The UK Government has an almost £160 billion annual budget deficit. Regional Development Agencies (RDAs) cost around £2 billion per annum. They should be abolished because they have failed to meet the two objectives they were originally set.
1. To increase the rate of economic growth in all the English regions. With the exception of London and the South East, the regions experienced higher economic growth (per head and in total output) in the seven years preceding the RDAs creation than in the seven years after.
2. To reduce the disparity in economic growth rates between regions. The Centre for Cities reveals that RDAs have failed to achieve this. During the first seven years of the RDAs existence (1999 to 2006), the Greater South East economy grew by nearly 18 per cent. The rest of England's economy grew by just 15%. Therefore the gap persists.
In fairness the RDA website does not claim to have achieved the objectives the agencies were originally set. Instead it lists ten ‘success’ stories to highlight their good work. A selection of them is contained below. Regrettably these stories reveal waste rather than achievement. They are available in full here.
London Development Agency: “The Docklands Light Railway (DLR) currently runs a two car service east and west from Canning Town to Beckton in east London…. The LDA worked with DLR to help facilitate the upgrade of the service from a two car to a three car service”
They added an extra car. This is an achievement? Would the DLR not have done this anyway if there were sufficient demand?
South West Development Agency: The “Wave Hub" project will be 10 miles off the coast of Hayle and will consist of a giant electrical ‘socket’ in 50 metres of water, connected to the National Grid on shore by a 16.5 mile cable.” Wave Hub is funded with £12.5m from the South West RDA, £20m from the Convergence European Regional Development Fund and £9.5m from the UK Government i.e. a total of £42 million in public funds. It will create enough power to serve 7,500 homes.
£42 million (project cost) divided by 7500 (homes that it powers) equals £5600 per house. By contrast the average annual electricity bill is £670. Are there not cheaper alternatives? Were these not considered?
East Midlands Development Agency: The East Midlands Urban Development Fund (EMUDF) has been set up using funding from emda and the European Regional Development Fund (ERDF). It will lend money to local enterprises with a view to achieving a financial return.
This scheme may have some merit. We would need to see how successful it is at extending finance. However, creating a public body is not in and of itself a success. This project highlights the Governmental weakness for judging success on inputs rather than outputs. A cheaper way of extending businesses finance would be to cut the taxes on business.
OneNorthEast: In 2009 they formed a Regeneration Public Private Partnership (PPP) entitled Onsite North East – to drive forward the region’s property market by developing twenty three sites owned by the RDA as part of its “impressive development land portfolio.”
Creating a public body is not in and of itself a success. Selling these sites to the public sector and using the funds to give a rebate on local rates could achieve much more. This does not seem to have been considered.
Yorkshire Forward: Digital Region commits Yorkshire to give £42 million to develop this 20 year project to provide 1.3 million people in southern Yorkshire with guaranteed download speeds of 25Mbps and above (the UK average is currently around 4Mbps).
Who does not like faster internet access? But if residents want this service there is little to stop a private sector provider installing the infrastructure to achieve it at its own cost and risk.
Remember that each of the above is an example of RDA ‘success,’ as chosen by the RDAs themselves. If this is success, we must ask what qualifies as failure? If these were the ‘good’ projects what ‘bad’ projects have not been highlighted?
Abolishing RDAs is a simple relatively painless cut. Few people will march to save them. However, the coalition programme for Government reveals they are to be replaced by Local Enterprise Partnerships(LEPs), which councils are to be empowered to form.
A cynic could say that these LEPs might just prove to be RDAs with a different name. In the case of RDAs outside the south of England it seems the cynic would be entirely right. The coalition expressly states that the new LEPs "may take the form of the existing RDAs in areas where they are popular".
This begs the question – popular with whom? Regional Government was comprehensively rejected in the only vote the English have been given on the subject. The people of the North East voted 78 per cent against a north east assembly. Only 22 per cent voted for. If the coalition believes the public actually support the continued existence of RDAs they should afford the English people a vote on this subject so their views can be determined.
So who are the RDAs 'popular' with?
Does the coalition mean ‘popular’ with businessmen? Mr Cable says that in the North West, Yorkshire and the West Midlands “there seems to be a broad agreement with local businesses that the RDAs are doing a good job.” He has apparently received “over a dozen letters” in support of these agencies. It is perhaps churlish to state that Mr Cable might have a low bar for “broad agreement.”
I don’t suggest the motives of those who wrote these letters was remotely impure. However, I do think it would be interesting to see if they emanated from agencies that have received or currently are receiving material support from their local RDA. If this were so it may affect their objectivity and the consequent weight we should give their recommendations.
Does the coalition mean ‘popular’ with RDA employees? Bureaucrats who have singularly failed to achieve the objectives their agencies were created to fulfil but have found the time to engage in conspicuous
acts of empire building, such as establishing offices overseas. Whatever the coalition means by ‘popular’ they clearly cannot mean ‘popular’ with ordinary British taxpayers who are forced to continue financing these failing agencies.
All RDAs should be abolished with immediate affect. The Conservative party should restate that economic growth is not a product of Government five year plans. It is the product of free citizens identifying commercial opportunities and being allowed by Government to keep the fruits of their labour or as the taxman would say their capital gains.