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Economy: Regions

Volume 709: debated on Wednesday 1 April 2009


Asked By

To ask Her Majesty’s Government how they intend to improve the economic competitiveness of the regions.

My Lords, the Government aim to improve the economic performance of all English regions and reduce the gap in economic growth rates between regions. We have devolved decision-making to the most appropriate geographical levels and are tackling the barriers to economic growth in the regions. We have given the regional development agencies a stronger focus on achieving regional growth and supporting business through the economic downturn, working with other delivery partners and the private sector.

My Lords, I thank my noble friend for that reply. Is he aware that, although the current economic decline affects the regions, there is particular anxiety in the north-west and the north-east, which are likely to suffer considerably over the next few months? As the noble Lord, Lord Mandelson, said on 20 February, we have to create an active industrial policy. That is most important at this time. What comment has my noble friend to make on that?

My Lords, it is critical to make sure that there is not a divide between the north and the south. The introduction of regional development agencies over the past decade has narrowed the gap in growth rates between the south and the north but there is still more to do. I was in Newcastle last week, an area that has been regenerated. We have to make sure that there is co-operation between the local authorities and the regional development agencies and that that fits into an industrial policy or industrial activism. That is exactly what we are doing.

My Lords, bearing in mind the heavy dependence of many of the regions in England, Wales and Scotland on small businesses for employment, and bearing in mind the recession and the difficulties that small businesses are enduring at present, will the Government have a close look at the uneven incidence of business rates throughout the United Kingdom? Perhaps the Chancellor of the Exchequer would consider increasing the exemptions from business rates for small businesses rather more extensively in his Budget.

My Lords, I shall begin by saying, “Prynhawm da”, which means “Good afternoon”. The SME sector is critical to a thriving economy. I met the Small Business Federation last week. There is no doubt that the RDAs need to work closely with all SMEs. I cannot make any comment on what the Chancellor has in mind but this is clearly an important aspect to look at. I thank the noble Lord for his comments.

My Lords, with regard to the Minister’s earlier answer that the reduction in the gap between north and south was as a consequence of the work of the RDAs, can he explain to us how that happened?

My Lords, the RDAs were set up in 1999 and in the past 10 years we have spent about £15 billion on them. We have spent about £2 billion a year. When one compares their performance against the EU 15, they have done very well. We have had three independent reviews of the RDAs: by the National Audit Office, by a Select Committee in the other House and now by PWC, in a report published yesterday. All three have said that the RDAs are adding value to the economy at a rate of about £4.50 per £1 invested. That is a good performance.

My Lords, does the Minister accept that, if we are going to have economic regeneration in the regions, there has to be proper co-ordination between UKTI, to which the noble Lord, Lord West, referred earlier, the regional development agencies and the local authorities? Notwithstanding attempts by the Treasury to obtain that co-ordination, it is still not working properly. What are the Government going to do about it?

My Lords, as the Minister for Trade and therefore responsible for UKTI, I see it as fundamental to my role to ensure that it is working with the regional development agencies and the local authorities. I believe that it is. Look at the international co-ordination that is going on; that is why the UK has been so successful in attracting inward investment. It is the partnership between UKTI and the RDAs that has achieved that.

My Lords, how many firms have received assistance from either the automotive assistance programme or the working capital scheme, or indeed both? Are these not the Government’s prize projects that are supposed to help this developing situation?

My Lords, we had about 40 inquiries about the automotive assistance programme and we are working though those proposals as we speak. About £1 billion of working capital loans are going through the working capital scheme. The noble Lord omitted to mention the enterprise finance scheme, which has been taken up by more than 1,300 businesses. A whole series of measures have been put in place to help the economy, and they are working.

My Lords, does my noble friend agree that we can further increase the competitiveness of the regions only when we start taking more notice of real engineers than of financial engineers?

My Lords, I will answer this one very carefully. Our economy has changed significantly over the past 10 to 20 years. There is no doubt that in areas such as advanced engineering we now excel. We have to ensure that we are training and skilling up the right workforce, which is why we are putting a focus on apprenticeships and why I as the Minister am spending a huge amount of time with the advanced engineering groups to make sure that we are delivering.

My Lords, given the importance of RDAs, how do the Government intend to make them answerable to local people and local communities?

My Lords, three independent reviews have all said that they are adding value. Their boards are accountable, and they are working very closely with the local authorities. We believe that that is sufficient.