The Chief Economic Development Officers' Society is pleased to have the opportunity to comment and officers of the society are willing to be called to give evidence to the Select Committee.

  The Society provides a forum for Economic Development professionals working for upper tier Local Authorities in England to meet, network and exchange best practice. It provides an opportunity to influence national and European policies by working closely with such organisations the Audit Commission, Improvement and Development Agency, Institute of Economic Development Officers and the Local Government Association.

  The current membership includes County Councils and Unitary Authorities which together represent over 47% of the population of England and provide services across over 84% of its land area.

  Based on the Inquiry's terms of reference, the CEDOS response may be framed as responses to a number of critical questions. These are listed below:

1.   Whilst the objective fulfils criteria relating to a concept of "equity" is it compatible with an "efficient" economy?

—  Whilst the goal of "equity" is desirable from a number of perspectives such as a concept of "fairness" and national economic management, nevertheless in a competitive global economic environment, there are issues relating to resource allocation to maximise economic growth.

2.   Technologies and patterns of trade change over time—is it not inevitable that some regions will be more successful than others at any given time and that relative positions will change?

—  As an advanced economy, the UK is becoming more "knowledge based" and integrated with other advanced economies such as those of Western Europe. These trends clearly favour those regions with a comparative advantage both in these sectors and in geographical location. Knowledge based businesses are disproportionately clustered in London and the South East.

3.   If resources are invested in "lagging" regions, will this act as a brake on national economic growth?

—  The Government's policy is to focus regional economic policy on raising the performance of the weakest regions but there does not appear to exist at present a coherent national policy to co-ordinate national transport and other infrastructure decisions. Recent decisions on R&D investment and airport policy would appear to be working against the Government's aim of reducing economic disparities.

—  Similar issues arise with regard to public procurement policies (eg Aircraft Carriers Project).

—  Experience in the EU and elsewhere has demonstrated the importance of research and development activity in concentrating the efforts of Government and business in developing key economic sectors. This in turn seems to strongly influence the level of GDP in many regions. The infrastructure and intellectual capacity that are needed to generate sufficient critical mass to stimulate growth seem also to be fundamental. Efforts to bolster the ability of the regions to develop intellectual capacity and associated infrastructure should feature more strongly if regional disparities are to be reduced. The location of government and private sector R&D capabilities that require Government support should be steered more strongly to potential Regional Centres.

4.   Given the small budget of RDAs in comparison to, for example, LSCs, will they be able to significantly influence changes in disparities between the regions?

—  It is too early to tell how influential RDAs will be in influencing regional disparities. They had limited initial freedoms in funding terms. The single pot approach and increased funding have only just occurred.

—  The attached diagrams illustrate the role of the East of England Development Agency in the public expenditure and funding programme profiles of the East of England. They illustrate, inter alia, the limited budget of EEDA in comparison with LSCs and other items of public expenditure.

—  RDA budgets are only a small part of regional public expenditure. It is not known whether there is a clear funding formula for allocations based on reducing regional disparities.

—  The new pilots, one of which is in the North West, with SBS and LSC budgets also being controlled by RDAs, could improve the potential for addressing regional disparities.

5.   Are regional economies more influenced by macro economic policies (viz labour market) than institutional structures?

—  Issues on this question relate to whether the establishment of regional assemblies, with the powers currently proposed, would be able to formulate and implement distinctive regional policies with the capacity to make a significant difference to their area's economic performance. Both transport and skills make a significant contribution to economic development yet the Assemblies proposed powers will only be consultative.

—  Affordable housing is an issue influencing the distribution of economic activity. Interest rates are set for the UK.

—  Disparities in the prosperity and disposable income between regions have a severe impact upon the local housing market and the lack of affordable housing for local people. The huge gap in disposable incomes between the South East and far South West of England and the presence of a large number of second homes in the South West suggests that raising income for local investment from second homes should be promoted by Government and used by local authorities to provide affordable housing. This would help to redress the current imbalance between regions.

6.   The impact of the proposals for Regional Assemblies might be assessed in terms of the following questions:

(a)  will they benefit the economic performance of their areas?

(b)  will they improve decision making?

(c)  will they provide an effective "voice"/lobbying role for their areas?

(d)  to what extent is a redistribution of power from the centre a necessary pre-requisite for regions to maximise their potential?

(e)  is there a link between elected regional government and improved regional economic performance?

(f)  will different governance systems in different regions have any implications for their economic performance?

(g)  will strengthened regions lead to increased competition between them?

(h)  how will their financial powers influence their scope for action?

(i)  is the "region" the spatial unit best suited to policy development and implementation?

—  Regional assemblies will be funded primarily by central government grant.

—  Assemblies will have complete freedom to spend their grant as they judge best, subject to their helping achieve in their region certain specific targets agreed with central government. Some additional funds will be available if an assembly meets or exceeds these targets.

—  Assemblies will be able to raise additional funds from a precept on the council tax. Their precept will be expected to make a small contribution to the direct running costs of an assembly. But costs to council tax-payers will be subject to a capping regime to prevent excessive increases.

—  Assemblies will have no power to alter non-domestic business rates.

—  Regional assemblies will have powers to borrow money, subject to certain limits.

—  One issue is whether Regional Assemblies will make a difference if powers and resources are not removed from Whitehall.

—  Regional disparities can only be addressed if regional policy is core to government activity at all levels. They cannot be addressed purely by economic development policy.

7.   How are disparities within region to be addressed?

—  The problem of intra-regional disparities may be illustrated with reference to two case studies the South West and South East. The South West is relatively prosperous in comparison to other regions, but there are huge discrepancies within the region. For example, whilst GDP per head in Swindon totals £18,129, Devon's is only £9,336—around 49% less than that of Swindon. The average figure for the South West is £11,447. The South East, is, after London, the second most "successful" economy, contributing some 15.8% of total UK GDP. The range of sub-regional GDP per head is greater than the range in regional GDP per head:

—  Berkshire—£19,000

—  South East av—£13,700

—  East Sussex—£8,600

—  Isle of Wight—£8,300

—  The poorly performing areas are also characterised by low GDP growth and the gap is thus widening.

8.   How important is EU funding in addressing regional disparities?

—  Particular concerns relate to the future of EU cohesion policy and the value of funding post 2006 and enlargement.

—  Existing Objective One designations are based on areas that are below 75% of average GDP per capita.

—  Objective One policies have an important role to play in assisting the economic development areas of low GDP per head, such as Cornwall. A commitment by Government to match funding, including match funding by the RDAs, is vital to realising the benefits of the Objective One programmes.

—  Alignment of UK Government efforts with policies agreed and promoted by the EU Member States would serve to reinforce the ability of the European Structural Funds to accelerate growth rates in a more effective manner. National, regional and sub-regional investment priorities for economic regeneration should be compatible and mutually supporting. This would result in a more coherent set of actions that would enable local economies to adjust more readily than hitherto. It is vital that investment and regeneration strategies are developed and owned at a local level and supported through a partnership approach. In the case of Cornwall this is at County level.

9.   Methods used to measure regional disparities

—  Given the plethora of activity in this field, it would be useful to consider linking measurement to national government performance targets. For example, one particular PSA target for DEFRA is to "reduce the gap in productivity between the least well performing quartile of rural areas and the English median by 2006". It would aid transparency to link the ODPM's aim of reducing regional disparities to such performance targets and crucially, to feed this into policy formation.

—  The Chief Economic Development Officers' Society is currently developing in association with the Audit Commission national performance indicators for economic regeneration.

Daniel Dobson-Mouawad

Chairman