What's going on at the RDAs?

[Updated 30 July with info on NWDA (thanks to Luke Georghiou) and TSB]

The regional policy of the coalition is one that it is spectacularly difficult to keep track of. Clearly major changes are afoot, but getting to the bottom of them leads only to obfuscation. A good example is the announcement by Nick Clegg this week of a £1 billion Regional Growth Fund. Is this new money or old money, and if old, how will it affect the budgets previously given to the Regional Development Agencies? There are no answers in the documents published by the government.

So what do we really know about the coalition's regional plans?

RDAs are to be replaced by Local Enterprise Partnerships of councils and businesses by March 2012. Each LEP is likely to cover a smaller area than an RDA, though a letter to councils this week leaves open the possibility that an LEP could operate at a regional level if that's what the partners want.

For the coalition partners, the LEPs serve three political purposes. First, they replace institutions that, like the NHS, are strongly identified with Labour. If scarce government money is to be spent on local developments, they want the credit to flow back to the coalition, not its predecessor. Second, they wrest day-to-day control of regional activity away from organisations that are - let's face it - probably packed with Labour sympathisers both on governing boards and among staff. (These two points explain the oddity of scrapping RDAs, but allowing for the possibility of new LEPs covering a region.) Third, by covering smaller areas, the LEP's fly the flag for small-scale localism, in contrast to Labour's big government.

All these steps are important because of the general election result. David Cameron failed to secure a majority because he failed to win marginal seats in the regions, especially up North. This failed regional breakthrough is also the reason Clegg ended up with fewer MPs than before. Both coalition partners know they have to win over unconvinced voters in the regions before the next election, and the LEPs are an important tool for that job.

The need for such a regional agenda is made urgent because we know that the coming cuts in public spending are about to fall disproportionately on these same regions. This explains why, in the letter sent to councils this week by Vince Cable and Eric Pickles, they said, "The Coalition Government is determined to rebalance the economy towards the private sector. We regard local enterprise partnerships as being central to this vision."

The political and economic imperatives both point at prioritising the same regions, eg the North West at the expense of the South East. The flow of money is in future going to reflect these imperatives, meaning that a Conservative-Liberal coalition is about to shift regional funding away from their voters towards Labour voters.

Indeed this is already happening, fast. The coalition's decisions have already cut the budget of the South East England Development Agency for the current year from £148m to £79m - less than its existing commitments. So SEEDA will spend the rest of this year making cuts to already announced plans, and doing nothing new.

(This, by the way, is a good example of the obfuscation at work. The government has provided no tables setting out the revisions to the budgets of the different RDAs. I only know about the SEEDA case because I have been forwarded a letter this week from that RDA's chief executive. Update 30 July: We now know that the NWDA is in just as bad a position as SEEDA right now.)

The RGF has a budget of £1bn spread over two years

This compares to the current annual budget for the RDAs of about £1.4 billion. The FT yesterday reported that the money was likely to come from the existing budget, which is easy to believe. So if we assume that total regional funding is going to go down in the coming years, and that the RGF spends more in Year 2 than in Year 1, then by 2012-13 the RGF is likely to have control of more regional money than the LEPs have as core budget. Much of that core budget will in any case be committed to existing plans. So the main significance of the RGF is that it shifts control of the great majority of discretionary spending on regional activity back to Whitehall.

This reflects the shift in responsibilities envisaged by the coalition in the Cable/Pickle letter. Responsibility for inward investment, industrial sector leadership, business support, innovation and access to finance will all shift to Whitehall.

Regional funds will continue to support hi-tech and innovation, but...

In his Budget speech, George Osborne highlighted the role of the RGF in supporting innovation. The Cable/Pickles letter was a bit less less encouraging, saying:

"Partnerships will therefore want to create the right environment for business and growth in their areas, by tackling issues such as planning and housing, local transport and infrastructure priorities employment and enterprise and the transition to the low carbon economy. Supporting small business start-ups will therefore be important. They will want to work closely with universities and further education colleges, in view of their importance to local economies."

There can't be any doubt about the LEP's continuing to support some hi-tech and innovation projects. But how much is going to be cut? According to the Technology Strategy Board, RDAs had planned to partner the organisation in investing £198m in R&D in this year. The fate of this funding under the new government remains unclear, as does it's continuation in future years.

The Technology Strategy Board will take on some of the functions of the RDAs [added 30 July]

At the House of Commons S&T Select Committe on 22 July, David Willetts said: "There are likely to be some extra responsibilities for the TSB as RDAs are abolished. ... Because money is tight we do have to look for a national lead either in BIS or in the Technology Strategy Board or located elsewhere."

The example he cited was nanotechnology, saying that there was no sense in the country having so many regional centres. He also promised a policy document on all this in the autumn, about the time of CSR.

And the consequence is...

An FT editorial yesterday sympathised with the change of priorities for the RDAs, but criticised the decision to scrap them. I think that's about right. I can remember the days before the RDAs when English regions used to look enviously at the successes of outfits such as Scottish Enterprise. I think there are some real skills and experience now in the RDAs, and useful networks. Furthermore, the institutions are visible and familiar to potential partners and citizens. Like the University of Hertfordshire's Alix Green, I worry that a lot will be lost. In a tweet earlier today, she asked, "Can we effectively create an LEP to deliver R&D objectives is huge question. Appetite/knowledge/expertise in LAs? Role for unis?" These are also my questions.