The County Councils Network (CCN) is a Special Interest Group within the Local Government Association (LGA), with all 35 English Shire Counties in membership. The County Councils Network exists to promote the voice of counties within the LGA and the values and interests of the English Counties. Together these authorities represent 47% of the population of England and provide services across 84% of its land area.

1.  IMPORTANCE OF THE REGIONAL PROSPERITY/ECONOMIC GAP

  1.1  We recognise that there are different views about the significance of regional variations in prosperity and economic growth. But the size of the gap between the highest and lowest regions is clear, as illustrated by the following headline indicators:

—  Prosperity is 87% higher in the Southeast than the Northeast (weekly household spend is £430 in Southeast, compared to £230 in the Northeast)

—  Growth is 50% higher in the Southeast, than in the Northeast (GDP per head per year is £15,000 in Southeast, compared to £10,000 in the Northeast) [8]

  1.2  While the North-South divide is an over-simplification all indicators of prosperity and economic performance tend to demarcate the contrast between the Southeast, London and East regions and the rest of the country. This dividing line is not watertight and the Southwest and West Midlands in particular shift between the divide. Even so there is a general ripple effect from the economic activities in the Southeast and London, with the regions that are further from the Southeast tending to be less prosperous.

  1.3  However, we would urge caution in interpreting this picture of regional disparities. First, sub-regional and local variations in living standards can be as great as inter-regional differences. Economic growth and social deprivation co-exist in and around most British cities. And one of the most pervasive trends in economic geography in the last three decades has been the urban-rural shift. Job growth has been proportionately faster in small towns than in the cities and new firm formation rates have also been higher in rural areas. These forces of counter-urbanisation cut across regional boundaries.

  1.4  The second caveat is that the regions with poorer economic performance often have lower costs of living. It is also true that the effects of the tax and benefit system mean that disparities in disposable income are smaller. The most obvious element of lower costs is house prices. The broad picture is familiar but data on the actual change in prices during 2001 show that regional disparities have increased still further.

  Average daily rise in house prices[9]

London, Southwest, East Anglia, Southwest	= £77-107
East, and West Midlands, Yorks + Humberside	= £60-71
Northwest, North, Wales, Scotland, N Ireland	= £30-52

  1.5  In this respect the "capital" prosperity gap is still widening and none of the key measures of prosperity suggest any narrowing of regional disparities.

2.  THE CASE FOR GOVERNMENT INTERVENTION

  2.1  Such regional differences contribute to regional identity and to a rich diversity across the UK. Since the Government's overriding priority is to maximise national economic growth it is therefore tempting to reject intervention to reduce regional disparities. There is concern that short-term economic costs may be imposed by government on investors and producers in the interests of uncertain and non-quantifiable benefits for the poorer regions.

  2.2  Moreover, regional disparities are not new. Unemployment in the Northeast has been more than double that in the Southeast throughout most of the last century. And despite a strong and persistent migration trend out of the peripheral regions no English region has suffered a substantial decline in population.

  2.3  But despite the attraction of these arguments (and bearing in mind statistical caveats) there are two powerful reasons for government to continue to try and reduce regional disparities:

—  Equity—while there is room for debate about how dramatic is the scale of regional disparity there can be no doubt about the case for reducing the gap in terms of social equity. Not only are lower living costs in the peripheral regions largely a reflection of the weakness of those local economies, but economic performance is closely correlated with other regional differentials. Differences in prosperity affect the quality of life in the widest sense. For example, the proportion of people with degrees in London (25%) is two and a half times that in the Northeast (10%). The death rate from heart disease among men under 65 is over one and a half times higher in the Northwest (63 per 100,000) than in the Southeast (39 per 100,000)·

—  Resources—high unemployment and low activity rates in some regions represent an under-used resource. It is in the national economic interest for that potential to be harnessed. The other side of this coin is the capacity of the buoyant regions to cope with growth in terms of pressure on environmental and infrastructure resources. Reducing regional disparities is about managing demand in the pressured regions as well as stimulating growth elsewhere.

  2.4  The interconnection between sustainable development and economic growth, and the need to address uneven regional development require major policy attention. And because these differences in regional economies are related to a wide range of health and other differentials we believe that the case for government to close the economic gaps is a compelling one.

3.  EFFECTIVENESS OF REGIONAL PLANNING AND DEVELOPMENT POLICY

Regional Structures

  3.1  The emerging wave of Regional Planning Guidance (RPG) and Regional Economic Strategies (RES) provides the most strategic vision so far of the spatial distribution of activities at the regional level. RPG's proposed by the local authority led Assemblies together with Unitary and Structure Plans provide a coherent framework for development which has the potential to assist disadvantaged areas. In contrast, the Regional Development Agencies' (RDA) economic policies scarcely include any explicit spatial dimension. Because of this difference in approach and because planning and economic development are dealt with by several different regional organisations, there are weaknesses in the horizontal linkages between different policy sectors. This organisational fragmentation limits the effectiveness of regional planning.

  3.2  There are some successful examples of integration of economic development and planning, particularly in the regions with social and economic adversity. But in other regions there has been concern at a lack of coordination due to parallel institutional frameworks and the range of other agencies involved in regional activity. [10]

  3.3  One positive aspect of the current Planning and Compulsory Purchase Bill should assist. Statutory Regional Spatial Strategies (RSS) will be prepared by the new Regional Chambers, with a wider social and economic role. This is a useful step towards more integrated strategies which guide public and private investment in the interests of regional revival. But the uncertain relationship with RDA's and their complementary economic strategies will still need to be addressed. And while any elected Regional Assemblies will have formal accountability for the RDA's they will still lack any other significant powers to redress regional imbalances. More powers and resources will be needed for the elected Assemblies to make an impact on that scale.

  3.4  There is also a short-term risk that the expertise in strategic planning that currently exists at county level may be disrupted unless the legislation provides for the harnessing of those skills to support the proposed regional planning bodies. This is serious because the inclusion in the P&CP Bill of a duty for planning based on sustainable development means reconciling the aim of raising living standards with sustainability. So future regional planning bodies will need those skills if they are to engage with issues of regional inequality and relate them to development and landuse.

Regional Policies

  3.5  Inequalities can be tackled either by policies aimed at individuals (eg through fiscal policy or through employers via the labour market or sector initiatives) or by spatial policies and area-based initiatives (eg through programmes often involving competitive bidding at EU and national as well as regional levels). The problem for the regional agencies is that the RDA's have limited—though increasing—budgets for policy implementation and the Assemblies have negligible resources. However, even though real intervention depends on government money it is possible to assess the policy aspirations of the present regional bodies.

  3.6  In the three years of their existence the government has placed increasing reliance on the RDA's to tackle barriers to growth, and has endorsed their bold economic targets. Take the East of England. It is ranked around 30th out of 77 European regions and aims to move into the top 20 European regions by 2010. This means that the regional economy must growth by 1.8% faster than those regions currently in the top 20, requiring a regional growth rate of over 3.6%.[11] While the East contains some strong sectors with good growth prospects, it is an ambitious target when all other regions are similarly seeking to improve their rankings. Indeed, when the targets in the first round of RES's were added together they implied an overall national growth rate well in excess of Treasury estimates.

  3.7  Not only are the implications of each region's economic targets for other regions unclear, but they have yet to be fully reconciled with their respective RPG policies. The latter will also be influenced by demographic projections, development rates and the building industry's outputs. (It is not surprising that in the East of England a special study has been commissioned of the impact of economic targets on landuse and development).

  3.8  Although it is early to make a definitive judgement on the effectiveness of both the current regional planning bodies and the RDA's two tentative conclusions seem valid. First, delivering their policies seems unlikely to have much impact on reducing regional disparities; the effect is likely at best to be neutral. During the last decade the Northeast and Northwest of England slipped further down the wealth league while the Southeast and East gained. Indeed, to the extent that the most buoyant regions achieve their future targets regional differentials might well be increased. Second, the aggregate of the regional aspirations for economy and prosperity is in any event not equivalent to a global vision of the nation.

4.  TOWARDS A COHERENT NATIONAL POLICY

Lessons from the Past

  4.1  Marked inter-regional differences have been the most distinctive feature of the economic geography of the UK for almost a century. This issue has been the subject of active policy intervention since the 1930's. But the precise effect of national policy is unclear. While it may have helped to hold static the approximate relative position of regions the fact is that these relative differences have barely changed in recent decades. [12]So while ad hoc regional development assistance may have helped economic restructuring outside the Southeast it falls well short of a coherent national strategy. One lesson is that a more comprehensive approach is required to close the regional gap.

  4.2  As long ago as 1947 the Barlow Commission was able to conclude that "legislation has not yet proceeded so far as to deal with the problem of planning from a national standpoint." It is still the case that the instruments of national planning are largely sectoral rather than spatial. So a second lesson is that reducing regional differentials will require a stronger "vertical cascade" of policy instruments to guide regional development.

  4.3  The Government's 1998 statement, Modernising Planning, recognised the case for strengthening planning at national and regional levels in order to improve the links between European and local policy making. But while the European Spatial Development Perspective (1998) highlighted the need for mechanisms to cascade policy down to regional level to deal with inter-regional inequality—and RSS's will provide frameworks for dealing with intra-regional issues—the process of inter-regional planning is still opaque. The establishment of the Scottish Parliament, Welsh Assembly, Greater London Assembly and the new Regional Chambers/Assemblies in England have thrown into sharp relief a third lesson, namely, the need for a more transparent inter-regional policy framework.

  4.4  There is of course no shortage of government guidance for regional strategies. This includes in particular:

—  A Better Quality of Life :UK Strategy for Sustainable Development (1999).

—  The Urban and Rural White Papers (2000).

—  The Transport White Paper (1998).

—  25 Planning Policy Guidance Notes (including PPG11 on Regional Planning).

—  "Sustainable Communities" and "Planning at Regional and Local Level": statements by the DPM 18 July 2001.

  4.5  A striking feature of this guidance is the general absence of an explicit spatial element directed towards the reduction of regional disparities. The final lesson is that if the Government's recently restated commitment "to improve the growth rate of every region while closing the gap between them"[13] is to be delivered these national policies will need to be translated into a more coherent inter-regional picture.

Improving the Machinery of Government

  4.6  The Government has made a useful first step in creating the Regional Co-ordination Unit (RCU) which is now located in the ODPM. It has a corporate remit to act as a clearing house for the strengthening regional networks. The RCU's responsibilities for allocating resources to individual regions, ensuring that regional interests are reflected in government policy and that area programmes are properly coordinated, are central to the issue of regional disparities.

  4.7  The RCU's Corporate Plan[14] includes thematic work on social cohesion and competitiveness: such cross-cutting initiatives have obvious potential for inter-regional coordination. Not only does appropriate machinery now exist but relevant data is being collated which could form the basis for a more structured approach to inter-regional policy.

  4.8  22 Regional Outcome Indicators are identified for each region including themes on the economy (inc GDP and business start ups), income (% on income support and poorer households) and work (employment and GCSE passes). More specific outcomes and objectives have been set for individual Government Offices. But it is interesting that the description of these measures is related in virtually all cases to improving the performance of all regions or to their internal cohesion, rather than reducing disparities among regions.

  4.9  We believe that if the overarching target of narrowing the inter-regional gap is to be achieved such outcomes and objectives will need to be supplemented by specific measures to reduce differentials. Enhanced economic performance within each region can be achieved by effective leadership of strategic partnerships by elected local authorities and local authority-led regional bodies. In this democratic context, there is also a strong case for more open and public discussion of the kind of regional outcomes being set by the Regional Coordination Unit. We acknowledge that the government has taken steps towards better linking up of policies at local and regional level. But the machinery for inter-regional strategy has yet to be fully addressed. [15]

5.  POLICY CHANGES NEEDED TO MEET THE TARGET

Policy Frameworks

  5.1  While some steps have been taken to improve functional integration of inter-regional policy recent studies have confirmed that the horizontal and vertical linkages are still rather disjointed. [16]It will be a challenge for the strengthened regional bodies to handle intra-regional coordination and cross-border issues, let alone deal with national policy choices. There is still a lack of comprehensive mechanisms in place to confront regional imbalances directly. The main policy levers adopted by government to combat unequal spatial development are via its competitive funding allocation regimes, the drawing up of regional assistance maps and the updating of the Index of Local Deprivation. While the regional bodies and local authorities are well able to devise initiatives to attract inward investment and enhance competitiveness, the fragmentation of policies requires more strategic coordination at government level to steer the overall direction of development.

  5.2  The first policy change should therefore be to develop a strong and well publicised regional monitoring framework to provide continuous intelligence on national trends. This could build on the work of the Regional Coordination Unit and draw on the development of Regional "Observatories". Wide dissemination of this information could provide the basis for better coordination of RSS housing and job forecasts, RES economic programmes, EU Structural Funds and the investment programmes of NDPB's such as the Highways Agency and Environment Agency etc.

  5.3  While we are conscious of the need to avoid additional bureaucracy the case for a national overview of RSS and RES and other regional strategies is clear. Genuine Regional devolution is a healthy trend. But the current approach to "integration after the event" is unlikely to reduce regional disparities between the central and periphery. Consideration should therefore be given to a light touch UK-wide spatial planning framework.

Policy Options

  5.4  The availability of more structured comparative information on the effect of government policy on the regions would enable a review of future policy options. There are four particular ways in which the government could address regional disparities.

Government Employment

  5.5  The location of government departments and NDPB's provides additional jobs and money circulating in the local economy and national functions add to the status of the area. While many government services are located outside London, several are headquartered in the more prosperous regions (Environment Agency and Planning Inspectorate in Bristol, English Nature in Peterborough, Countryside Agency in Cheltenham, Research Councils in Swindon etc).

  5.6  In terms of regional Government Offices, the less prosperous regions do have somewhat more generous staffing than those in southern and eastern England. The GO for the Northeast has 111 staff per 100,000 population whereas the Southeast, East and London have only 30-35 (and civil service figures in Scotland and Wales are of course much higher). However, the 2300 staff in the English GO's represent a minute fraction of the seven million public sector jobs over which the government has control or influence.

  5.7  Despite some high profile relocations all major government departments and most NDPB's are still based in London. Modern technology provides the scope for a more decisive shift of civil servants to the peripheral regions.

Transport Investment

  5.8  Although there is debate about the relationship between transport investment and economic growth there is no doubt about the perception of investors. The location of the 300 largest European firms is strongly related to international airports and high speed trains as well as motorways. [17]The competitiveness of the Southeast has undoubtedly benefited from the dominance of Heathrow and Gatwick. Whatever the result of the current consultation on airports, the expansion of Stansted (and elsewhere?) is likely to reinforce the north-south divide of air transport infrastructure. The largest international airport outside the Southeast, Manchester, only accounts for 11% of UK passengers.

  5.9  Improvements to the West and East Coast main rail lines look increasingly remote. In the case of the former the Northwest RDA has expressed concern that the unreliability of rail services is undermining business confidence in the region[18]. Meanwhile the Southeast is in line for the largest share of the SRA's budget and roadbuilding is being expanded without regard to an inter-regional economic development and landuse strategy.

Knowledge Infrastructure

  5.10  The knowledge infrastructure of a region is closely associated with research and innovation. Universities have been shown to have a significant impact on the local economy in terms of technology transfer, commercial linkages and as major employers and purchasers of local services. The Southeast retains its dominance in the information and media sector: there are now 10 British terrestrial TV networks all based in London and none in any of the English regions. The Work Foundation is examining the potential of Manchester to become an "ideapolis" or knowledge capital. Government clearly has the key role in targeting national research and higher education budgets so as to assist disadvantaged regions.

6.  CONCLUSIONS

  6.1  It is the wealth creating sector that drives regional economies. But public spending can pump prime and influence the longer term attractiveness of regions. We do not believe that simply changing the overall share of public expenditure going to individual regions in isolation from the need for individual services is appropriate. Nor do we consider that it is possible to "cost" the reduction of regional disparities.

  6.2  However, a more concerted attempt to address regional differentials in prosperity is justified. It requires government to set out a strategic vision of the spatial structure of the UK economy. This would be reflected in spending programmes and would provide the basis for monitoring their impact on the regional economy. The strengthened regional structures may assist regional coordination, but they are no substitute for a clearer national policy framework.

9   Source: Nationwide Building Society. Back

10   P Roberts (2000), Institutional Aspects of Regional Planning, Management and Development: Lessons from the English experience, Environment and Planning B.26. Back

11   Ernst and Young/Cambridge Econometrics, (1999) Regional Economic and Strategic Analysis, EEDA. Back

12   Regional Policy Commission (1996) Reviewing the Region: Strategies for Regional Economic Development, Sheffield Hallam University. Back

13   Alan Johnson (2002), Minister for Manufacturing and the Regions, Building a More Balanced UK plc, Regeneration, 13 December 2002. Back

14   Regional Coordination Unit 2002, Corporate Plan, 2002-03 ODPM. Back

15   Performance and Innovation Unit, Reaching Out-the Role of Government at Regional and Local level, Cabinet Office, 2000. Back

16   Royal Town Planning Institute. The UK Spatial Planning Framework, University of Manchester, October 2000. Back

17   Rosenblat & Pumain (1993) The Location of multi-national firms in the European system, Urban Studies, 30. Back

18   Peter Hetherington, The Gridlocked North, The Guardian, 13 December 2002. Back