North-West Economy

Graham Stringer Excerpts

Tuesday 20th July 2010 Westminster Hall

[Graham Stringer (Blackley and Broughton) (Lab)]

There is a real regional imbalance in this country. Whatever criteria or measures we use, almost every region in the country outside London and the south-east has inferior wealth and health, which is a national disgrace and a waste of resources. We have an extremely congested south-east, with space elsewhere in both the economy and the transport system. I congratulate my right hon. Friend the Member for Salford and Eccles (Hazel Blears) on bringing this important subject to the Chamber this morning. I agree with her on almost everything, apart from what she said about the regional development agency, which I will come back to.

I also enjoyed the speech of the hon. Member for Warrington South (David Mowat). He made some extremely good points, but I have some questions for him to reflect on. They are rhetorical questions rather than arguments and relate to the fact that the relationship between capital, training and the economy is rather more complicated than just training a lot more engineers and scientists—although I agree we need to do more of that. After the second world war, where were most of the world’s scientists and engineers based? In the Soviet Union, which was an economic basket case. Where were there almost no trained scientists and engineers? In Japan, which saw huge growth. I make that point simply to stress that the issue is complicated.

Most Opposition Members have been asking what we will do without the regional development agency, but I think we will do rather better than we have been doing. The important thing is to ensure that money gets to where it is necessary to support business, but the regional development agencies have been a burden and a barrier to getting money into the right places. From their very inception, they have made life more difficult in the north-west. Let me explain why. It was my Government who created them, so this is not a party political point. When they were set up, money was transferred from the rest of the country into London and the south-east, where there had not previously been a development agency. That was a mistake. This is slightly unfair, but if we add up the administrative costs of all the RDAs over their lifetime, we find that they come to more than £6 billion, which is more than the Conservative Government’s first round of cuts. Is that money well spent? I do not think so.

Let us look at the number of jobs created. At the end of March, just before the general election, a National Audit Office report on all the RDAs was published which stated that the RDAs had claimed that, over a five-year period, they had created 413,000 jobs. However, an independent audit of that claim said that the figure was actually 375,000 jobs, and if the jobs that would have been created anyway without the intervention of the RDAs were taken out, it was only 178,000 jobs. The NAO recommended changing the system. I wrote to the chairman of Northwest RDA, Robert Hough, after the NAO report was published asking if he would change the statistics, so that they told us what was really happening. He replied:

“It would be inappropriate to adjust any of the information previously published.”

I thought that that was a bizarre reply, even though Robert Hough is a good man, whom I have worked with on many occasions. The cost of those jobs is £60,000 per job, according to the NAO. Those are terrible figures. I say to my hon. Friends: think about it. What matters is that we get money into the right places, not that we have a body that, when it was formed, centralised the grant-giving process away from local authorities.

The NAO report says that the measure of the RDAs’ activities is whether there is gross value added because of their work. However, what the report says about GVA is its most devastating aspect. The conclusion in paragraph 16 is worth reading out:

“We are unable to conclude that the regional wealth benefits actually generated were as much as they could and should have been, and are therefore value for money. Weaknesses which, in many cases, undermined the RDAs’ ability to make decisions and set priorities to maximise regional economic wealth do not support such a positive conclusion. These weaknesses included poor project economic analysis and appraisal, pervasive optimism bias, and weak evaluation. In particular, most RDAs were unaware, until 2009, of the types of projects which yielded the best and most enduring benefits.”

That is a devastating analysis. We in the north-west have experienced those perverse policies, which have not put money into the sectors that are the major players in the region—the sectors that would generate the most jobs and support the economy most effectively. I look forward to analysing this issue and I will be as critical as I can be if money is not put in, but I will not defend the indefensible in the structure of the RDAs.

I accept that a lot of wealth—indeed, the vast majority—will be created by having a more fertile and active private sector. On the other hand, when we look at some of the causes of the current regional imbalances, I do not think that we can get away from looking at the Government’s structural and spatial expenditure. Looking at transport in particular—I have spent a long time on the Transport Committee—we see some of the reasons why wealth in the north-west and the other English regions is not as great as it should be. Of all the spending blocks, the money spent on transport in the south-east of England has increased per head of population relative to every other region in the country. One can go over spending under the Labour Government, but that was happening before—this is not a party political point. More money is spent on education and health in London than in other English regions, but the gap in expenditure between London and the other English regions has not been increasing as it has been in the transport sector.

When we look at the detailed projects, we can see why that has happened. The public-private partnership for the tube in London was very expensive. Crossrail, too, is hugely expensive and is certainly of no benefit to the north-west. The costs of those projects add up to in excess of £30 billion-worth of expenditure, yet we are not getting investment in the rail system of the north of England, which has railway schedules that would have embarrassed Gladstone, because trains now travel more slowly between stations in the north of England than they did in the 1880s. That is a measure of the imbalance between the south-east and the other English regions. I know that we will have cuts, but only when we examine the major spending blocks and change them will we make a fundamental difference.

The Treasury, which inspired the Barker and Eddington reports, has come to almost exactly the wrong conclusions in those reports. The Barker report says, “Well, there’s a lot of people in the south-east of England, so we’ll build a lot more homes there and spend £20 billion on infrastructure,” when we need that expenditure in the north-west of England. The Eddington report said, “Well, we’ve got a transport structure and, effectively, we will invest where the transport system is now.” Those are the most reactionary conclusions that one could come to. If this Government or any other want to do something about the original regional imbalances that I talked about, they must adopt positive investment policies that do not carry on subsidising congestion—as the policies advocated in the Barker and Eddington reports do—but instead help the economies of the regions, spread out the jobs and wealth, and improve people’s health by doing so. I therefore hope that the Minister will reject a lot of the conclusions in Barker and Eddington.

I will finish with two very small points. First, there are other major projects that have gone to the south-east of England. One of them is the Olympics. I have always thought that the only part of the United Kingdom that should not have the Olympics is London, because one of the benefits of having the Olympics is that the city that holds the games effectively receives an incredible amount of advertising—it can show what it can do as a city. If anything, London is the capital of the world already; it is a great world city. It did not need the Olympics.

There is a little known and little publicised report by a professor in Nottingham, Professor Blake, which explained that the Olympic games in London would cost the regions between £4 billion and £5 billion in economic costs, because money would be dragged into the south-east. Certainly some things will be bought from the regions, such as steel from steelworks in Bolton, which will help, but essentially the net flow will be a cost to the regions of about £4 billion. Furthermore, Professor Blake wrote his report during a time of economic boom. The Minister may not have heard of that report, but I would be grateful if he wrote to me about the update on it.

My final point is in response to my right hon. Friend’s comment about city regions. I have long been a strong supporter of city regions. I think that today’s boundaries are, in many cases, left over not from 1972 or 1971 but from mediaeval England. The boundaries of many of our areas need changing. Working together to relate to the real political economy is what having a city region is all about. I just hope that we do not leave the electorate out of the system. It should not be merely a bureaucratic relationship between local authorities. People must still have the right to vote for the people who can influence their transport network.

Once again, I offer my congratulations to my right hon. Friend on securing this important debate.