Finance: England takes a Scottish way to local profit

TOMORROW'S elections for the Scottish Parliament and the Welsh Assembly have overshadowed an important constitutional move in England that could reshape industrial policy.

Regional development agencies (RDAs) came into force last month with ambitious objectives. John Prescott, the Deputy Prime Minister who is overseeing regional policy, has long believed that Britain is too politically centralised, and argued that regional power houses - preferably elected - are needed to counter-balance Westminster and Whitehall. The English regional bodies will operate in parallel to devolution in Scotland, Wales and Northern Ireland.

The RDAs are supposed to strengthen regional economies and the strategic direction of government by helping local authorities to work together and replace some of the multitude of quangos. English Partnerships (a regeneration agency) and the Rural Development Commission have both gone, with their responsibilities transferred to the RDAs, which have also taken on some of the functions of government regional offices, such as allocating the Single Regeneration Budget and Rural Challenge. They will also try to make the various adult training bodies - further and higher education institutions and Training and Enterprise Councils - work together in a common strategy. Each RDA will be developing an industrial policy for its region based on the Government's belief that the "knowledge-driven economy" is the key to the country's prosperity and each will present its particular vision to ministers in October. RDAs will be expected to work with local industrial groups to encourage sectoral partnerships and the type of clusters and business networks so successful for Japanese industry.

But it seems as if the public has failed to notice the creation of the RDAs, and it is a reasonable question to ask whether anyone will see benefits from them. Certainly, in the absence of elections to the boards of the RDAs, there is widespread concern about their lack of accountability. Membership is by government appointment with a large number of business executives and councillors represented, as well as a trade unionist on each board. All the chairman - who are paid pounds 44,000 a year for a two-day week - have successful business backgrounds.

Every region has chosen to create a voluntary regional chamber, largely consisting of representatives of local authorities, to debate regional policy, but there is no direct election to the boards. As far as the English public is concerned, they can be forgiven for feeling that regional government remains distant from them. But direct elections to regional assemblies may begin after the next general election, if Labour wins again.

But there is a deal of goodwill towards the RDAs. Andrew Hunt, policy advisor to the CBI, said: "We recommended the creation of RDA-type bodies in 1996. We did a survey of 16,000 businesses and we said there was a need for a single body to take forward the competitiveness of the English regions. We want business-like RDAs, to add real value to their regions. What we asked for is not vastly different from what we have got now."

The chambers of commerce and the TUC have joined in the welcome of the RDAs. The Local Government Association is also positive, although it recognises practical difficulties facing the RDAs, which it spelt out in evidence to the House of Commons' environment select committee earlier this year. Much of its concern is at the democratic deficit of the new bodies, but it is also under no illusions about the problems getting nearby local authorities to work together. They often have a history of animosity, with deep-seated conflicts of interest. Differences in needs of rural and inner-city populations is just one example. They have also often been in competition for inward investment.

A further concern is that the RDAs themselves may now spend much of their time, and money, competing with each other for footloose corporations to build new factories. This would simply replicate problems with the old Welsh Development Agency and Scottish Enterprise, which were criticised by the World Development Movement for competing for footloose investment rather than promoting home-grown organic development.

This fear has led the Regions minister Richard Caborn to instruct RDAs not to attract inward investors at the expense of other regions. Three northern RDAs have responded by working together in the United States to jointly promote themselves to businesses there. Mr Caborn himself cannot be criticised for under-selling the RDAs or be blamed for the lack of attention to them. He said: "They represent a milestone in improving the economic performance and competitiveness of the English regions - addressing past failures which prevented sustainable regeneration and business growth. We need to develop a strategy for each of the English regions. RDA strategies will help bring coherence to the work of regional economic partners, and a much-needed strategic vision for each English region."

Whether those grand wishes can be turned into practical economic reality will be a real challenge for the boards.