Q&As on the future of RDAs
ENGLAND’S RDAS: FAQS:
LAST UPDATED: 27 AUGUST 2010
Latest position on RDAs
Local Enterprise Partnerships
Regional Growth Fund
2010/11 cuts
‘Waste’/Value-for Money/’Bloated Quangos’?
General/Historical
Latest position
Q. What is the very latest position on the future of RDAs?
A. Ministers have confirmed their intention to abolish RDAs and support the creation of Local Enterprise Partnerships (LEPs), to be in place by March 2012 at the latest. They have also indicated that some of the RDAs’ current functions may continue at a national, rather than local level.
The Government has stated that a White Paper will be published in the autumn which will give greater detail and, we expect, clarify a number of issues – such as which work will be carried out locally, which nationally and which not at all.
RDAs accept this change is coming, and are committed to helping ensure as smooth a transition to the new arrangements as possible. Our main task in the meantime remains to support economic recovery and future growth.
Local Authorities and business leaders are now preparing proposals on where and how LEPs should be created. Some of these have already been submitted to government in advance of the 6 September deadline. We believe it is important that both business and local government should have a strong voice in creating these future arrangements.
We are keen to work closely with these partners to help them understand functions, projects and activities which we currently manage and deliver, and we believe the expertise and experience of our staff will ensure this transition is handled efficiently, and for the maximum benefit of economic areas.
Q. When are you going to be abolished?
A. Government intends for the abolition of RDAs to be complete by March 2012. We are now working with Government and partners to support a smooth transition to new arrangements, including the formation of LEPs. In the meantime we have an important investment programme to continue delivering across England which will create more jobs, more competitive businesses and stronger sectors at a critical time for the economy.
Q. What will happen to RDA staff?
A. It’s obviously a very unsettling time for the 2,700 people (excluding the LDA) who work in the RDAs, but our staff remain committed to delivering our current programme of work during this period of uncertainty.
We are seeking clarity about future structures, redundancy arrangements and on any opportunities for transferring staff to successor bodies. In the meantime, some RDAs have opened limited voluntary redundancy schemes based on restricted existing terms to help manage 2010/11 admin budget pressures and to begin the process of transition.
Q. What is the RDAs’ reaction to the decision to abolish RDAs?
A. RDAs’ responsibility is clear: to support and help government deliver their objectives. The RDA Network accepts change is coming and we are ready for it. We also recognise that funding available for economic development work will be more limited in the next few years, given the need to tackle the public deficit.
Discussions about our future have not reduced our passion for working to create stronger, more sustainable and balanced economies in each part of the country - and for making best use of reduced resources to ensure that England can remain internationally competitive in future, particularly in key sectors such as innovation, advanced manufacturing and low carbon technologies.
We also want to do what we can, working with national and local government, to ensure that the voice of business is heard in the shaping of new arrangements.
Local Enterprise Partnerships (LEPs)
Much of the detail concerning LEPs is yet to be finalised, but this series of questions represents our best understanding so far:
Q. How many LEPs will there be, and what areas will they cover?
A. At the end of June, the Secretaries of State for CLG and BIS invited local authorities and business groups to consider proposals for LEPs in their local areas.
These proposals should indicate the area for each LEP to cover, and also the functions they should undertake.
The Secretaries of State also asked that LEPs be formed to represent ‘natural’ economic areas.
The deadline for submission of LEP proposals is 6 September.
Q. Will all RDA work go to LEPs?
A. No, the Secretaries of State for BIS and CLG have outlined a range of functions which LEPs may take on, while other RDA functions may be lead in future at a national level. Also some RDA functions will no longer continue, such as regional strategy work. Final proposals are expected to be included in a White Paper this autumn.
Q. How much money will LEPs have?
A. . LEPs will probably inherit some of the RDAs’ current work, much of which carries significant contractual and financial commitments. The Government has announced a £1bn Regional Growth Fund which provides the opportunity for LEPs – and other organisations – to bid for funding.
It remains unclear whether any ‘core funding’ will be made available to support any running costs LEPs may have.
Q. Can some RDA functions be effectively delivered nationally?
A. Ministers have written to local authorities and business leaders to suggest a range of current RDA functions which Government believes should be led at national level. At this stage it is not clear exactly how this would be managed but our experience suggests that many of these functions will require an on-the-ground delivery capability, with local/geographic knowledge and relationships.
Regional Growth Fund (RGF)
Q. What is the Regional Growth Fund?
A. The Budget on 22 June confirmed a Regional Growth Fund of £1 billion to be made available across 2011/12 and 2012/13 to support private sector growth in areas where the private sector is currently weakest.
A consultation on the RGF was launched on the 23 July, with more details expected in the autumn on the operation of the fund.
Q. Will the Regional Growth Fund be available everywhere?
A. Government has stated it wishes to provide opportunities in areas with higher dependence on the public sector to grow more rapidly, to ‘rebalance’ the economy. We do not yet know if the RGF will be available in all regions.
Q. How will the RGF be spent?
A. Ministers have said that bids into the RGF should be made by private/public partnerships, focussing on projects and initiatives which will have an impact on jobs growth in the private sector.
Q. How does the RGF compare with funding for economic development currently available through RDAs?
A. The Regional Growth Fund will total £1 billion available across two years – 2011/12 and 2012/13.
Until in-year cuts for 2010/11 for RDAs were announced by the Chancellor in May, RDA programme funding across England were in the region of £1.4 billion outside London, excluding a further 10% running costs.
Taking the latest £270 cuts into consideration, RDA programme funding for the rest of 2010/11 will be £1.1 billion outside London (excluding running costs)
2010/11 cuts
Q. How much money is being cut from RDA budgets this year?
A. RDAs were asked to find £270 million of cuts to their projects and programmes as part of the £6.2 billion reduction in public spending for 2010/11 announced by the Chancellor in May. This was in addition to the £300 million reductions asked of RDAs last year covering the two years from 2009 to 2011.
The Secretary of State confirmed that some regions - East Midlands, South East, East and South West - will bear a greater proportion of these reductions relative to their original budgets.
Each RDA has since been talking to partners to agree where these reductions will take place, and how projects will be affected, while looking to minimise the impact on our partners through this difficult period of transition as best we can.
In most cases this will involve delaying work, scaling back, or stopping projects altogether. However as the vast majority of our programme funding is already allocated and committed, and especially as the cuts are needed this year, some RDAs will be looking again at existing contractual commitments.
Q. How committed are RDA budgets?
A. At this stage in the year, and given both the work required to plan and deliver projects, and the reductions already made to our budgets for 2010/11 from previous cuts, RDAs have forecasted collectively that just under 90% of the total programme budget for 2010/11 is committed to legally contracted work.
If projects and initiatives where RDAs have agreed investments and are at an advanced stage of negotiation are added, then all of our budget is committed and allocated.
On many projects, RDAs work together across regional boundaries and jointly invest in projects. RDAs are also committed to delivering European programmes, such as RDPE and ERDF.
Q. Aren't the £270 million of cuts for 2010/11 just targeting 'low value' investments?
A. As independent research has shown, RDA expenditure is delivering a significant return on investment - on average, at least £4.50 on every pound spent. All our interventions are targeted at helping grow the economy, with a particular focus on the skills, infrastructure and support that businesses will need for the low carbon economy of the future. We will do everything we can to minimise the effect of these cuts, but they are bound to have some impact on the businesses and communities we serve.
Q. Will you have to stop work already under way?
A. Most of the RDAs’ budgets for 2010/11 are already committed so it is possible that some work already underway might be affected.
Q. Do these cuts mean that RDAs are now irrelevant?
A. The RDA network still has a significant programme of investments, and even after these cuts are made we will continue to deliver vital support needed to get the economy moving again and to put the infrastructure in place to help develop the economy of the future. Ultimately, this is not about RDAs as organisations, it is about the vital work we are doing to help re-balance the economy.
Q. Is London affected in the same way?
The LDA has unique governance arrangements which mean that it has different arrangements to the other RDAs. The LDA has been asked to make £40m in-year programme cuts. The LDA have also been asked to make 10% efficiency cuts in administration this year.
The LDA supports the Mayor of London's proposals for the future of economic development in the capital. The LDA will continue to work with the Mayor to ensure that these proposals achieve greater value for money and safeguard frontline services in the capital.
The LDA has already publicly supported the Mayor of London's proposals for devolution in London.
Value-for Money
Q. Do RDAs have high overhead costs?
A. Government analysis in the past year confirms that RDAs are among the most efficient of all major public sector bodies, including central government departments. The 2009 study "Smarter government: Putting the frontline first" found that RDAs were among the 25% most efficient of all government departments and larger agencies in terms of financial management, HR, IT, procurement and office costs.
Over the last three years, England's RDAs have spent less than 10% of their 'Single Programme’ funding on administration costs. At the start of the current spending period administration was £238.6 million compared to an overall budget of some £2.3 billion. Spend on administration will come down by a further £57 million by the end of the three year spending period in 2011.
Q. Do RDAs ‘waste money’?
A. We do not claim we have got everything right in our 11 year history, but the story of our work is overwhelmingly one of success.
In one of the largest independent evaluations of its type undertaken for Government, PricewaterhouseCoopers found last year that - over a four-year period from 2002/3 to 2006/7 - each £1 invested by RDAs had directly benefited regional economies by an average of at least £4.50.
That figure increased to £6.40 if future benefits of RDA investment were taken into account. PwC were rigorous in analysing only that proportion of RDA work where they considered there were clearly attributable 'direct' benefits to RDA investment. If indirect benefits were taken into account, those £4.50 and £6.40 would increase significantly.
In the National Audit Office’s independent performance assessment of all RDAs in 2006, all the Agencies were found to be performing well or better.
In their recent Independent Supplementary Review of the RDAs, following up the work in 2006, the NAO found that performance that in over 80% of the areas performance was either ‘good’ or ‘strong’ and in all other areas assessed were at least satisfactory.
Q. How much has it costs to generate each job created by RDAs?
A. Independent evaluation has concluded that on average, the cost per job is £27K which, over the medium term is more than paid for by increases in Exchequer revenues (tax take) and savings on benefits payments.
Evaluation has also demonstrated that the cost per job for all our activities supporting business and creating the right environment for economic growth was £14K, for our activity supporting skills and developing the workforce was £43K, and for the third strand of RDAs’ activity – physical regeneration the cost was £60k. By its nature, this is long-term work and has focussed mainly on physical regeneration – buildings and infrastructure, rather than job creation.
These figures are calculated by dividing our total spend by the number of jobs created. But this represents just one output for the time and effort the Agencies invest in developing their regional economies. Put another way, if these figures are looked at in isolation, it would mean that we would be providing all the other crucial work we undertake - to improve skills, trial new technologies, pilot low carbon projects, community regeneration, supporting business development, sector-related support, deliver large and complex projects for Government, analytical and foresight work, development of new physical and ICT infrastructure, provide a rapid response to economic shocks – for free.
Q. Is it right that scrapping the RDAs will save over £2 billion a year?
A. No. This suggests that all our money is spent on administration which no one will miss.
About 10% of our budgets are spent on admin, such as jobs, offices and travel. The vast majority of our funding is already committed to business-facing projects and initiatives across the country supporting new industry, creating jobs, encouraging business start-ups and so on.
Since 2008, RDA budgets have been reduced considerably from an earlier figure of over £2 billion. Some £430 million was cut last year to fund Home Buy Direct and Small Business Finance schemes. As part of the Chancellor's recent £6.2 billion public cuts for the remainder of 2010-11, RDA budgets have been cut by a further £293 million.
This means RDAs total remaining budget (outside London) following cuts already announced and acted upon is nearer £1.1 billion.
Q. What’s your reaction to critics who say RDAs have cost more than £15bn yet have contributed little to the economic development of England's regions?
A. In one of the largest independent evaluations of its type, PricewaterhouseCoopers found that - over a five-year period from 2003 to 2008 - each £1 invested by RDAs had directly benefited regional economies by £4.50.
That figure increased to £6.40 if future benefits of RDA investment were taken into account.
And PwC were rigorous in analysing only that proportion of RDA work where they considered there were 'direct' benefits. If indirect benefits were taken into account, those £4.50 and £6.40 would increase significantly.
So, based on this independent analysis, RDAs have contributed at least £38 billion towards the economic development of England's regions during that period.
Despite the fact that regional economic development is tiny compared to the size of regional economies, the return on investment is very high when compared with many other government (or indeed private sector) interventions.
Q. What’s the point of regions?
A. Most successful countries since 1945 have had a regional development element to economic policy. Germany, France, even the US use it as a tool to invest in competitiveness through workers, infrastructure and firms.
The US provides a good example of where state and functional zone groupings of business and public sector, with some seed corn funding and co-ordination by the latter proving critical in turning places around. The Asian Tiger economies were all built on a clear industrial and sector policy with intervention by the state.
National intervention will generally not address regional disparities and local intervention alone is unlikely to provide the scale, integration, or cost effectiveness necessary consistently over the time required. For this reason, approaches that bridge the national and local level operate in the vast majority of major world economies.
The delivery of functions at regional level does not automatically equate to regional government – the two issues are separate. The Regional Development Agencies are an arm of, and are fully accountable to, national government.
Q. Surely the state needs to just get out of the way of business at every level anyway?
A. Re-balancing the economy is a long term process. It is needed to secure the long term success of our country, particularly at a time when the economy is fragile. It is also needed because of important drivers such as climate change and demographic change. Across the world, development organisations - public and private - are out to capture the new technologies, jobs and markets for a new, low carbon economy.
Innovation is the key to competitiveness; historically, regions have been the engines of this competition in the global economy.
Government has an important role to play in removing barriers, enabling growth, removing excessive risk from business models and providing crucial incentives for business investment in key sectors and geographical areas.
General/Historical
If we just handed out all the money in tax breaks, wouldn't that have the same effect?
RDAs make long-term investments to ensure the sustainable prosperity of the economy, targeting areas where the investment will make the biggest difference. Our unique position as business-led agencies means that we are able to identify and support developing emerging industries and ensure that the best possible returns on investment are gained.
In a recent Impact Evaluation, conducted by PricewaterhouseCoopers, RDAs were found to return at least £4.50 for every £1 invested, with a projection for future returns on investment of £6.20.
You say you have been successful. How do you know?
The RDAs have had a significant positive impact on their regional economies over the five years 2002-03 to 2006-07 (the period focused on by PWC in their report). The economic benefits generated by the RDAs substantially outweigh their overall costs.
An independent evaluation for BIS carried out by PWC showed that for every £1 spent by the RDAs, an average of at least £4.50 of economic output (or Gross Value Added, GVA) is put back into the regional economies. When future benefits are included, this increases to at least £6.40. This means the RDAs have nearly quadrupled the £5.1 billion spend covered by the evaluations analysed, with an overall return on investment of at least £23 billion, or £33 billion when future benefits are included.
In addition, the National Audit Office has undertaken a number of studies in the effectiveness of RDAs. The most recent report, published on the 19 July, showed that the Agencies were performing to a strong or good standard in most of the areas examined.
Hasn't the gap between the richest and poorest English regions actually widened rather than narrowed since the RDAs were established?
RDA budgets represent only a tiny fraction of public sector expenditure in each of the regions, and it is therefore unrealistic to expect them to singlehandedly overturn long term structural differences in economic performance.
Nonetheless, there has actually been convergence between the English regions if you exclude London and the greater South East which distorts the overall regional picture.
If you exclude London, the difference between the English region with the highest GVA per head and the lowest GVA per head has fallen slightly since 2000. The same picture is true for disposable household income which indicates how much people have left over to spend after tax and social security.
The effect of the financial services sector in London warps the figures indicating the difference between the richest and poorest English regions. It is therefore hard to produce an accurate representation of the relative wealth of the regions. What is important is that each region has been able to grow economically to its maximum potential.