Local Growth White Paper

John Denham Excerpts

Thursday 28th October 2010 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

This Government's economic ambition is to build a more balanced economy, driven by private sector growth. Today I am announcing the publication of the Government's local growth White Paper, which sets out what that means for locally driven growth, job creation and the Government's role in supporting that.

The previous Government's policy sought to close the gap between the greater south-east and the rest of England through centrally led, unaccountable development agencies whose boundaries often bore no relation to the real economic geography. Ten years, and £19 billion later, the economy is still as regionally unbalanced as before, if not more so.

It is clear that that policy failed. Our new approach to sub-national growth therefore focuses on three key themes. The first is shifting power to local communities and businesses. Local communities and businesses are in the best position to understand the opportunities and needs of their own economies. Therefore, the Secretary of State for Communities and Local Government and I have asked business and civic leaders to come together with other partners, such as universities and the social and voluntary sectors, to form local enterprise partnerships which reflect natural economic areas.

We received 62 proposals and I am pleased to say that today we are asking 24 partnerships to progress and set up their boards. The list of those partnerships is in annex A of the White Paper, which will be laid in the House today. Together, those 24 partnerships represent more than 60% of the economy of England outside London and cover almost all our major cities. Many of the remaining proposals are well developed and we will welcome further proposals when they are ready. We are undertaking separate discussions with the Mayor and London boroughs on local enterprise partnerships in London.

The White Paper sets out a diverse range of roles which LEPs could take on, such as working with Government to set out key investment priorities, including transport infrastructure and supporting or co-ordinating project delivery; co-ordinating proposals or bidding directly for the regional growth fund; supporting high-growth business, for example through bringing together and supporting consortiums to run new growth hubs; and making representations on the development of national planning policy and ensuring that business is involved in the development and consideration of strategic planning applications.

We will reinforce that at national level by transforming the national Business Link website and establishing a national contact centre. We will provide support to businesses with high growth potential through a network of growth hubs and bring together venture capital and loan funds at the national level. We will support key industry sectors and innovation at national level, including through a network of technology and innovation centres.

UK Trade & Investment will have responsibility for promoting the UK overseas and helping exporters. LEPs will want to help investors to find sites and provide other support such as planning, infrastructure and support for skills.

We are committed to an orderly transition from the regional development agencies to the new delivery arrangements, and we will aim to ensure that all staff are treated fairly. RDA assets and liabilities will be transferred to other bodies through a clear and transparent process that is aimed at ensuring the best possible outcomes for regions and is consistent with achieving value for the public purse. Assets will be transferred with associated liabilities wherever possible. We expect the RDAs to manage down existing financial commitments within the funding envelope agreed in the spending review.

The second key theme is focused intervention. Today we are launching the regional growth fund, which will achieve strong growth and create sustainable private sector jobs. The first bidding round is now open to bids from private bodies and public private partnerships, and first-round bids will be submitted by 21 January 2011.

Some £1.4 billion is being made available over the next three years to encourage private sector investment across England by providing support for projects with significant potential for private sector-led economic growth and sustainable employment. Support will be provided in particular for bids from those English communities that currently are dependent on the public sector to help them to make the transition to sustainable, private sector-led growth. The advisory panel, chaired by Lord Heseltine, will provide an independent strategic view to Ministers on how the fund should be deployed to achieve its objectives. As with all major business investments undertaken under industrial development legislation, interventions will be subject to advice from the Industrial Development Advisory Board. That will ensure the highest possible level of commercial challenge through the process. Final decisions will be made jointly by a ministerial group under the chairmanship of the Deputy Prime Minister. The White Paper sets all this out in detail.

Thirdly, there has to be confidence to invest. An efficient and effective planning system is crucial in enabling growth. My right hon. Friend the Secretary of State for Communities and Local Government will soon bring forward policy and legislation to deliver that. In them, the Government will introduce a new duty to co-operate on local authorities, statutory undertakers and infrastructure providers, to ensure that the right people and groups share information and work together to make the best possible decisions for their area.

We will reform the planning system so that it is driven by communities and introduce a presumption in favour of sustainable economic development. We will fundamentally reform and simplify planning policy and guidance, presenting to Parliament a simple national planning framework that will cover all forms of development. This framework will establish economic growth as a Government priority for planning, and will lift many of the complex bureaucratic burdens that have slowed down decision making. The review of framework will be carried out in parallel with the localism Bill.

The Government are also committed to introduce a framework of effective incentives through the local government finance system to help to drive economic and housing growth at the local level. The Government’s new homes bonus will be the cornerstone of the new framework for incentivising growth in housing supply, creating a simple, transparent and permanent incentive that will be more effective than the failed top-down regional targets.

We have also looked at the incentives for business growth and decided that more can be done to give a strong and predictable incentive. We have considered ways of enabling councils to retain locally raised business rates. That means many local councils will be set free from dependency on central funding and it will represent a radical departure from the way in which the existing local government finance system operates. In considering this option, the Government are clear that businesses should not be subject to locally imposed increases in the burden of taxation that they do not support. We have already made it clear that businesses would have the right to hold a binding vote on any local authority proposals to introduce a local supplement on business rates. That is a principle to which we remain firmly committed. Equally, we will ensure that all councils have adequate resources to meet the needs of their local community. Rewarding growth is also about fairness in the local government finance system. Local business rate retention will be considered within the local government resource review, which the Government intend to launch in January after a period of consultation on the proposals in the White Paper.

To support renewable energy, we will be introducing a renewable energy bonus, which will mean that local authorities can keep the business rates from renewable energy projects. Finally, we will bring forward proposals for tax increment financing to allow local authorities to borrow against future increases in business rate revenues to pay for upfront infrastructure and development costs.

The measures set out in the White Paper complement the other measures the Government are taking to support growth and job creation through infrastructure investment; support for education and skills; improvements in competition; and support for research and innovation. This needs to be joined up with locally led action to improve the environment for business, and we are today putting in place the tools for this to happen.

[Mr John Denham (Southampton, Itchen) (Lab)]

I thank the Secretary of State for his statement, and of course I look forward to reading the White Paper when it is made available to the House.

Growth and jobs are of critical importance to every family and every region of the country. They are the best way to cut the deficit and the best way to offer hope to young people. The coalition Government will slash 500,000 public jobs and put 500,000 private sector workers out of work through their reckless cuts, but they claim they will create 2.5 million new private sector jobs over the next four years. There is no sign today that they can live up to that claim.

I do not suppose that the Business Secretary has ever used hair-restoring lotion, but if he had he would have discovered that just because it says “Promotes Growth” on the bottle it does not mean that growth will happen. It is very much the same with his Department and this White Paper. He calls it the Department for growth, but the comprehensive spending review led to its funding being cut by more than that of almost any other Department. Is it not true that just when growth is most important and business needs to be able to invest with certainty and confidence, this statement confirms deep cuts in growth funding, a shambles of local development organisations that will last for years, broken promises to the English regions, a planning system that will not work and delays in key investments?

This statement cuts the resources for regional development by at least two thirds. RDAs will receive about £1.4 billion this year, but the regional growth fund will have £1.4 billion over three years. Will the Business Secretary admit that the tiny regional growth fund will now have to pay for many activities that RDAs did not have to fund? The Minister for Housing and Local Government says it must pay for housing renewal. The Transport Secretary says it must pay for transport. It will invite national applications as well as those from local and regional schemes. Will the Business Secretary confirm that he expects the money to run out after one round of bids?

The Chancellor of the Exchequer once accused Lord Mandelson of writing cheques before the election, but what happened when the coalition set out to cancel them? They found that the investments made by Labour ensured that Nissan would develop electric vehicles, Ford would produce new engines and Vauxhall would maintain car production, and enabled Airbus to design and develop the A350, secured the next generation of offshore wind blades and supported the video games industry and start-up biotech companies. I am pleased Labour’s investments finally went ahead, but is not the truth that the coalition has now completely hamstrung itself in respect of making such investments in the future?

The regional growth fund is a pathetic fig leaf to cover absence of any growth strategy. It is not regional—all the decisions will be taken by two semi-retired politicians in London—and it is not much of a growth fund. As Sir Ian Wrigglesworth, deputy chair of the growth fund, said:

“One billion pounds over two years is not a lot of money and the amount you can do with it is limited.”

Will the Business Secretary admit that the Government’s reckless cuts mean that growth will be underfunded? Will he admit that if the coalition had adopted the responsible and measured approach to deficit reduction set out by the shadow Chancellor, public spending would have been cut by £30 billion less, allowing us to focus on growth?

Support for growth is not just about the level of public spending; it is about creating business confidence and certainty. What happened to the Business Secretary’s promise to the Yorkshire Post:

“What we have said is where RDAs are doing a good job and where the partners recognise they are doing a good job, they can continue in a similar form to what they have at the moment”?

Where is the evidence that business wants what he has announced today? Is not the director general of the CBI right to say that local economic partnerships

“have got off to a pretty ropy start. So far it’s been a bit of a shambles”?

Is not the Institute of Directors right to say that if local economic partnerships do not have money

“they’ll be little more than a toothless talking shop”?

Will the Business Secretary confirm that the local economic partnerships will have no start-up funding, no core funding, no guaranteed access to the regional growth fund, no new legal powers and no promises of money—for example, from the Department for Work and Pensions—to replace the future jobs fund? Will he confirm press reports that key areas such as the south-west and Lancashire will be left without a local economic partnership? Will he confirm that of places such as Hull, which is 11th in the deprivation index, Blackpool, which is 12th, Blackburn, which is 14th, and Burnley, which is 24th, none will have even a feeble local economic partnership, which other areas will enjoy? Will he confirm that RDA redundancy payments will cost nearly £500 million? Will he confirm that for the next two years, when growth is crucial, most businesses will have no coherent local development agency to talk to about key investments, key infrastructure decisions and major planning decisions? Is it not true that Wales and Scotland will enjoy coherent and focused business support and England will not?

The world outside cares little about the petty power battles between the Business Secretary and the Communities Secretary, but they, together, owed it to business and to the country to provide certainty, clarity, confidence and coherence for the future, and between them they have failed. Will the Business Secretary confirm that in so many other areas the coalition is failing to produce the conditions for growth? There is no plan for growth. How will cutting hundreds of thousands of training opportunities for adults help employers with the skills they need? What has happened to Labour’s plans to transfer responsibility for skills to employer-led organisations? At a time when every other OECD country apart from Romania is increasing higher education funding, how will cutting such funding produce the graduates we need?

More than 70 councils have started to withdraw or delay planning applications since regional strategies were scrapped. How does that give the construction industry the certainty it needs? The scheme for retaining business rates seems to build on Labour’s business rate supplement, but how much does the Business Secretary expect it to raise? Will it compensate for the 30% cut in local government funding? Does he believe that all councils will benefit equally, or will those facing the greatest challenges get less money from his new policy? Why are green industries laying off workers because of uncertainty about renewable energy policy? When the Government announced eight nuclear power stations, why did they not make the loan to Sheffield Forgemasters which would have made sure that specialist steel was made in Britain, not in Korea or Japan? The Government have turned off the tap on the drivers of growth and jobs. There is no plan for growth. They have given up on growth.

[Vince Cable]

Many of the specific questions about policy, the role of the local enterprise partnerships, the numbers, those that have been approved and the process of approval are dealt with in the White Paper, which is available at the Vote Office.

The whole premise of the right hon. Gentleman’s central arguments is that Government performance is measured by how much money is put in, not by what we get out of it. I will come to the performance of the regional development agencies in a moment. He repeats the argument, which he has done on several occasions, of how much money we should be spending on higher education, further education and regional development, and I have thrown the same question back at him in all our exchanges. We know that the outgoing Government were planning to cut the budget of this Department by 20 to 25%, but he has never explained where the money was going to come from. Was it from HE, FE, regional development or science? We have never had an answer and until we have one we cannot engage in a serious debate on priorities.

The RDAs were the focus of much of the right hon. Gentleman’s response. As I say, the issue is not how much the Government spend, but what they get out of it. The RDAs absorbed £19 billion over a decade, but what did they achieve? Their objective was to achieve a narrowing of the gap in growth between the north and the west midlands, on the one hand, and the south-east, on the other. If one studies the figures, one finds that in fact a widening divergence took place during the decade. The role of the RDAs in stemming that process was utterly ineffective. As the right hon. Gentleman said, the RDAs did, of course, have teeth, but they also had an enormous appetite and they consumed an enormous amount of resource with very little output. What the LEPs will have is the word “partnership”; the partnership will be between local communities and business, and this will be instead of the top-down Government-dictated approach to development.

The right hon. Gentleman asked about planning and the planning system. Let me review some of the legacy. The level of approvals for office, retail and industrial development, in a decade of relatively high growth, actually declined, while the rate of refusals increased. We have a system where every year £750 million is spent on consultancy fees and legal fees by people trying to get through the planning process. It is no wonder that very little happens. The system of planning guidance and advice that we inherited involves 7,000 pages of Government documentation; it is almost as complicated as the tax system that we inherited and it is equally dysfunctional.

The right hon. Gentleman mentioned, in passing, the key issue of housing, which is crucial not only to our population, but to local development on the ground. What is remarkable is that even in the highest boom year of 2008, fewer houses were built in Britain than at the depths of the recession of the early 1990s. In 2009, there were 118,000 housing completions, which can be set against an estimated growth in the number of households of 250,000. The system of planning and the support that the previous Government put in place failed utterly in this central task of development.

My final point is that we inherited a system of local government finance and decision making that was the most centralised in Europe. The only country in Europe that has a higher percentage of central Government funding for local government is Malta. We believe that the previous Government wanted to organise fact-finding missions to Malta to find out how they could improve by having that extra bit of centralised decision making. Our Government are trying to move to more decentralised decision making, based on local communities and a genuine partnership with business, and that is what will produce local growth.