forth Valley, Annual Report 2000,
Paper 109, Final Conclusion 9 Back
Economic Forums. National Guidelines,
Scottish Executive, Enterprise and Lifelong Learning Department,
March 2001, p3 Back
32 WWW.SBGATEWAY.COM Back
the Enterprise Networks: The Interim Conclusions of the Enterprise
Networks Review, November
2000, para 9.7 Back