Rachel Reeves on the government’s chaotic and contradictory economic policy

The chaotic and schizophrenic temperament of the government’s economic policy was further in evidence yesterday when the select committee for business, innovation and skills (of which I am a member) took evidence on the abolition of the regional development agencies (RDAs).  We’ve known for months now that the RDAs are going, but we still don’t know what will be formed in their place or the transition plans to get there.  Anyone would think the government doesn’t really care…

What we have now is a mess, and that’s dangerous for business and jobs.  On the one hand, the government trumpets its localism – devolving decision making from the regions to local authorities.  On the other, they centralise – with trade, investment, business support and skills being re-nationalised back to Whitehall.  Sir Roy McNulty, chairman of the west midlands RDA, described the policy as ‘a strange type of localism’.  Strange indeed, when it includes centralising key functions.

My feeling, and that of the businesses I speak to in Leeds, is that there is much merit in having powers at the regional level – where experts are closer to the businesses they serve and understand the local challenges, opportunities and strengths, while at the same time having the economies of scale to address strategic not just parochial issues.

But whether any regional structure is allowed to be retained – to promote tourism, strategic infrastructure investment or trade – is unclear, as is funding.  Of course, RDAs did not get everything right – they needed to change and streamlining functions would have been welcome. RDAs tried to do too much, and often had competing or contradicting objectives. But that doesn’t mean everything should go. Far better to get the evidence and then make the decision. Not shoe-horn everything in to an ideologically pre-determined position where the very word ‘region’ is despised by government.

The witnesses from the RDAs, as well as representatives from the TUC, national audit office and local government association (business representatives are in front of us next week) also shared concerns about the pace of change the government is forcing. At a time of fragile economic recovery, where the risk of a double dip recession seems to be increasing all the time, the Tory-Lib Dem government appears willing to risk losing the skills and expertise of the RDAs and disrupt the projects and business support that are currently being provided.

At a time when banks are scared to lend and government spending and contracts are drying up, it is not clear where the private sector jobs are going to come from. To rip away vital economic support at a local level – including for business advice to small businesses and help on exporting and skills – will further undermine the tentative return to growth we have seen in the first half of the year.

As we return to Parliament the elephant in the room is the comprehensive spending review. The money available for regional economic support has already been halved since the new government came to power. In October we could see that support cut further. Deficit reduction requires economic growth not just austerity in public services. Re-balancing the economy requires private sector growth in areas reliant on the public sector. And job creation and business success depends on a government willing to take the key strategic decisions on skills, infrastructure and planning that enable industry to thrive.

No business I meet seems to understand government strategy for re-balancing the economy or how government plans to work with business. This does not bode well. The economy got too reliant on banking and finance in the last three decades, and we saw the results in the recession.  Unless we take this opportunity to build a better balanced economy, with a coherent industrial strategy, then we will risk an anaemic recovery and a British economy that lacks ambition and self-belief. We deserve more than that, and I hope that this evidence will at least be considered by ministers as they develop a policy more coherent than what they have so far advanced.

Rachel Reeves is Labour MP for Leeds West

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One Response to “Rachel Reeves on the government’s chaotic and contradictory economic policy”

  1. Tim Sewell says:

    The types of business that benefit from RDAs are exactly the ones that have no place in the globalised, profit-sucking world which the Conservatives’ front benches represent. Having no value to the multinationals, they can be left to wither. Equally beneficial to the conservatives’ true constituency is the destruction of the ability of regions to form alternative (often left-leaning) power bases to challenge Westminster’s (and the capital in general’s) economic and political hegemony.

    I think we can safely predict that the next years will be even tougher than they were already set to be for SMEs in the regions and generally. The question is, what can the Labour Party offer in response? To my mind we should be the party of ever-greater devolution, or at least full-blown subsidiarity, empowering regions economically but, more importantly, politically.

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