End of the road

It was known that with the election of the coalition Government, cost slashing was most certainly coming to the public sector. Many perhaps did not quite expect the brutal 25 percent cuts to non-protected departments that George Osbourne announced would take place at the budget.

Yet with the policy of localism high on the Conservatives’ agenda, it should have come as no great surprise really that regional development agencies were likely to be on the chopping block. And it seemed with some glee that the Department of Communities and Local Government announced that RDAs were to be scrapped this summer, creating an expected saving of around £2.3bn per year.

In their place is planned a system whereby local authorities and private business work together to form local enterprise partnerships that will aim to prioritise areas of local economies that need improving. They would then help to initiate local economic incentives ranging from business support to infrastructure requirements.

Though the clamp down on spending maybe making the headlines, there is more to the axing of RDAs than just cost cutting. Politically, they are symptomatic of Labour’s extensive legacy of quangos – unelected bodies created by the Labour government to take control of issues considered to be of hindrance in achieving day-to-day business in Westminster.

Quangos are the bane of a cost-conscious coalition government, which is now attempting to cut them down to size and remove many of the levels of bureaucracy they have created. RDAs were founded to promote regional schemes that may have otherwise been overlooked by central government, they could be seen as a control mechanism through which the central government could tightly control issues of local level development. The abolition of RDAs therefore is about putting “democratic accountability back into the local economy making it responsive to the needs of local business and local people” according to Mr Pickles.

As such the new Government views RDAs as an obstacle to helping local economies recover in the current climate. “If you want to rebuild a fragile national economy you don’t strangle business with red tape and let bloated regional quangos make all the decisions. Urgent action is needed to rebuild and rebalance local economies so that new businesses and economic opportunities spread across the country” said Eric Pickles, Secretary of State for Communities and Local Government, in his open letter announcing the new scheme.

RDAs were created following on from Regional Development Agencies Act 1998 as one of the flagship ideas of the Labour government. Eight RDAs were initially created to cover the England’s regions, with the London Development Agency (LDA) was created in 2000 following the resurrection of the Greater London Authority (GLA). Their principle roles were to draw up strategies that help stimulate regional economies and attract new business and investment into an area. This was then intended to have the effect of creating more jobs in the areas. RDAs were also designed to promote sustainable development. This has meant they have had an influence on new building developments.

There have been numerous success stories for RDAs. The RDA for the North West has helped to speed up development in the region, helping to transform over 5,000ha of brownfield sites into new developments. Equally RDAs have been responsible for the improvement of conditions for people in their particular regions. As a specific example, Hull Forward, a division of the Yorkshire Forward, has helped to generate around 1000 jobs for the hard-hit city over the past year. However, it will now close on 30 September in advance of the expected wider closer of RDAs.

Equally though, as decisions made by RDAs are largely unaccountable some of their use of  budgets have been questionable. The South West Development Agency, for example, invested around £2m in establishing offices as far away as Australia and China, in the attempt to improve investment in the region. Local people have challenged the rationale of doing this when money could instead have been invested locally.

The extra level of bureacracy created by RDAs has also proved a hindrance. This is particularly the case in London where the LDA clashes with borough councils and where the LDA has made unpopular decisions. As an example, Lewisham council strongly objected to the LDA’s plans to use part of the historic Crystal Palace park to build 200 luxury private houses  

The LDA has also faced accusations of ‘cronyism’ and shown itself to have poor management of its resources and has struggled to prove it could provide value for money through its activities. This can be seen in particular in regards to the Olympics, where the LDA has overspent on land requirements by £160m. When it is considered that the LDA’s budget of nearly half a billion pounds a year could be put into projects that hold a greater value for the capital.

Despite their shortcomings, RDAs have served a useful function in boosting regional economic growth, particularly in the north of the country. According to government figures, it is estimated that for every one pound spent by RDAs, five pounds has been generated for local region through increased economic activity and the creation of new jobs.

This will be a tough level of investment to match, yet measures are being put in place to ensure that regions do not suffer to greatly from the decline of RDAs. Deputy Prime Minister Nick Clegg announced that a contingency fund of £1bn would be made available for areas likely to be hard hit by spending cuts, pledging to “create the conditions for growth and enterprise in the regions”. Details remain sparse as to how this funding will be allocated, yet it is likely to be handed out upon request of councils and channelled through them.

In terms of the wider replacement of RDAs, whereby councils and the private sector work together towards generating jobs and new businesses, there is likely to be a great deal of pressure on local authorities to perform. Yet the new government is keen for councils to tackle a number of other areas of government as well. These include increased involvement in the planning process and more responsibility in ensuring major regional developments are achieved. Local authorities are also being expected to become more involved in the education system as well also being devolved to the local level. Many of these new powers will additionally coincide with budget cuts as well.

As many authorities already complain of an existing lack of resources and funding, unless a solid system is put in place it is likely that authorities will crumble under the pressure. Thus at a time when regional investment is badly needed, impetus may be potentially lost on pushing forward development in local areas.

Equally, there is the assumption that the service delivered to local communities will be improved by involvement of the private sector. Past instances of this type private sector coming in to deal with government affairs have had decidedly mixed results. As such, there will need to be careful monitoring of regions by central government to ensure that this system is a success.

There is a long way to go still, both on the abolition of RDAs and the establishment of local enterprise partnerships. Yet the path has at least been set. Now its time for the Government and local authorities to walk it.