When this government was elected in 1997, there was a recognition of the failures of past regional policies and a genuine desire to decentralise some of the economic decision making. A third generation of regional policies is now in place, one which concentrates on indigenous measures by strengthening within the region. New institutions have been established to create the essential building blocks of self-generating growth.

After a lengthy consultation process, eight Regional Development Agencies were set up by act of Parliament in England in April 1999, originally under the aegis of the Department of the Environment, Transport and Regions but since July 2007 the Department for Business Enterprise and Regulatory Reform (BERR).

A ninth, for London, followed in July 2000 with the establishment of the Greater London Authority. The initial eight were:

• One NorthEast
• North West Development Agency
• Yorkshire Forward
• Advantage West Midlands
• East Midlands Development Agency
• East of England Development Agency
• South West of England Regional Development Agency
• South East England Development Agency

These bodies are charged with co-ordinating regional economic development and regeneration to enable the English regions to improve their relative competitiveness and reduce the imbalances that exist within and between regions.

The models for the English agencies are the Scottish and Welsh Development Agencies which were set up in 1976.

Where the original Scottish and Welsh agencies had very narrowly defined terms of reference (principally to attract inward investment into their regions), the remit of the new RDAs is much broader. They have the following statutory purposes:

• to further economic development and regeneration;
• to promote business efficiency, investment and competitiveness;
• to promote employment;
• to enhance development and application of skill relevant to employment;
• to contribute to sustainable development.

The Agencies’ specific functions are:

• formulating a regional strategy;
• regional regeneration;
• taking forward the government’s competitiveness agenda in the regions;
• taking the lead on regional inward investment;
• developing a regional Skills Action Plan to ensure that skills training matches the needs of the labour market; and
• playing a leading role on European funding.

Funding of RDAs

Currently, the RDAs are funded by six different central government departments and in 2007-08 the total funding amounted to £2.297 billion, an increase of almost 25% in three years. The RDAs have taken over from Government Offices the administration of EU regional development funds, but the enlargement of the EU means this is likely to reduce in significance for the UK.

In addition, Prime Minister Gordon Brown announced that the functions of the eight English assemblies will be transferred to the appropriate RDAs from 2010. The unelected assemblies, which oversaw the spending of tens of millions of pounds on housing, transport and planning, are to be wound up.

Too wide a remit?

This list of purposes and functions for the Agencies suggests that whilst they may have more autonomy in establishing local priorities, the terms of reference are far too wide to be achievable.

There is something of the ‘all things to all men’ about the RDAs and their effectiveness could easily be diluted as they take on too many tasks. It is also not clear why every region needs an agency since some have been competing quite effectively without this additional layer of support.

Accountability

Although funded by government, the RDAs will be looking to draw on local business expertise to steer their activities. Local authorities will also be closely involved, supplying four of the 13 RDA board members.

The RDAs are accountable to ministers and Parliament as well as being responsive to regional views. To achieve this, the legislation includes provisions for the creation of regional chambers.

Teething troubles

The setting up of the Regional Development Agencies is an enormously ambitious undertaking, and progress has not been smooth. In the early stages, some predictable problems emerged, such as disagreements about the inadequate funding for RDAs, issues related to local needs conflicting with national policies and the fact that, despite the intention to promote enterprise and competitiveness, the agencies are run on typical civil service lines.

Setback for Regional Assemblies

In November 2004, moreover, there was a major setback for hopes that the RDAs will lead eventually to the formation of elected regional assemblies. In a referendum in the North East, plans to create a regional assembly were decisively rejected (by 78% to 22%).

As a result, the government dropped plans to introduce a Regional Assemblies Bill and similar referendums proposed in the North West and Yorks and Humber were shelved.

Fears of duplication of effort

There are, furthermore, concerns about the extent and level of local private sector involvement and the fact that the agencies, rather than taking on new functions, will merely be assuming the activities previously undertaken by other bodies or even duplicating the work of other local organisations.

Given the controls still exercised by central government and their all-embracing purposes and functions, there is a real risk that the RDA initiative will go the way of the equally ambitious National Plan and Industrial Strategy in a previous generation.

The value of RDAs

An in-depth ‘impact evaluation’ of the RDAs was undertaken at the government’s behest by PriceWaterhouseCoopers and the report was published in March 2009. The conclusion was that there is credible evidence that all RDAs have generated regional economic benefits which exceed their costs.

This is especially so if account is taken of the potential persistence of the benefits and of future potential benefits, although there are inherent uncertainties in these estimates.

Across all interventions, the annual impact on gross value added (GVA) resulting from jobs which have been created or safeguarded is broadly equal to the cost. But, if allowance is made for the expected persistence of these benefits, every pound of RDA spend will add £4.50 to regional GVA.

The picture, however, is varied. On the one hand, some projects and programmes have already achieved regional benefits in excess of costs, notably in the area of business support.

On the other, some interventions have not yet achieved regional economic benefits in excess of their costs, although the majority of them have the potential to do so if the expected benefits arise.

This is especially true of many physical regeneration projects/programmes where the investments are expected to deliver longer term benefits.

Overall, the PwC analysis concluded that RDAs had:

• created and safeguarded nearly 213,000 net jobs;
• assisted over 35,000 net businesses;
• helped to create over 8,500 net businesses;
• assisted over 403,000 people (net) in skills development;
• remediated over 570 hectares (net) of brownfield land.