Select Committee on Treasury Minutes of Evidence

Examination of witnesses (Questions 160 - 179)



  160. Would it suggest good value for money if the 7,000 figure is right?  (Mr Macpherson) I am not sufficiently close to the data to give you an answer on that.

  161. How do you measure whether regional selective assistance was effective or not?  (Mr Macpherson) Yes, it is. That should inform the allocation in the spending review and I am quite certain it has informed the allocation in the spending review just finished.

  162. How are you measuring the effectiveness of RSA?  (Mr Macpherson) There are a whole raft of different indicators which can measure it. Jobs is an issue, but it is only one issue. One reason for that, which comes out in this Treasury/DTI published last year, is this issue of clusters. It is not only the jobs in the relevant enterprise which are being supported but it is also whether there are externalities in terms of promoting a cluster of related economic activity. Evaluation of RSA is very important. History suggests that with an ill-thought out policy of regional selective assistance you can end up spending a great deal and not get very much in return. It is important the policy should be framed in a way that is cost effective.

  163. Are you not afraid it might be in precisely that situation.  (Mr Macpherson) I am not afraid of that because I know that these issues were looked at closely in the spending review and my colleagues in that particular part of Treasury which deals with RSA would have subjected this area of spending to considerable scrutiny.

  164. It sounds like you doubt Dr Wren's analysis?  (Mr Macpherson) I have to look at his analysis. Would it be helpful if we provided a note on this issue.

  165. I think it might be.  (Mrs Dunn) May I make a general observation just in case you are going to go on and ask us about the other drivers and what the measures are.

  166. You will be relieved to know I am not.  (Mrs Dunn) It is possibly a point that is worth making anyway. I have been trying to look through the Spending Review White Paper and turned to the DTI chapter to look at what that said about enterprise. There is a more general point, which is throughout this I think what you would see if you were to look at each individual departmental programme you would find evidence of policies that are being persued in support of the five productivity drivers. In the chapter on regional policy we set out there how we think some of the other mechanisms will be used to take forward our spending plans in the way that allocates resources to the regions. The other thing we say, as we said before, is we have signed up to a PSA target about improving economies and making sustainable improvements in all English regions, and so on. Part of the process of signing up to that is we now have to commit ourselves to actually having performance against that target monitored in a very public way, so a lot of your questions were about what we could tell you now about what success these policies have and the answer to that is partly that because we are talking about a range of policies, some of which have a very long run effect, some of which have a more immediate impact, some which have a broad coverage, some of which are much more targeted, it is quite difficult to come up with a single answer to that question. The great advantage of having a target that we are developing is that we will be able to come up with some sort of mechanism for monitoring our progress against that target. Your task will become easier because we will be able to explain how we are performing against that.

  167. You will have targets for say five and 10 years out?  (Mr Macpherson) The great thing about Public Service Agreements is that we are getting a report regularly on progress against them. I think we plan to have a website up and running in the near future which will set out what is going on.

  168. If I want to find the answer to my question about how we are progressing on enterprise at some point there are going to be clear targets and measurable performances against those targets?  (Mrs Dunn) There are. In fact the PSA target for enterprise is to help to build an enterprise society in which small firms of all kinds—

  169. That is an aspiration. The question is, how will we know whether we are getting it?  (Mr Macpherson) On the regional target we will know as the regional data comes out through time when the ONS publish it.

  170. Within that data what are you looking at to see whether we are making progress on the enterprise?  (Mr Parkinson) An increase in the number of people going into business, improvement in the overall productivity and more enterprise in disadvantaged communities.

  171. Are their targets linked to those variables?  (Mr Macpherson) No.


  172. You said that the target will be monitored. It is the Treasury that is monitoring targets? You are monitoring yourself?  (Mrs Dunn) This a DTI target.  (Mr Macpherson) Departments are required to publish progress and they are required to get independent assurance through the NAO of the data systems which underpin it. I think they will be pretty robust.

Mr Beard

  173. In your memo you say that the 2002 Spending Review will reflect the government's emphasis on regional agenda and build on the analysis set out in the 2001 paper on productivity in the UK. What new policies were brought in directly to do with the regional agenda?  (Mr Macpherson) As I mentioned earlier, first there was an increase in resource for the RDAs. I would identify three areas where I think there was a step forward in the Spending Review, one is in relation to housing, where there is a commitment to creating strong regional bodies. Secondly, in relation to the relationship between RDA and Learning and Skills Councils, where we are running pilots for creating pooled budgets. Finally, in relation to the small business service and how that interacts with the RDA. In those three areas, skills, small business support and housing I am hopeful that we will make important steps forward.

  174. Taking the first of those, which was the resource allocation, since April you have been having a single lump sum allocated to regions according to the formula, you also incorporated into that a floor so that no one suffers too much reduction. If you have introduced a floor it is going to take ages and ages to equalise the amount of money going to the different regions, is it not?  (Mr Macpherson) This is always one of the issues which arises when you introduce a new formula. There is a trade off between getting the revised approach in place quickly and not creating dislocations in the areas you are going to end up transferring the money.  (Mrs Dunn) I think the floor could be regarded as a transitional arrangement for exactly the reason that Nick says. I think it would be fair to add that the formula used for allocative purposes is one that is agreed by the Regional Development Agencies themselves and their perception is that it delivers an allocation they feel is consistent with what they want.

  175. That does not make it right if the objective policy is to try to equalise the productivity or the GDP of the different regions. First of all, they do not have much statistical information to go on and, secondly, their objectives may not be the same as the central purpose. The central purpose is saying, yes, we are going to re-allocate the funds if there is a problem there but not very much. It could take a long time.  (Mr Scotter) Our PSA has two parts, one is to improve the economic performance of all regions and the other is to reduce the persistent gap between regions. It goes back partly to Mr Cousins question earlier, some of them, the south east for instance needs resources from government to help to continue its economic performance which is of benefit to the United Kingdom as a whole. We are not actually about trying to hold back the south east, government is not about trying hold back the south east or London in any way it is about trying to give the regions that are not at that level of performance the ability to move forward and catch up. It is right that there is a balance here and that one gradually may focus resources more towards particular regions while continuing to keep up support. For instance there are skills gaps in the south east and in the east of England which are growing very quickly and it is right that government through the RDAs and the Learning and Skills Councils should be doing things to address that. I do not think the fact that money will continue to go into the south east or the east of England is a flaw in the process, it is because we are trying to tackle two things at the same time, one is the growth everywhere and the other is tackling the gap.

  176. I accept that. I am not really talking about that, I am talking about the disparity between what has been declared, which is the process of differentiating between regions so that you allow regions to catch up in productivity and GDP per head, and the fact that one of the policies that proclaims itself as trying to do that has a brake on so that it is not really doing it at all in any measurable time scale.  (Mr Macpherson) I think it is doing something. The direction of travel is clear, it is just a question of how much dislocation you have in getting there. As I said earlier there is a trade off here as, no doubt, there will be a trade off when a new SSA formula is introduced. Inevitably you cannot please everybody.

  177. Do you have any feeling for how long it will take to get any reasonable equity between regions if you follow the present arrangements?  (Mrs Dunn) Do you mean just in respect of the allocations to the RDAs?

  178. Yes.  (Mrs Dunn) I think it would depend on how you defined equity. The regions have different sizes, and so on.  (Mr Macpherson) I suspect what you are asking is if you have a formula without floors and ceilings that is where you are going to end up, it is how long it will take, given the current floors and ceilings.  (Mrs Dunn) Probably one spending review period.

  179. That is how long?  (Mrs Dunn) Three years. I would like to check that I think.

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