SUMMARY

  The inquiry brief—". . . how the ODPM is going to achieve its target to `reduce the persistent gap in growth rates between regions'."

  This paper contains the views of the Hull and Humber Chamber of Commerce on the Office of the Deputy Prime Minister's inquiry into regional policy. The key issue is how the Government will achieve its target of "reducing the persistent gap in growth rates between regions." The main points of the Chamber response are as follows:

—  The Chamber believes that tackling disparities between the English regions should be an aspiration for the Government—with its key priority being increasing growth rates in under performing regions.

—  There is complex geography with different levels of growth within regions and localities but generally the "North-South divide" principle applies at a macro level.

—  Government policy has failed to tackle the big issues that are the underlying causes of the "North-South divide" (and indeed has often inadvertently exacerbated it). Too many regional and local initiatives have been introduced instead of sound, mainstream policy (eg for manufacturing industry).

—  Present policies such as the introduction of business led RDA's have been welcome, however by establishing RDA's in all of the regions, the Government signalled it is not genuinely committed to tackling regional disparities by this mechanism.

—  Too many well intentioned Government initiatives to address local and regional economic underperformance have been public sector driven, bureaucratic and have failed to deliver impact.

—  A recent Chamber survey revealed that elected regional assemblies as proposed would do little to improve economic performance or public services but would add a costly tier of bureaucracy in the view of local businesses.

—  Government should attempt to tackle regional disparities by breaking the welfare and dependency culture; better supporting manufacturing industry; increasing enterprise in depressed areas; raising educational and vocational standards and reviewing the Barnett formula.

—  Specifically for the Humber, the Government should revisit the Humber Bridge tolls issue and seek to build on initiatives such as the Humber Trade Zone through tax breaks for investment and enterprise.

1.  INTRODUCTION AND BACKGROUND

  1.1  The Hull and Humber Chamber of Commerce represents around 1,500 businesses of all sizes and sectors in the Humber sub-region. As well as being the dominant "voice" of Humber business, the Chamber is a significant business service provider. Its work on policy and representation has been awarded a maximum five out of five mark in its recent Accreditation inspection from British Chambers of Commerce.

  1.2  The Chamber is committed to the economic development of the Humber and wider region and seeks to work with the range of partnerships in the sub-region and its four local authority areas (East Riding of Yorkshire, Kingston-upon-Hull, North Lincolnshire and North East Lincolnshire) to achieve this objective.

  1.3  The Chamber identified tackling regional disparities as one of the key aspirations for the new Government in its 2001 Humber Business Manifesto. The Humber contains some of the areas of highest deprivation in the country as well as poor educational attainment, low levels of enterprise and low aspirations.

  1.4  This paper identifies the main problems associated with continued economic underperformance, highlights the key issues in the debate, examines the reasons for some of the failures of previous policy interventions and suggests some positive actions the Committee could recommend the Government to take.

  1.5  The Humber is an area of economic underperformance within the region of Yorkshire and the Humber which is itself below the national averages on key economic indicators. Yorkshire Forward's "Progress in the Region 2002" report highlighted that Yorkshire and the Humber was making some progress and had "leapfrogged" the North-West, but had failed to catch up with the UK and Europe's strongest regions.

  1.6  In terms of business competitiveness, "Progress in the Region" reveals that the region is well down the league tables. Yorkshire and the Humber is seventh out of the English regions in GDP per head; seventh by regional share of GDP; ninth by manufacturing investment by foreign firms; seventh by business survival rates of three or more years; eighth by business start ups measured by VAT registrations; and eighth by the percent of employees in high and medium technology employment.

  1.7  Of course these indicators are all relative to the performance of other regions, but they do exemplify the nature of the North-South split purely economic terms. The social consequences are significant often leading to higher unemployment, lower aspirations and poorer standards of education, all of which simply reinforce the regional disparities.

2.  RESPONSE TO COMMITTEE QUESTIONS

The importance of achieving the target

  2.1  Reducing regional disparities and tackling what has become known as the "North-South" divide is a laudable objective and important aspiration. Disparities within regions, sub-regions and within local authority areas are also important and public policy should reflect this complex geography.

  2.2  However, the objective of reducing regional disparities in themselves is less important than significantly increasing the growth rates in underperforming regions. This may or may not lead to a reduction in disparities, but it should take priority in the short term.

  2.3  As outlined in paragraphs 1.6 and 1.7, the cycle of economic underperformance of mainly Northern regions such as Yorkshire and the Humber has significant socio-economic impacts which both handicap economic growth and consume substantial amounts of taxpayers money paying the price for failure. Breaking the "welfare and dependency cultures" in these regions is the key to reversing the negative trends.

Achieving the target with current and proposed policies

Impact of current regional strategies

  2.4  The Government's regional policy strategy at present is built around the Regional Development Agencies (delivering their economic strategies) and Government Office's (delivering European funds in Objective one and two areas). Government interventions in localities, eg neighbourhood renewal, New Deal for Communities etc. also target many of the similar problems at different geographical levels.

  2.5  The advent of Local Strategic Partnerships will add another tier to the fragmented approach of local economic development and in our view exemplifies one of the causes in the failure of tackling economic underperformance. Too many poorly thought out and public sector dominated initiatives, most with good intentions, but not sufficiently mainstream or co-ordinated to make any real difference. Often such initiatives have "crowded out" existing, privately funded deliverers and provided poor value for money for the taxpayer.

  2.6  The Single Regeneration Budget schemes over a number of years have in our view not delivered value for money in terms of meaningful and sustained regeneration. Too often, the pursuit of securing the £85 million funding into the Humber has taken precedence over delivering a meaningful impact once projects begin. Local business communities, and many community organisations, have too often been poorly engaged with their presence seemingly to "rubberstamp" decisions already made and give only the appearance of partnership. Funding has also been used to supplement core local authority funding and so there has been little added value. For these reasons we have supported the shift towards funding flexibility for RDA's.

  2.7  European funding (recycled from UK taxpayers and controlled by Government Offices) has not successfully reduced regional disparities although they may have decreased the rate of divergence of economic performance. Our experience of dealing with European funding suggests that they are too centralised regionally rather than locally, far too bureaucratic, too complex for either the private sector or community/voluntary sectors in particular to engage as effectively as possible and match funding requirements often prohibit smaller deliverers developing high quality projects. With significant funding set to end in 2006 a new strategic approach needs to be taken. Before then, it would seem logical for RDA's rather than Government Offices to directly control this funding stream. Delivering in a more business like manner should be a priority and ending the "initiative fatigue" is a must.

  2.8  At the same time as this regeneration money pores into an area such as the Humber, circa £20 million is taken out of the Humber Bridge tolls, which cancels out the net impact or these core regeneration monies. Revisiting the issue of Humber Bridge debt is one way to tackle sub-regional growth rates in the Humber in a practical sense.

Impact of RDA's on regional disparities

  2.9  If the introduction of RDA's was designed to tackle regional disparities, the Government would not have established RDA's in the best performing regions as well as those that were struggling. Is the Government genuinely committed to targeting significant resources to the regions of most need?

  2.10  An effective regional economic strategy has been developed for Yorkshire and the Humber and the increasing flexibility in RDA funding should help the implementation of the strategy. However, sufficient progress has not been made in developing the delivery mechanisms and this should now be the priority for regions.

Proposals for Regional Assemblies

  2.11  The Chamber has supported "regionalisation" in general and has welcomed the establishment of RDA's who are at least operating in a business friendly manner. The proposals for elected regional assemblies are of greater concern. The CBI has been very critical of the Regional Government White Paper of 2002 and British Chambers of Commerce (BCC) have also taken a sceptical view.

  2.12  Putting the political arguments to one side, businesses will take a pragmatic view about what a regional assembly could mean. The key question is one of added value. Would an elected regional assembly increase economic performance? Would it improve standards of education and health?

  2.13  At the present time, Chamber members are far from convinced. In a survey carried out in December 2002, businesses in the Humber spoke conclusively about their views on an elected regional assembly along the lines proposed.

THE GOVERNMENT HAS ANNOUNCED PLANS FOR ELECTED REGIONAL ASSEMBLIES. DO YOU THINK THEY A YORKSHIRE AND HUMBER ASSEMBLY WOULD

	Yes	No	Don't know
Increase business competitiveness in general	9%	67%	24%
Increase competitiveness for your business	0%	73%	27%
Add a costly tier of Bureaucracy	82%	5%	13%
Improve public services	12%	67%	21%
Provide a powerful voice for the region	25%	48%	27%

  Source: Hull & Humber Chamber of Commerce, January 2003

Can a coherent national policy be achieved?

  2.14  A coherent policy must be achieved. In a wide range of its policies the Government has demonstrated a lack of commitment to tackling the regional problem eg RDA's in all regions, a failure to support manufacturing industry and lack of regional sensitivity in policies such as the minimum wage. Looking at the UK perspective, we would support a rethink on the Barnett formula which provides more funding per head for Scotland and Wales not just for public services but also for areas such as tourism promotion which is an important part of the economy.

  2.15  A coherent policy can be achieved if the necessary commitment is shown. However, the jigsaw of regional assembly referendums could well lead to a piecemeal approach if some but not all regions agree to have an assembly.

Lessons from past regional policies

  2.16  Past regional policies tend to have been interventionist and piecemeal rather than tackling the "big issues" which cause economic underperformance such as relative underachievement in educational low levels of enterprise and poor infrastructure. Too many "initiatives" and the lack of a coherent policy approach at local and regional level has limited the benefit of policies (see Better Regulation Task Force report on "Local Delivery of Central Policy").

  2.17  It is the wealth creators in the private sector who will truly influence whether or not the ODPM achieves its regional prosperity objectives. There is little evidence that either the Government or its agencies have identified any effective way of supporting wealth creation in the regions in a coordinated manner. Answers may lie in the Government and its agencies stepping back, being less interventionist and letting businesses get on with the job. This could be even more relevant if funding related policy mechanisms are not available once European funding ends as well as the Government's likely budget deficit in the coming years.

What policy changes are required?

  2.18  Some past and present Government policies are exacerbating inequalities in so far as many of the underperforming regions are more dependent on manufacturing industry, which is suffering a general decline with little support from Government policy eg Ministry of Defence failure to sign contracts with BAE Systems at Brough, East Yorkshire for Hawk jets. Polices such as the minimum wage have been introduced without any differing levels to reflect wage rates across the country making it more expensive to comply in lower wage areas in the North than those better performing regions.

  2.19  In terms of policy responses, the first step is that the Government as a whole would need to recognise there was a problem. The Prime Minister himself rejected the notion of a "North-South divide". Present policies such as elected regional assemblies would do little in our view to tackle regional disparities.

  2.20  Examining ways of better integrating delivery structures, such as RDA's, LSC's and Business Links/SBS is an option we would welcome. These alternatives were hinted at in the 2002 Comprehensive Spending Review and Better Regulation Task Force reports. It is important that "the customer"—ie businesses have a say in this change and are uppermost in policy makers minds, not the service deliverers.

How much additional funding is required in the poorest performing regions

  2.21  In short, we believe the following measures would help address regional disparities:

—  Focus on mainstream policies (education, manufacturing etc) and an end to plethora of initiatives.

—  Help to increase enterprise in depressed areas with tax breaks and grants rather than "tea and sympathy" from public sector advisors.

—  Take further measures through the tax system to encourage development and growth in areas such as the Humber.

—  Funding and flexibility to RDA's to help them deliver and no regional assemblies as presently proposed.

—  Review the Barnett formula.

—  Revisit issues such as Humber Bridge tolls which offset regeneration spend.

  2.22  Within the current policy framework significant additional funding for RDA's in lagging regions would be required—presumably channeled from "successful" region's. Discussions with local partners about how to effectively deliver results from these resources would then be essential.

  2.23  Additional investment in infrastructure is necessary to stimulate development. Access to the Humber's ports for example is limited by poor rail infrastructure. The SRA has identified the South Humber freight link as a priority but is not delivering as quickly as is needed.

Hull and Humber Chamber of Commerce

January 2003