The LGA welcomes the inquiry by the ODPM Select Committee. We represent all local councils in England and Wales and have benefited from contributions by a number of them in drawing up this submission. Local authorities have responsibility under the Local Government Act 2000 for developing strategies to promote the "social, economic and environmental well-being" of their area. Almost all have now published Community Strategies, drawn up with local partners, which set out how they will be using this important new power. Many authorities are also directly involved with delivering a variety of regeneration programmes and most councils have departments or units dedicated to fostering economic development.

THE IMPORTANCE OF ACHIEVING THIS TARGET

  The LGA believes it is vital that the economic disparities between regions in the UK are tackled in a more systematic and proactive way than has been the case over most of last 25 years. We do not believe that persistently differential growth rates between London, the South East and the rest of the country are either sustainable or desirable. It is our view that national social cohesion demands an approach to economic growth and prosperity which supports the whole of the UK and not just the so-called engine of growth in London and the South East. Having said which, it is important that growth is levered upwards to match the best rather than see prosperity formation capped.

  Current national Government policy has in several ways worked to increase regional disparities in prosperity. For example, current national policy on air transport is largely aimed at increasing the capacity of airports in the SE which will serve to further increase disparities. In terms of investment in research and development the decision to move a regional R&D centre from Daresbury in Cheshire to Oxford will have a similar effect.

THE IMPACT OF CURRENT REGIONAL STRATEGIES

  The LGA believes there is a lack of coherence to current regional strategies which needs to be addressed if current trends are to be altered. We recognise and welcome the Government's efforts to bring more resources to the regional level. We appreciate that the work of Government offices in the regions has enabled a more tailored approach to a number of Government initiatives. At the same time, we detect a tendency to adopt a "one size fits all" approach which runs counter to these principles. We believe that it would be more effective to support greater creativity and encourage more distinctive regional approaches based on the needs, capacity and historical legacies of different regions. At the same time, such an approach would need to be backed by a pro-active approach to supporting regions and, in particular, meeting long-term infrastructure needs.

WHETHER THE INTRODUCTION OF THE NINE REGIONAL DEVELOPMENT AGENCIES HAS CONTRIBUTED TOWARDS A REDUCTION IN, OR INCREASED THE DISPARITIES BETWEEN REGIONS

  The LGA is generally supportive of the work of the RDAs. We believe they have assisted creating a more coherent approach to strategic economic development in the English regions and have brought together physical, economic and social regeneration at this level. The RDAs have also been helpful in bringing together a variety of partners at the regional level which facilitates a more "joined-up" approach to problem solving and produces more effective regional champions.

  However, Government's policy on RDAs appears to adopt the perspective of treating unequal regions "equally", and doesn't take into account the national target of reducing the disparities between them. RDAs are not expressly designed to reduce regional disparities. They have been established in all regions in England and not just those currently lagging in terms of GDP per head etc. National objectives and performance targets for the nine RDAs are also identical whether or not the regional economy in question is "lagging" (Regional Development Agencies and Local Regeneration, Joseph Rowntree Foundation, May 2000).

  In terms of the allocation of RDA funding the Association has learned that less than 30% of RDA "single pot" is allocated using the Index of Deprivation. RDAs have tended, in turn, to adopt a "blueprint" approach to drawing up strategies which has failed to differentiate and build sufficiently on the diversity of regional strengths. It was evident that the first round of regional economic strategies failed to make the most of the distinctiveness of particular regions, with too great a tendency for RDAs to pursue a strategy of ICT-focused cluster development, whatever their region's characteristics. Although RDA strategies are now far more regionally distinctive the agencies are still charged with increasing GDP in their regions with the strong regions able to move forward at a faster pace than the weaker ones, thereby increasing regional disparities.

WHETHER THE PROPOSALS FOR REGIONAL ASSEMBLIES WILL MAKE A DIFFERENCE TO THE ACHIEVEMENT OF THIS TARGET

  Although the directly elected assemblies will take over control of the relevant RDA in the region, they will not be able to influence regional economic disparities with the level of spending, range of powers and functions currently included in Government proposals. Research undertaken by the University of Birmingham for the LGA ("Devolution to the Regions: What does it mean for local government in England?" December 2002, copy enclosed) has concluded that the powers allocated to assemblies will lag behind those of regional government in Scotland and Wales, but broadly match those of the GLA. It goes on to state: "The sense among most of those who have expressed a view is that the ERA powers do not go far enough (or do not provide the `packages' of responsibilities to join up government and mobilise all forces to make a difference)..." A further conclusion of the research is that much will depend upon an effective coalition being established between ERAs and the main delivery agencies in the region such as the Learning and Skills Councils and Small Business Service.

WHETHER A COHERENT NATIONAL POLICY CAN BE ACHIEVED; AND IF SO, HOW

  The LGA would agree that there is need for a more coherent national policy to be developed with the explicit purpose of tackling regional disparities. We believe a national spatial plan should be developed with funding and infrastructure strategy attached. Most notably we believe there is a pressing requirement to address a series of crucial transport investment needs.

  The ODPM target of reducing regional disparities is welcome, but it is clear that ODPM alone cannot deliver on this without the active engagement of other Government Departments. In addition RDA budgets are only a small part of regional Government spending. We know that the Core Cities group, comprising Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield have been pressing for an approach to national policies around post-school education, transport, culture and spatial planning which support cities and their regions outside London. The group has been working closely with the Urban Policy Unit at ODPM, but there is a need to engage with other Whitehall departments.

  The Deputy Prime Minister's "Communities Plan", launched on 5 February, aims to meet housing need in areas of high demand while also tackling the causes of low demand and abandonment in other parts of the country. It is important to reflect on the underlying structural economic weaknesses which lie behind these contradictory patterns. While this hints at clear structural deficiencies in the economies of large parts of the North and parts of the West Midlands, it needs to be recognised that are also economic disparities within regions. London has the greatest share of inequalities of any of the English regions. Measures which fail to address the underlying features of poverty in London and the South East can have the effect of simply reinforcing these trends.

  At the same time it should be remembered that the best successes in challenging stereotypical perceptions have been developed around approaches which have emphasised distinctiveness, such as the Newcastle/Gateshead Millennium Bridge, Manchester's approach to hosting the Commonwealth Games or Birmingham's redevelopment of the Bull Ring. We believe that RDAs need to be encouraged and enabled to develop support strategies tailored to differing needs.

WHAT LESSONS CAN BE LEARNT FROM PAST REGIONAL POLICIES

  UK regional policy in the period from 1979-97 focused largely on Wales, Scotland and Northern Ireland. Enterprise Agencies covering these areas have been in operation for far longer than those in the English regions and could usefully be evaluated to ascertain their effectiveness in raising prosperity. Regional policy in England has included the use of Regional Selective Assistance (RSA), the allocation of which is triggered by unemployment rates. In addition EU Structural Funds, which in Objective one areas are triggered by GDP rates in relation to the EU average, are targeted at deprived regions. For Objective two EU funding targeted at areas suffering economic decline, as with RSA, the principal emphasis is currently on rates of unemployment.

  However, although the measures above (especially in Objective one areas) are targeted at "lagging" regions the approach could not be described as a coherent regional policy to address inter-regional disparities. Attempts to address deprivation eg Urban Programme, City Challenge, SRB have tended to focus on small areas. The Government's programme of decentralising its functions through the establishment of Government Regional Offices (GROs) has tended to operate as "Government in the Regions" rather than by the regions. GROs can play a useful function in representing regions in Whitehall and in regional coordination of central Government departments. Some regional directors see themselves as genuine champions for their regions. The main lessons from the operation of the GROs as set out in the report by the Policy and Innovation Unit (PIU) Report "Reaching Out" are that representation of departments on GROs needed to be broadened to include more departments (and now includes nine) and more opportunity needed to be made for GROs to influence central policy-making. It is telling that one of the main responses of the Government to the PIU report was to introduce a new unit (the Regional Coordination Unit) to coordinate the GROs from the centre. This illustrates one of the main lessons of past regional policy which is the tendency for Governments to try to control matters from the centre.

WHAT CHANGES TO POLICIES ARE REQUIRED TO ACHIEVE THE TARGET INCLUDING WHETHER GOVERNMENT DEPARTMENTS, AGENCIES AND NON-DEPARTMENTAL PUBLIC BODIES SHOULD BE MOVED TO LESS PROSPEROUS REGIONS

  We believe that there is much that Government can do to assist in meeting the target. Most importantly, we believe that all major infrastructure decisions should be informed by a need to reduce regional inequalities. This would require a significant shift in thinking in a number of Government departments. It would have a major impact on decisions around airport and rail strategies—both seen as crucial to lifting the ability of regions away from London to compete on a global scale. It would also have an impact on the approach of DCMS to the funding of arts and cultural programmes and to the approach taken to prestige projects which can have a transformative effect outside London.

  Equally important are decisions around support for higher education and for investment in research and development in particular. It is high quality R&D which will make the biggest difference to a diversified British economy. Alongside this, however, comes the need for an adequately skilled and trained workforce. The Learning and Skills Councils and industry Sector Skills Councils will need to be supported to develop regional approaches to meeting need.

  This is not to say that London should not continue to be supported as a world class capital city. Addressing the needs of Londoners is going to continue to be a pressing political issue with quality of life issues high on the agenda. Developing strategies which tackle poverty and social exclusion will also require imaginative approaches. But ultimately London and the South East cannot be the only engine on which the UK economy depends. Diversifying and building on regional strengths around the UK will produce more economic stability and improved living standards for greater numbers in the longer term.

  There is evidence to suggest that public sector employment has a crucial role to play in holding up employment levels and in driving the so-called knowledge economy. In some areas of the country professions such as doctors, teachers, social workers and university lecturers are crucial in providing work for highly qualified graduates. But public sector employment is important at all levels—local authorities and the NHS are large scale employers of often very local labour and their approach to workforce learning and development can have a significant impact on skills levels within whole communities. Decisions about the location of Government and other public bodies can also have a demonstrable impact and an assessment of regional economic impact should be used to inform such decisions.

HOW MUCH ADDITIONAL FUNDING IS NEEDED IN THE POOREST PERFORMING REGIONS

  It is very difficult to quantify the amount of additional funding necessary—it is more about reaching a point of critical mass and "take-off". However, public funding can help in reaching this point and can also help to stave off worse economic catastrophe—so areas of industrial restructuring, such as the former coalfields communities, would have been worse off without the levels of public investment, but in the end they need to develop new economic engines.

CONCLUSIONS

—  The LGA supports the view that a reliance on the South East economy as a single "engine" fuelling English macro economic development would be an inadequate response under-estimating the potential contribution that regions outside London and the South East make.

—  It is probably too early to tell whether RDAs are able to make a difference to regional economic disparities. However, given the small scale of RDA spending in relation to the totality of public expenditure, the agencies on their own are unlikely to have a great impact, and there is evidence to show that regional economic disparities may have actually increased since the agencies have been established.

—  RDAs located in lagging regions need specific tools to deal with the scale of problems they suffer (eg a lack of market demand for Brownfield land development). This is over and above the powers and tools that all RDAs have been equipped with.

—  Whilst there are undoubtedly "pockets of deprivation" in all regions, (and intra-regional inequalities are a pressing issue that needs to be addressed) there are structural economic difficulties facing some of the regions outside London/South East and East Anglia that require a more concerted approach.

—  In order to address inter-regional inequalities the LGA considers is of the view that there is a need to develop a national perspective on infrastructure provision. Decisions on Government investment need to be taken on the basis of addressing regional economic disparities.

—  Reducing regional disparities will require a response that includes Government expenditure as a whole and not just that on economic development. Government spending should favour the "lagging" regions, and be allocated using the most appropriate indicators (such as GDP per head) in order to try to build their capacity and great greater endogenous growth.