On Tuesday, Nick Clegg announced that at least £0.5bn was to be cut from the budget for regional economic development and at the same time abolished the regional development agencies (RDAs). In their place will be a ‘regional development fund’. In creating this new body, the government broke its promise – with no consultation or debate – that regional development agencies would remain in areas where they were popular.
This is devastating news for businesses across the country, with the coalition government seemingly evermore determined to risk plunging the UK back into recession.
These immediate and savage cuts to regional economic support – reducing funding by more than a third, even before the comprehensive review – goes much further than the 25% cuts foreseen by the Chancellor in the budget. It shows the short-term and unfocussed nature of things to come – with cuts that will set back the recovery. We have already seen it with the refusal to honour the previous government’s loan to Sheffield Forgemasters, which would have brought investment, technology and skills to South Yorkshire. Now we are seeing it at a national level.
In my own region of Yorkshire, we have a huge pride in our industrial past. From wool to coal and steel and to retail and finance, our industries have powered the nation and enriched our region. As we plan for the recovery we need to build a future of which we can be equally proud. Our purpose must be to put every region in charge of its own economic destiny.
My hope for the long-term economic future of this country is based on a new economy that will build on our strengths in high-end manufacturing, creative industries and our great university and research traditions. It will require investment in skills, apprenticeships, infrastructure, science and technology.
It will be regionally and industrially diverse – with less emphasis on London and the South East and more focus in jobs in regions across the UK.
It will require a responsible banking sector to provide finance and stability and a supportive government that works with business to realise this vision. In Yorkshire we want the means to ensure growth in our region, and in doing so, to play our part in ensuring growth in the UK as a whole.
But instead of building this new economy, and with unemployment still on the rise and businesses continuing to struggle in accessing finance, the government chose harsh cuts in the budget that have now been compounded by the news that we are losing our regional economic strategies. To put this in context, the coalition’s own office for budget responsibility has revealed that by 2016, over 600,000 jobs will be lost in the public sector, on top of the jobs that have already been lost in the private sector through the course of the recession.
While we all hope that new private sector jobs will take up the slack, this will not just happen by chance, it requires the right policies from government. As the director general of the British chamber of commerce said on Tuesday, “while business has been fully supportive of the government’s drive to reduce the UK’s deficit, we believe that investment in the business environment must remain a key priority.” This is why it is so wrong that the government has u-turned on its promise to keep RDAs in areas, like Yorkshire, where they are needed and valued the most.
Without Yorkshire Forward, Yorkshire wouldn’t be what it is today. It is unlikely that we would have brought clean coal, and the 1,000 jobs it means, to our region. Without Yorkshire Forward we would have been less likely to negotiate the deal with Siemens and GE to bring offshore wind – with thousands of much needed jobs – to Hull, Grimsby and Scunthorpe. And without Yorkshire Forward, the takeover by Lloyds Banking Group of HBOS may well have meant jobs in our region being relocated elsewhere. Increasingly, jobs can go anywhere in Britain, and to any country in the world. Yorkshire Forward fought for our region like Whitehall never could, and its abolition will hit us hard.
Of course the budget deficit must be reduced. But there are choices about how to do this. RDAs represent excellent value-for-money. According to independent analysis by Price Waterhouse Coopers, for every £1 spent on RDAs, £4.50 is gained by the economy as a whole. To make cuts in areas of spending that have the most bang for their buck, and those that are focused on securing the nation’s long-term economic future, is nothing short of madness.
We need a clear and coherent plan for growth. The paths to recovery will be local and regional if they are to be sustainable. Every region must be allowed the flexibility and freedom to take control of its own future. This cannot be done without the institutional, strategic and financial support of a regional economic strategy – based in our regions not in Whitehall and not starved of the funding needed to make them work.
Rachel Reeves is Labour MP for Leeds West and a member of the BIS select committee
Tags: growth plan, Rachel Reeves, RDAs, Sheffield Forgemasters, Yorkshire Forward
When will Labour stop lecturing everyone on business, when the party patently knows nothing about it?
A “responsible banking sector” would have had no hesitation in lending Sheffield Forgemasters the same amount of money had the business plan made any sense. Unfortunately, it didn’t.
What exactly was “responsible” about Peter Mandelson’s decision, in the midst of a catastrophic Labour-created budget deficit, to splurge £80m of taxpayers money on a “maybe-possibly-might be” project just because the factory is located in a safe Labour constituency?
Here’s an article on the “offshore wind” project that Ms Reeves is trumpeting as an achievement by Yorkshire Forward – full of words like “…might…estimated…could….expected..potentially…” and not a single commitment anywhere. http://www.yorkshirepost.co.uk/news/Exclusive-Yorkshire-on-brink-of.6266576.jp
If I filled my sales forecasts with words like that, I’d get fired – perhaps it’s best that the RDAs have been too.
I take a wholly opposite view from the first recorded response to the article, above.
The point being made by Rachel Reeves is that Regional Development Agencies have, generally speaking, been a success. They act as a powerful conduit between local businesses, some of which are newly established, and local people seeking employment in their home area.
Some of these businesses focus on new and emerging technologies; they are therefore pioneering in nature as well as being unique and exciting for areas of the country that have been deprived of such schemes for far too long.
Everyone benefits from initiatives like RDA’s. Local communities, for instance, were hope is re- introduced into the equation for many people, perhaps for the first time in a generation, as they emerge from stagnation and depravation and regain a sense of identity and pride in their local community.
Rachel’s article also quotes Price Waterhouse Coopers who have concluded that “for every £1 spent on RDAs, £4.50 is gained by the economy as a whole”. That comment alone is a clincher for anyone viewing the benefits of RDA’s objectively. What businessman in his right mind wouldn’t want to have that sort of return on his investment?
There was a similar case made by the Labour MP for Streatham, Chuka Umunna, in this Wednesday’s Guardian in relation to the Future Jobs Fund (FJF). The FJF was designed to provide young people in areas of the country, just like Yorkshire, with valuable new skills and ultimately assist in stimulating the local economy. The Tories have just announced their intention to abolish it. You have to wonder why though when, as Chuka Umunna points out, a Treasury report has established that for every £1 invested in past schemes like the FJF, the taxpayer saved £3 in benefits. Where is the business sense in scrapping it when we learn from history that there is a clear benefit to the taxpayer and to local businesses and to the people from the local communities that such schemes serve?
So, RDA’s are out and FJF’s are out but that’s not the end of it. To add insult to injury to these local communities, once all the schemes introduced by Labour are gone, and the hopes of the people whom they have assisted have gone with them, the Tory government will arrive on the scene and tell the people there that it is in their own best interest to get off their backsides and move to another part of the country to find work. Oh, and the areas they want them to move to are also the same areas with huge waiting lists for housing. Zero consideration, planning or care from the Tories but, you know, it was ever thus with them. Businessmen they are not.
Andy N – are you familiar with the concept of market failure?
Oddly, neither Ms Reeves claim that “for every £1 spent on RDAs, £4.50 is gained by the economy as a whole” nor Mr Ummuna’s that “for every £1 spent invested in past schemes like the FJF, the taxpayer saved £3 in benefits” have links back to their cited source material, apparently published by PWC and the Treasury respectively.
Why are they both so coy about letting anyone view the original documents they’ve quoted? Unless of course, the “no-brainer” choices suggested are not actually as straightforward as all that, and the figures are (as usual) being spun completely out of context.
I can’t comment on the RDAs but as a local manufacturing business owner (Target Print (Leeds) Ltd and member of the Proskills Council I have to endorse the following sentiments and I take Rachel at her word that will be something she works for.
My hope for the long-term economic future of this country is based on a new economy that will build on our strengths in high-end manufacturing, creative industries and our great university and research traditions. It will require investment in skills, apprenticeships, infrastructure, science and technology.
It will be regionally and industrially diverse – with less emphasis on London and the South East and more focus in jobs in regions across the UK.