The Development of Governance in the English Regions: Sarah Ayres & Ian Stafford School for Policy Studies, University of Bristol, UK The Development of Governance in the English Regions: A Whitehall Perspective 7th February 2008 Background to Paper: Part of 2 year research project analysing the quality and depth of regional decision-making procedures for RFAs in all English regions The paper draws on the first stage of our research, an extensive literature review and interviews conducted in summer 2007 with Whitehall and regional officials This paper is very much work in progress and an early draft of our analysis.

The Development of Governance in the English Regions: A Whitehall Perspective This paper focuses on two elements of the Labour government’s reform agenda within the English regions: the Regional Funding Allocations (RFAs) published in July 2005 and the ‘Review of sub-national economic development & regeneration’ (SNR) and ‘Governance of Britain’ green paper published in July 2007. The paper explores the rationale underpinning the RFAs and SNR, the perceptions of this from Whitehall departments and concludes with a brief assessment of their implications for the future of English regionalism. A prominent theme within the Labour government’s reform agenda has been the desire to join-up policy making and delivery. Indeed, in a bid to tackle complex ‘wicked issues’ the regional tier has been identified as a prime site for co-ordinating a range of policies.

Research Questions What motivations underpinned the Government’s decision to introduce the RFA’s and SNR? What impact have the RFAs had on horizontal and vertical intergovernmental relations? How does Whitehall perceive regional decision- making capacity post-RFAs? What are the implications of the SNR and Governance of Britain for future regional institutions and policies?

English Regionalism since the 1990’s Creation of the ‘Integrated Government Offices of the Regions’ in 1994. Since coming to power in 1997 Labour has ‘beefed’ up the regional level. Regional Development Agencies (RDAs) and unelected Regional Assemblies established in 1998. Also a range of Regional Executive Agencies and Quangos. Government Offices were established in April 1994 Although the government announced that the GOs would involve a ‘transfer of power from Whitehall to local communities’, Mawson points out that it is important to note that the primary function of the GOs ‘was to strengthen the presence and improve the quality of central government decision-making in the regions.’ RDAs and unelected regional chambers or assemblies were announced in the 1997 White paper ‘Building Partnerships for Prosperity’: RDAs were established to improve regional economic performance and work with regional partners in the region to draw together a Regional Economic Strategy The regional chambers comprising representatives from local government and regional business, social and environmental interests, to provide a semblance of democratic accountability, but without legislative or decision-making powers. Key functions were to scrutinise RDAs’ activities, coordinate and regional strategies. In addition despite adopting a language which highlighted the flaws of the previous Conservatives introduction of quangos, the Labour government has introduced a variety of non-departmental public bodies, most notably the RDAs but also Learning and Skills councils, Highways agency and so on.

Motivations underpinning Labour’s regional policy Promote economic development & boost UK productivity Improve the effectiveness of services through regional & local diversity Enhance the efficiency of service delivery by joining up policy areas Boost local democracy by bringing decision making closer to the people NB - differentiation across Whitehall departments Drawing from the ‘new regionalism’ literature; emphasis from departments such as the Treasury and DTI, now DBERR, that building on the indigenous strengths of each region creates balanced growth and is key to delivering economic prosperity and employment for all. Recognition that regional or local issues require services tailored to respond to specific regional and local circumstances rather a ‘one size fits all’ Whitehall approach. Regions are viewed as convenient for the joining-up of policy areas – small enough to allow for face-to-face contact upon which trust and co-operation can be built, and large enough to permit economies of scale and scope. Local democracy and accountability perhaps the weakest of these motivations, however as we shall see it is a recurring theme.

Strengthening the Regional Tier 1997-2002 1997-2001 Origins in EU Structural Funds (New Regionalism) Building Partnerships for Prosperity (DETR, 1997) Modernising Government (Cabinet Office, 1999) Reaching Out & Wiring it Up (Cabinet Office, 2000) Strengthening RDAs, Regional Assemblies and GOs; enhanced functions and flexibility over budgets Your Region, Your Choice (ODPM/DTLR, 2002) - Elected Regional Assemblies? Modernising Government set out a programme to improve the integration, delivery and quality of services. Its premise was that policy processes, organized around functional departments, were effective in providing clear lines of accountability and management. However, policy-making had become far too centralized to deliver high quality public services, and responsibility for delivery should be directed downwards to a level where policy and investment come together. Wiring It Up and Reaching Out examined the issues of horizontal policy making within Whitehall and the vertical links between central government and the regions. They pointed to the need to better integrate central government initiatives, ensure that government service delivery matched local circumstances and improve understanding of local and regional issues in the design of national policy. The latter led to the creation of the RCU aimed at improving the co-ordination of central and regional policies. Strengthening of RDAs: creation of the RDAs’ Single Pot in 2001 and extension of departments included in the GOs. Your Region, Your Choice marked a key point; proposed for all regions a package which includes freedoms and flexibility for the RDAs; a new enhanced role for the regional chambers; better regional planning; and a strengthening of the Government Offices and other regional bodies. (Chapter 2 agenda).

Towards Elected Regional Assemblies? Elected regional assemblies dependent on unitary local government and a ‘yes’ vote in regional referenda Adoption of ‘rolling devolution’ in the regions Assemblies to strengthen effectiveness and accountability North East Referendum (Nov 2004) 77.9% voted No, Turnout 47.7% Wheels had come off elected regional government agenda “No" campaigner John Elliott was delighted with the result

The ‘Chapter 2’ Agenda: 2002-7 2002-2007 Devolving Decision Making agenda ( HM Treasury) Regional Priority & Emphasis Documents City regions & Northern Way New Housing functions for Assemblies Sustainable development (DEFRA, 2005) Regional Funding Allocations (July 2005) 2007 Change in political leadership (June 2007) Comprehensive Spending Review (July 2007) Governance of Britain Green paper Sub-national Review Devolving Decision Making agenda, several papers published by the Treasury announced as part of the 2003 Budget. Meeting the Regional Economic Challenge (2004) identified the key drivers for enhancing economic performance within the regions and included recommendations to strengthen regional institutions, develop a robust regional evidence-base and ensure that policy design occurs at the most relevant spatial level. Northern Way – 3 northern RDAs focused on eight city regions; Liverpool, Central Lancashire, Manchester, Sheffield, Leeds, Hull and Humber Ports, Tees Valley and Tyne & Wear. Regional Assemblies responsible for RHS and RSS, after Barker Review of housing and became regional planning body.

Regional Funding Allocations Regions invited to prepare advice on spending priorities in each policy area up to 2007-8 & indicative planning assumptions up to 2016. Transport: major schemes under the Local Transport Plan (LTP) system and Highways Agency schemes of non-national status Housing: the Regional Housing Pot funds Economic Development: the RDAs cross-departmental ‘Single Pot’ Regions able to vire funding across spending pots. Lack of policy manoeuvre due to existing commitments and level of resources within exercise. In July 2005 regional partners were invited to jointly prepare advice to ministers on spending priorities in each policy area through to 2007-08 and to prepare indicative planning assumptions up to 2016. Transport: Also didn’t include rail expenditure and had £5m rule of thumb. Housing: covering funding to improve existing housing conditions and provision of additional affordable housing. Guidance stressed the importance of building upon local synergies, BUT it also emphasised that advice which took into account national policy priorities and objectives would be more likely to get central government approval. The regions had already been given responsibility for identifying spending priorities within economic development and housing policy and therefore the RFAs provided little room for manoeuvre within these two policy sectors. A Treasury Official, for example, pointed out that, ‘the big prize was bringing transport into the equation’. Only amounted to £4.1bn in 2006/7 and while significant, this represents just 14% of total public expenditure in the three policy areas.

Motivations underpinning Regional Funding Allocations RFAs underpinned by previous prioritisation exercises - Whitehall officials confirmed improvements over rounds Provided an opportunity for greater regional discretion, was intended to enable regions to better align their strategies and provide an enhanced input into Government decision-making The Treasury’s guidance stated advice must be: 1) Evidence-based 2) Agreed within the region 3) Realistic 4) Consistent Regional Priority Documents (RPDS) 2002 CSR & Regional Emphasis Documents (REDs) 2004 CSR. The regions’ ability to prioritise programmes ‘had drastically improved with each stage of the process and submissions had certainly been given air time in departmental spending discussions’ (DBERR official). However, a Treasury official pointed out that ‘there was still a strong sense that regions saw themselves as lobbying organisations asking for more money without realising the public sector spending constraints that central government operates within.’ (Treasury official) Move away from wishlists, DfT official £300m = 10 £30m schemes. Evidence-based - robust regional evidence, Agreed within the region - represent a regionally-agreed view of priorities, Realistic - it is important that cost estimates are robust and proposals have been tested for deliverability, Consistent - consistent with wider national policy objectives and regional and local strategies. 30 page limit, 6 month timetable & 10% variation in funding.

Evolving inter-departmental relations Lack of new inter-departmental structures apart from an ‘ad-hoc’ cross-departmental steering group Treasury led coordination Limited role of the Regional Coordination Unit Lack of coordinated Whitehall response to regions’ RFA advice Limited resources & funding streams included within RFA exercise Inter-departmental coordination hampered by existing commitments Impact of regions decision not to vire funding The scheme promoted some cross-departmental communication via a cross-departmental steering group, acting as a ‘clearing house’ for RFA advice but was described by a DCLG official as having limited influence and ad-hoc in basis. The RFA was very much Treasury driven and Whitehall contacts noted that the Treasury also played the primary coordination role within the exercise, potentially limiting the level of interaction between the participating departments. Whitehall officials expressed that there was confusion regarding what the RCU actually did. However, a DCLG official pointed out that the RCU may have played a limited role due to the GO review which created a ‘defensive mindset’ within the RCU and GO network more generally. The limitations to interdepartmental communication was highlighted by the departments responses to the regions RFA advice during 2006. Competing interpretations of DfT’s decision to respond alone; DCLG expressed ‘annoyance’ & was ‘borderline insulting.’ The character of the first round can be seen as a key factor; the resources and funding streams limited the level/depth of interdepartmental relations The commitments which existed within the economic development and housing policy areas also meant that the transport priorities within the regions developed in isolation. Similarly the decision taken by regions not to vire – transfer – funding across the three policy areas. As a DfT official pointed out; ‘If you broaden the scope of RFAs and regions mature through the process a second time around then there might be scope for potential conflicts between the different budgets.’

Relations between Whitehall & regional actors Formalisation of central-regional relations in funding sphere - built upon past initiatives Limited impact on DTI & DCLG due to existing arrangements Significant new structures within DfT for engaging regional actors RFA advice filtered into departmental CSR submissions Lack of conflict between levels - RFAs actually reduced tensions in transport policy sector DBERR Official commented only 1 or 2 man team, to ‘make sure we were getting the right input from the appropriate people in the Department.’ Whitehall contacts emphasised that the RFAs had filtered into the CSR decision-making process. The Treasury sent a letter to the participating departments stating that their CSR submissions had to reflect or reference regions RFA advice. This was perceived as influential within the Treasury or it would have been ‘quietly buried.’ DCLG official ‘By the time regions got to the funding allocation process they were essentially repeating the dialogue and decisions that had already been made around housing and spatial priorities’. DfT official ‘The conflict in the past was usually the regions lobbying for completely unrealistic levels of spend. Now they have got indicative budgets allocations it's more about managing within that framework so it has actually decreased the potential for conflict’.

Whitehall’s perceptions of regional capacity Regions’ use of consultants ‘disappointing’ & highlighted lack of decision-making capacity DfT argued that consultants enabled stakeholder buy-in Regions’ failure to vire funding ‘disappointing but understandable’ Whitehall departments lacked robust arrangements to analyse RFA evidence & procedures Variations in regional performance London snubbed RFA invitation A DBERR official pointed out that; ‘There is a general concern about the capacity of the RDAs and regional structures generally so in that sense the use of consultants for the RFAs wasn’t a surprise but was a disappointment.’ In contrast DfT officials emphasised the benefits of regions using consultants; ‘had produced a robust, rigorous and evidence based process. Regions were able to get consensus among all of the local authority partners so it wasn't just horse trading. It made some of the hard decision making more bearable’. A DBERR official described the departments assessment as being based on ‘gut feeling’ and a DCLG official noted that rather than ‘evidence based policy making’ the department engaged in ‘policy based evidence making.’ The DfT had the most thorough analysis of the departments. GOs were used as ‘critical friends’ ; DBERR official pointed out that some regions took the process more seriously where as others produced ‘wishlists in sheep’s clothing’. Example of Yorkshire and Humber. A DCLG official pointed out that London had been ‘included as a reflex’ and if more thought had been given to it the embarrassment would have been avoided.

Motivations underpinning the SNR & Governance for Britain Green Paper Perceived shortcomings of existing governance: Confusion over roles & responsibilities Assemblies viewed as ineffective Too many regional strategies Gap between administrative & economic boundaries No real success in meeting target to reduce economic disparities Devolve further responsibilities to sub-national tiers Address the democratic deficit Streamline decision making & simplify structures Respond to globalisation - ‘new regionalist’ perspective still a driver for change Reduce economic disparities Continuity in the motivations of the UK government. However, change in political leadership. Early theme of Brown’s leadership was tackling these issues. Governance of Britain green paper focused on constitutional issues, not just devolution but addressed 2 key questions: how should we hold power accountable, and how should we uphold and enhance the rights and responsibilities of the citizen? Need to emphasise was a very much Treasury driven exercise with feed in from other main departments: DEFRA official: Limited engagement but: ‘there is a big difference between the subnational review which was a Treasury review for Treasury purposes of economic development, regeneration and neighbourhood renewal, it was not a review of regional policy.’ However, huge implications for regional governance environment.

The Complexity of Regional Governance Actually since Tomaney did this analysis it could be argued that the regional level actually became more complex and fragmented. Source: Tomaney, J. (2002) ‘In What Sense a Regional Problem? Sub- National Governance in England’ Local Economy, VOL. 17, NO. 3, p.231.

Sub-national review proposals RDAs to be responsible for preparing a single ‘regional strategy’ Assemblies to be abolished by 2010 Local authorities (LAs) to be given new roles to promote economic development & scrutinise RDAs Stronger accountability of RDAs to central & local government - Introduction of Regional Ministers RDAs to delegate funding to LAs & sub-regional partnerships wherever possible Emphasis on Multi Area Agreements Simplification of targets – single PSA target Drives to link activities of quangos to regional strategies RDA problem: DEFRA official: ‘This is a fundamental flaw in the implementation of the SNR, what we are doing is that we have a body that has a funding stream which is about economic growth that has responsibility for a strategy that is about economic, social, environmental and spatial planning.’ Problems of balancing. Assemblies: Assemblies performance described as ‘patchy’ and effectively lame ducks after the failure of the 2004 referendum. A DWP official pointed out agreed with the focus on streamlining and devolving power to the most appropriate level but actually wanted the RDAs not Assemblies abolished. Relations between RDA and Local Auths: DIUS official: There is a very real risk, out in the regions attention on perceived super-RDAs. ‘Actually the perception is probably wrong, RDAs are going to be reined back to a more strategic role and will have a requirement to delegate funding to the local and subregional level unless they can demonstrate very good reasons why not.’ Parochialism: Treasury official: View was the best way of resolving that tension is to gain one place and in one strategy but having that strategy developed in an open and transparent way with local authorities feeding in at the outset and signing off at the end.

Governance of Britain proposals Regional Ministers advise on the approval of regional strategies and RDA Chairs and Boards represent regional interests in central government policy; facilitate a joined up approach champion the region represent the Government at regional select committees & parliamentary debates Regional Select Committees add democratic accountability and scrutiny Design yet to be decided, possibilities a single regional select committee, 8 regional select committees or grand committee model DEFRA official: ‘I think they are making their presence felt within the regions and I think although they all have departmental responsibilities I get the impression that they taken their new regional portfolio pretty seriously.’ Problems of single regional committee for each region; resources intensive, reflect political make-up of each region etc…

Conclusion: Implications for the future First round of RFAs viewed positively in Whitehall but number of constraints Ambiguity surrounds the implementation of proposals within SNR and Governance of Britain Whitehall confirmation that SNR not a move towards elected regional government in future Consistency in the primary motivations behind the Labour government’s approach to regions but adaptation of approach