Submissions by Andrew Lydon on Regional Disparities in Prosperity made to the Office of the Deputy Prime Minister and the Allsop Review. 

Other submissions can be found on the official government websites at:- 

http://www.publications.parliament.uk/pa/cm200203/cmselect/cmodpm/492/492m01.htm

http://www.hm-treasury.gov.uk/consultations_and_legislation/allsop_review/consult_allsopp_index.cfm

From the WEST MIDLANDS NEW ECONOMICS GROUP:

The sections relate to the questions set out on the Press Notice of December 6 2002

When completed the paragraph numbers will be tabled below.

Who we are

Growth rates and the regions.

Impact of current regional strategies.

Introduction of Regional Development Agencies.

Will regional assemblies make a difference ?

A Moving the activities of government and public agencies.

Additional funding in the poorest regions.

Who we are

The group arose out of meetings organised in the later years of the Major government for the purposes of self-education about alternative approaches to economic policy and sustainable development in a context where all the main political parties were gravitating towards the 'globalisation' agenda of big business. We had an affinity with the New Economics Foundation and formalised as a group in 1994 . (our website is at http://freespace.virgin.net/alan.clawley.htm)

The initial consultations of the Labour government saw our role dramatically evolve. In an era where focus groups have come to play a central role in policy making we became a sort of ideologically structured focus group. With a membership drawn from liberal, social democratic and green traditions, we knew that ideas that achieved acceptance from people from all these backgrounds did have an important validity and strength and should with be put in the public arena with appropriate confidence. Part of the merit of your select committees is that they also try to find consensus in political diversity.

After initial experience in responding to these consultations and many others by regional and local government, we have since played a role in the emerging networks of regional government in the West Midlands, and in the interests of brevity we will mention details of this in responding to the specific issues that your committee are examining.

The gap in growth rates between the regions - its importance to the regional disparities.

Regional disparities in prosperity within England are one of the most serious problems the UK faces. We have long been arguing for government to address these problems. However the government’s policy/target places a misguided emphasis on the economic ‘growth’ rates of the different regions. We do not believe these regional growth rates are the appropriate focus for regional policy.

We would support policies aimed at addressing the disparities in employment, employment opportunities, and employment growth. We would further emphasize the need for policies that address the disparities of poverty, and the different migratory pressures that bedevil most regions. We would also like to see more concern about the disparities in public spending and public investment in the English regions. However, the differences in what the government calls ‘growth’ would not be the focus of the kind of government policy we would like to see.

In calculating GDP growth, the cost of housing is entirely excluded. This fatally flaws year-on-year comparisons of GDP for anything other than the planning of taxation and public expenditure. It cannot serve as any kind of measure of economic progress or welfare as it relates to people.

In the years since Margaret Thatcher’s second government, we are often told that the UK has been the beneficiary of many years of ‘impressive’ GDP growth. The generation setting up home in the 1990s are allegedly living in more prosperous times than their parental generation setting up home in the 1960s and 1970s. In our West Midlands region however, to achieve comparable forms of housing tenure, the norm now is for households to need the income of two adult earners where previously one adult earner (or one earner and a bit) could support a household in that comparable tenure in the 1960s and 1970s.

The falling real price of cars, computers and foreign holidays can for some of the time distract people from the basic fact that the household has to devote more of their lives to paid work to full fill the most basic need of keeping a roof over one’s head. On this basis real wages in our part of the UK have fallen by maybe as much as a half since the mid 1970s. We suspect that people in London and the south-east could make a similar or more dramatic calculation. Much of the country could claim that we are now on average poorer than we were in the mid 1970s, and that is without bringing the unpredictability of tomorrow’s pensions into the equation. GDP growth figures just seem to contradict what most families know in their bones.

Because we do not believe that GDP, GDP per capita, and GDP per capita growth are meaningful economic indicators for peoples welfare, we find it seriously inappropriate that such indicators be the basis of the government’s target in assessing its regional policies and initiatives. When in 2000/2001, we were involved in the drafting of the economic sections of the pending West Midlands Regional Planning Guidance, even the business representatives who were involved in working groups with us would record their concern about what has been called ‘jobless growth’ in our region. It was the government agencies who would bring up the GDP issue because they were acting under instructions from Whitehall.

Advantage West Midlands(AWM) have put forward a GDP growth figure in their Agenda for Action of 2001. The target for 2010 is 93.5. (93.5% of the national average) That is a smidgen more than the index figure was in 1994 (93). This is hardly inspiring as an aspiration for the region. However, AWM explains that 93.5 would itself require ‘ a trend rate of growth above EU average…’

An achievable target ?

So having set out our lack of enthusiasm for the GDP target, we would also emphasize how it would require a growth rate in the West Midlands above what has been achieved in the ‘boom’ years of the 1990s.

In AWM’s Agenda for Action they suggest that the main sub-aims that will facilitate the achievement of this growth objective would be the transport/movement improvements and the preparation of sites for new investment. In the year since this agenda was published it has become clear that many of the government’s hopes on the transport front have had to be discarded. At the Examination in Public of our draft Regional Planning Guidance, we and other participants persuaded the Deputy Prime Minister’s panel that undue and unrealistic emphasis was being given by AWM to sites for large inward investors. So we feel sure that the growth target is one that at some point would have to be quietly dropped, because we see nothing in the current policies of our regional arms of government to suggest that any sort of step change here is likely to happen. We believe that this is not very different in most of the other regions.

We recognise that government does need to use some sort of targets for judging the interrelationship of what they are doing in the regions. However, GDP per capita is not appropriate.

Impact of current regional strategies.

ur West Midlands region has been suffering increasing economic stress over the period since 1996. This is mainly because we are still the UK’s main manufacturing centre. By definition our manufactured goods compete with those produced in other such locations around the world. It would not be appropriate to here detail the rise in the real exchange-rate since mid 1996 and its impact on our region. The definitive crisis at BMW Rover will be well known to your committee.

Our region shares an exchange-rate with one of the world’s major financial centres – London, and we also share an interest rate with the same world centre which is one of the world’s great generators of inflation. This means that our interest rates will tend to be higher than the welfare of a region like ours would require.

There is very little that any regional strategy can do for historic employment in the face of such international developments when so much of our employment (manufacturing and agricultural) is internationally exposed, other than to foster diversification into less internationally exposed employment. We always bring this matter up in any consultation to which we respond.

Introduction of Regional Development Agencies.

Given what we have said about how little can be done for the internationally exposed sectors of employment at regional level, we are concerned at how the RDAs have come to exaggerate what they can do for such industries. This is of particular concern for us in the West Midlands where so much of our employment is so exposed. While resources are put into such spurious and political efforts, many potentially more beneficial and sustainable lines of development stand neglected.

In the West Midlands, AWM have sought to give particular attention to the politically sensitive automotive, brewing and pottery industries as part of what they called their management and development of industrial ‘clusters’. However, many of us felt that such clusters of industrial employment were exactly what was wrong with the economy of our region. Bringing new types of employment into their areas does more for families who are traditionally employment in the declining industries than making out that RDAs can significantly enhance their international competitive situation.

For us this came to a head when it was proposed that these flawed 'cluster' policies be written into the regional planning guidance. The 'Examination in Public' last summer gave us a unique opportunity to challenge the logic of this before a panel independent of the current official establishment of the region. The Deputy Prime Minister's panel explicitly adopted our critique and deleted AWM's 'clusters' policy from the draft RPG. (See Regional Planning Guidance….Panel Report . October 2002 P.72-73) Had they been able to delete sections of AWM's Regional Economic Strategy, we are sure we could have convinced the panel that these cluster policies in their totality were just as counter-productive as the land-use planning components that they just enthusiastically deleted.

We believe that RDAs could be a crucial vehicle for the development of local economies but not while they are run as they are at the moment by people who look to Whitehall and each other for direction. Look at how nearly all have adopted the same vacuous vision statement about being a leading World/European region, with many of them having only a very few words of difference. Each RDA needs to look to their own regions for more specific and meaningful objectives.

Will regional assemblies make a difference ?

Those objectives would come most appropriately and effectively from an elected assembly. Such assemblies will have the mandate to define properly relevant targets and objectives for the economic strategies of their regions. As long as regional government is un-elected it will be unable to present national government with an alternative to the sort of one-size-fits-all objectives and strategy that we have always seen emanate from a national government.

We have been actively involved in the West Midlands Constitutional Convention and support the establishment of elected regional assemblies. However, we do not think the package of powers and responsibilities currently on offer, as set out in 'Your Region, Your Choice…(Cm 5511)' will convince the people of our region that they should vote for such an assembly.

Furthermore, we do not think the case for regional government will stand or fall on the issue of what is officially called the regional economic performance. We have been involved in Birmingham NHS Concern, and from our recognition of what happened in NHS in Kidderminister in the last Parliament, we believe that scrutiny is only basis for building a popular interest in government.

Major decisions that can have huge impacts on localities are made by ministers on the basis of advice and reports from anonymous regional/local bureaucrats. Ministers have to carry the can for much of this, while the bureaucrats who are often culpable never face scrutiny. Hence the same old mistakes occur over and over again.

We believe that the best way forward for regional assemblies would be for them to have a general scrutiny role across the whole spectrum of government work in their region. Making the regional directors of the NHS, or the Government Offices face questioning here in the region (and in public) about the specifics of government would do more to improve our regions and the country as a whole than much of what passes for scrutiny in Westminster at present. Should the committee wish to pursue this, particularly in anticipation of the bill that would detail the role of the future elected assemblies, we would be happy to outline our views further. Late last year we wrote to Mr. Nick Raynsford at the Office of the Deputy Prime Minister about this.

A coherent national policy can be achieved.

The only way that a coherent national policy can be achieved is if the government organises a national dialogue around the economic needs of the different regions and then brokers the drafting of a national strategy to address those needs.

In our view the needs that will be voiced will prove quite coherent. They will cohere around the objective of moving economic activity northwards in England. A clear consensus is emergent on this. Almost all of the regions other than London and South East England are finding people and resources are being drawn away from them to London and the south-east. However, much of the political leadership of the south east are aware that this situation has been fostering a range of disastrous inflations in the counties immediately around London. They are seeing a house-price inflation that is feeding a wage-inflation that is undermining public services in their counties. The conservative leaders of the shire counties of the south-east are aware that what is happening threatens to transform their communities and localities beyond recognition.

In this situation we believe that the various regional economic strategies could be brought together around a movement northwards of the type of economic activity that government has leverage over. Most regions would have to prepare to host increased activity, and London and the south-east would benefit from the relief of the inflationary pressures we have described and assist in the relocation.

The problems in England are now so severe that the northern regions can be persuaded to co-operate with each other in the redistribution of economic activity. Should any significant relief of the inflationary pressures in the London/South-East be achieved, they would all benefit. Interest rates in the UK would have been even lower in recent years without the particular inflationary pressures that the over-heating of the south-east has stoked. Public spending would have been more evenly distributed without the over-heating of London and the south-east.

We have become aware of a very significant potential for consensus in England, between people of all political traditions - around economic development - should we have a government with the political sensitivity to recognise this. In late 1999 we became aware that the conservative leaders of the south-eastern shires were making public statements about what they called a 'one nation' politics that would divert economic activity northwards. We made contact with Councillor David Shakespeare and in early 2000 devoted some efforts to fostering discussion on this in Birmingham and the West Midlands region. Councillor Shakespeare responded to the efforts we made with the press, and although we provoked some useful discussion with regional decision-makers, isolated intermittent efforts such as we can currently produce are not enough to since open up a public debate like this when government seems determinedly unresponsive.

We believe a committee of the House would be far more effective in this, even in the face of an un-responsive government.

Moving the activities of government and public agencies.

rom much of what we have already said it will be clear that we view the movement of government functions out of London and the South-East as one of the most important levers that national government has to tackle the regional divide in the UK. Indeed we have regularly brought up this issue in various consultations and inquiries since 1996.

However, since what is now referred to as 9.11, we believe this issue has taken on a new relevance. We have been hearing of the contingency planning for the possibility of a terrorist attack on London, and are reminded how much of the drive behind previous dispersals of government work from London and the south-east has come from the need to make our national systems less vulnerable when we faced the threat of strategic weapons of mass destruction. We recall that Sir Henry Hardman who presided over what was known as the 'Hardman dispersal' of 1973 had been a former head of the Ministry of Defence.

With the increased use of Information and Communications Technology (ICT), it should be recognised that there is no necessity for many civil and public servants to be based in London unless they are involved in ceremonial roles or day-to-day personal contact with ministers or parliamentarians. The technological developments of the 1990s allow whole swathes of public employees to be geographically re-deployed in ways that could not even be imagined in the 1980s.

Should the higher echelons of public service be moved, echelons of business and other organisations would have less convincing need to remain based in London and the south-east. The dynamics for change that such re-location could unleash are potentially substantial, and would probably eliminate any arguable need to interfere in any substantial way in the decisions of businesses and other organisations that have traditionally argued crucial commercial considerations have to be the primary criteria in making their locational decisions.

In the past, the two great waves of governmental relocation were initiated by conservative governments in 1963 and 1973, and implemented by Labour governments. In the late 1980s both main parties were again looking at this lever for addressing the polarisation of our country. Both Michael Heseltine and the Labour Party Policy Review under Bryan Gould had positive things to say about it. However, the first great post-war south-east depression, following upon our entry into the Exchange-rate Mechanism of the European Monetary System, swept the issue off the political agenda - pretty much until today. The episode is remembered for its disastrous consequences for the Conservative Party but it has also had negative consequences for the balance between England's regions.

We would remind the committee how Federal Germany made a success of distributing many of the functions of its capital city around the rest of the country, while Berlin was partitioned. Federal Germany has also treated the transfer of government work from Bonn back to Berlin as a contribution to assisting the impoverished east. Many lessons both positive and negative could be gained from looking at this.

However, there needs to be a more rational discussion of such issues in this country than has recently been the case. The West Midlands put a great deal of effort into chasing the relocation of the ‘Wembley Stadium’ to the West Midlands. However, we were sceptical of what this would really contribute to the benefit of the West Midlands. It became clear to us that it would probably transfer more traffic to what is currently the UK’s capital of congestion, rather than much by way of economic opportunity. We felt that many supported the bid after only superficial consideration and got drawn into the collective effort of a tussle with those that were justifiably felt to have long undervalued our region. We do not believe that this is the way functions should come to be re-distributed around the UK. We believe that a more sustained discussion of these issues led by new voices - in a new vehicle of leadership that elected assemblies could be - could foster a more rational and inclusive discussion within and between the regions.

Additional funding in the poorest regions.

From the arguments that we have made, we hope the committee will see the problems in terms of the re-distribution of roles and activities rather than demanding a sustained real increase in state expenditure. We would caution against early and symbolic injections of government spending in the regions because it would create the wrong sort of expectations, and probably set back the process of fostering the right sort of dialogue that is needed within and between the regions.

We think the government has been pretty mean with funding the existing (appointed) regional assemblies and believe they could have done far more by now to have improved the quality of the debate in the English regions had the assemblies been able to build themselves a more prominent public presence. It would not be unfair to say that in the early years of the ‘West Midland Regional Chamber’ our small pressure group had more prominence in the region on such concerns through regular letters in the Birmingham Post , our most serious regional daily newspaper.

We hope the select committee will urge better funding for the fostering of life around the regional assemblies before considering any more radical steps. Otherwise the committee would just be continuing in the centralist tradition of the past.