With Scotland on the verge of its own massive cuts, Scottish Enterprise chief Lena Wilson knows her development agency faces a bonfire too

Published on Thursday 9 September 2010 17:57

THE Conservative Party has long had it in for England's nine regional development agencies (RDAs), established in 1999 to drive economic development in the regions. In the north in particular, the RDAs - the Northwest Regional Development Agency (NWDA), Yorkshire Forward, One North East - acted as lifelines for communities still blighted by industrial decline, and were partners in land deals that fuelled local property booms.

Sometimes loved and hated by their "stakeholders" in equal measure, the RDAs were the vestiges of New Labour "prosperity for all" policies and as such they were among the first for the chop in Chancellor George Osborne's first budget, when it was announced that the lot would go by 2012 - with the aim of saving 2.3 billion.

Communities secretary Eric Pickles, could barely hide his disdain, calling them "bloated regional quangos". In their place, local councils have been told to organise "local enterprise partnerships" - a decree that has provoked a scramble among regional-based economic development professionals, politicians and council leaders as they are set up. These would be backed by a 1bn regional growth fund while important areas formerly governed by the RDAs - such as inward investment and access to finance - would be centralised too.

In the North East, the changes are causing anxiety - not least because, while England has lit the touch paper for its "bonfire of the quangos", Scotland has not. Yet.

Last week, a report found that Middlesbrough would be least resilient to economic shocks caused by austerity-driven cuts. At the same time, Alan Clarke, the head of the region's doomed development agency One North East, warned a Commons committee that money being swilled around Scotland would leach jobs and investment away from a budget-less North East.

He argued that while Scotland was still spending on foreign direct investment, business grants and tourism, the English RDAs had been forced to curtail projects.

"We in England have had to stop some of this activity and we certainly can't commit any money beyond March 2011 so they have already got a relative advantage as we speak," said Clarke.

Lena Wilson, the head of Scottish Enterprise (SE), admitted the abolition of the RDAs south of the Border "offers a good opportunity for Scotland."Clarke's fears touch on a long-held, jealousy-tinged view among the southern versions of SE that Scotland has it better. But as Scotland is on the verge of its own cuts, estimated to amount to 1bn, the country's economic development agency is facing its own bonfire.

This month, Scottish Enterprise will face the scrutiny of the Scottish Parliament's economy, energy and tourism committee. According to committee member Gavin Brown, the aim of the inquiry is to evaluate the effects of massive changes that have been wrought in the organisation of Scotland's enterprise agencies in the past two and a half years. These include the separation of SE's former training responsibilities into Skills Development Scotland and the farming out of the Business Gateway - the provision of entry level business support to start-ups - to the local authorities.

Brown says: "Enterprise can't be immune from spending cuts. But spend on enterprise has been cut over the past six or seven years."

He says that when it comes to slimming SE even further, there are two arguments - some who argue that there should be a bigger enterprise network versus others who argue the money would be better spent on tax cuts.

Wilson and her chairman Crawford Gillies are keen to show that the agency has become a lean economic development machine since the changes have been made. In the past week SE has published a raft of numbers on various operations, such as the 375m in turnover growth experienced by the 2,000 firms it has included in its golden circle of companies predicted to produce high growth.

Overall, the agency commissioned research - from SQW, DTZ Peida and EKOS - which said that every 1 spent by SE produced 8.88 for the Scottish economy. This compares favourably to the 1 to 4.50 ratio the English RDA's claimed they were returning on their investments in a report conducted by PricewaterhouseCoopers.

Nevertheless, SE admits the comparisons are not like for like. And while it says its efforts have "helped" grow turnover and SDI has "helped" to attract inward investment, there are questions over the robustness of the methodology in evaluating the figures.

Brown says it may be too complicated to scrutinise these figures during this month's committee hearings.

He says: "I have my criticisms of SE and its practices. My view is mixed from talking to businesses. Some people think it is fantastic others can't stand it. Scottish Enterprise only reorganised two and a half years ago and it needs to bed in before you start to judge but now is the time to start looking."

For those who have already submitted evidence to the inquiry, most are adamant that this is not the time to be making cuts to Scotland's economic development programme although most can agree that costs savings need to be made.

The Royal Society of Edinburgh has called for a "nimbler, swifter" organisation - but praises SE-led investment projects such as the fledgling Edinburgh BioQuarter. But the society says that areas where the agency has been less successful is in attracting venture capital and "developing an enterprise strategy for alternative and cleaner energy".

Some predict the SE will have to merge with its Highlands counterpart, Highlands and Islands Enterprise (HIE) but this will not be without its difficulties.

As Graham Birse, deputy chief executive at Edinburgh Chamber of Commerce warns: "You could save a lot of public money by doing so but HIE and its previous incarnation has existed for over 60 years so it will be a big issue in the Highlands."

However he insists that a national economic development agency serving the whole of Scotland will be required to help put the country on a stable economic footing.

"There has to be a national strategy for economic development support, and that national strategy needs to be co-ordinated by an agency that is not sitting in government and subject to ministerial interference."