HC Deb 01 April 1998 vol 309 cc1324-33

'(1) The Secretary of State may by directions require the transfer of responsibility for any Training and Enterprise Council in England ("a Council") from the Department for Education and Employment to the Regional Development Agency for the area in which the Council is based.

(2) Any Agency to which the responsibilities for a Council have been transferred shall—

  1. (a) monitor and seek to improve the performance of the Council, and
  2. (b) ensure that the Council contributes to any objectives of the Agency.

(3) If a Secretary of State makes a direction in respect of any Council under subsection (1) he shall either—

  1. (a) make such a direction in respect of all Councils, or
  2. (b) lay before both Houses of Parliament a statement of his reasons for not making a direction in respect of all such Councils.'.—[Mr. Bennett.]

Brought up, and read the First time.

Mr. Andrew F. Bennett (Denton and Reddish)

I beg to move, That the clause be read a Second time.

When I first came to the House I was not enthusiastic about regional government. I have realised over the past few years that the more we move to a global economy, the more important it is to have a regional presence rather than to rely on the cities that dominated in the early part of this century. Regional structures should be democratic, and we should have regionally elected government. I accept that the measure is merely a faltering first step, but it is important to make it clear that I want us to achieve regionally elected government as quickly as possible.

I fear that we will stop at this stage in the process and will never have regionally elected government. I am also worried that, if we stop at this stage, there will be a confusion of regional responsibilities. There will be regional chambers, regional development agencies and regional planning conferences. The TECs will have a regional structure to ensure that they have a co-ordinated policy for their region. There are higher education and further education regional bodies, and regional sports and arts bodies. We cannot continue that proliferation of different regional bodies and we need to try to slim them down and make them all accountable to an elected body as quickly as possible.

Both the Select Committee on Education and Employment and the Select Committee on the Environment, Transport and Regional Affairs looked at the role of TECs and it was clear to them that there was no excuse for TECs to be kept separate from the RDAs. The logic was that there should be a funding mechanism, working in an integrated way. When trying to attract new industries and develop existing ones, part of that regional development consists of making sure that the skills are there. Companies are attracted to areas not only by sites and the availability of funds, but by the presence of a skilled labour force. It would be absolutely crazy for TECs to have a different regional strategy from that of RDAs. Both Select Committee reports made it clear that the Government had got it wrong in leaving TECs out of the new structure. I hope that the Minister will be able to tell us how we are going to progress to a point where responsibility for TECs moves to the RDAs.

7.30 pm

There are a few excellent TECs in this country, but there are many that have failed the nation. The skills shortage in many regions is an indication of those failures. Some TECs are too small and some are far too parochial in their attitude. Some are dominated by unsuccessful local business people and in some there is nothing like the accountability for their funds that there should be. All those issues have to be sorted out and one of the most effective means of doing so would be to ensure that TECs had to get their funding via RDAs. Many of my hon. Friends want to speak in the debate, so, before sitting down, I simply ask the Minister that we should make some progress in moving TECs into the new regional structure.

Mr. Lansley

Like the hon. Member for Denton and Reddish (Mr. Bennett), I am conscious of the fact that several Labour Members want to speak on this subject but, before they do so, I should like to make a few comments.

I was the policy director for the Association of British Chambers of Commerce in 1988, when my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler)— then the Secretary of State for Employment—initiated the proposals for TECs. At that time, the British Chambers of Commerce put it to my right hon. Friend that, rather than engage in an endless bout of initiativitis and try to create a new body at regional or local level, the experience of local employer networks and the way in which they worked demonstrated that, in some parts of the country, chambers of commerce and those businesses that worked within them were perfectly capable of taking on the responsibility for TECs and making them work.

At that time, rightly or wrongly, it was decided that chambers of commerce were not the appropriate bodies to have responsibility for TECs and the words that the hon. Member for Denton and Reddish has just used to describe today's TECs were used in respect of chambers of commerce. It was said that their quality was variable across the country; and that, in some areas, they were too small and covered too limited an area; that were too parochial in their outlook. Not all those criticisms would now apply to chambers of commerce, but it is an irony not lost on me that a Labour Member is now making the same criticisms of TECs as were made against chambers of commerce 10 years ago.

There is in this country a structure of business-led organisations that has been sustained by entirely voluntary activity for more than 150 years, yet Governments of all persuasions seem unwilling to use that as a suitable foundation on which to structure support for business. The answer to the question how best to support businesses in enterprise and creating wealth is normally to work through those organisations to which businesses voluntarily subscribe. RDAs may, in due course, become bodies to which businesses are willing to subscribe, but we cannot be certain of that. RDAs are to operate at policy-making level and with a substantial local authority component—I do not complain about that; I support local authority participation in RDAs and the view taken on RDA accountability to local authorities—but many businesses will regard RDAs, if not as parochial, as having a regional focus beyond the scope of the local labour market with which they want the local TEC to forge a relationship. That is why, in each region, TECs come together in a regional council.

The intent of what is proposed under new clause 5 is wrong in that sense. The objective of RDAs, if it is a proper objective to pursue, is that of setting strategy and enabling organisations that focus on the components of competitiveness to come together in support of that strategy and make it happen more effectively. It is quite wrong for the RDA to take into its own responsibilities the bureaucratic task of administering the relationship through contract with TECs. If it does so, it will become directly enmeshed in decisions as to the responsibilities of chambers of commerce, TECs and business links— chambers of commerce and TECs are increasingly voluntarily combining to form a single organisation and business links are often related to TECs.

Even in the terms of the Government's proposals, which I do not necessarily support, there is an inherent danger in the RDAs' strategic function. The new clause would ensure that, instead of being strategic bodies separate from the economic development functions of local authorities, chambers of commerce and TECs—and, in the case of the Eastern region, the East of England Inward Investment Agency—RDAs would be directly responsible for those functions, even if only through contract. At this point, I should say that the current contracts between TECs and the Government offices or the Department for Education and Employment are, at the Treasury's behest, so detailed and exert so much control over the activities of the TECs that there is too little discretion for TECs to respond to business priorities in their own area.

If the hon. Member for Denton and Reddish wants TECs to enter into wider partnerships, I agree—they should combine with the local chamber of commerce so that there is increasingly a single local business-led organisation that acts as a counterpart to the local authority in its economic development role. If the hon. Gentleman is saying that TECs are often too parochial and should operate at a higher level of aggregation, that is true in some cases.

Mr. Pickles

Does my hon. Friend agree that training is a function that is essentially sub-regional or local? I recall asking the Humberside TEC to explain the commonality between somebody requiring training in Whitby and someone requiring training in the Yorkshire dales. There is no such commonality. Training should be local.

Mr. Lansley

My hon. Friend makes a good point, which is entirely congruent with what I was saying. It is not automatically true that TECs are currently constituted on the right basis. If one looks at the way in which chambers of commerce have changed in recent years, one can see that there has been a general merging and aggregation of chambers so as to provide services and relate to policy across a wider area.

It is perfectly true that the natural structure of training and enterprise councils should relate to a high degree of self-containment within the local labour market. The self-containment level should be above 80 per cent. or 90 per cent. for that labour market area. That points to large groupings in some areas. In other places, such as Cambridgeshire, the area would not be quite so large. There is considerable self-containment—probably at that level—within Cambridge and the south Cambridgeshire district. In truth, it does not make much sense for a training and enterprise council to be smaller than the local labour market area within which about 80 per cent. or 90 per cent. of people live and work.

To go above that level, and to think that it necessarily makes sense to set the parameters for an individual training and enterprise council on a regional level, is to miss the point. Training and enterprise councils should have a regional focus. The reason is that, if the regional development agency—or an inward investment agency acting on its behalf—pursues inward investment projects, it will be necessary to look at a specific area and within the confines of a specific training and enterprise council in order to provide the skills that will bring a company to that area. Precisely that approach was taken in Sheffield— I regret that I cannot recall the specific case; the Minister may recall it better than I do—and it was a significant attraction to businesses to come to that area.

In Atlanta in the mid to late 1980s, it was generally presumed that, in order to attract inward investment, one had to engage substantially in site assembly and provide infrastructure. However, when it came to internationally mobile investments of a higher technological character, site assembly and infrastructure did not determine where the business went. It was all about access to markets and skills in the labour force. It is important that there be scope for the regional development agency strategy—if it is going to be provided—to inform the role of the Government office in exercising its contract with a training and enterprise council.

If the Government office and the regional development agencies are to head in any direction in the future, they should move to take their hands off the training and enterprise councils' policy-making functions—not necessarily their propriety and accountability for public funds—which determine the response to local labour markets. Too much is driven at present by desire on the part of Government—Governments of both colours—to see their employment Department initiatives pursued. Employers in the local labour market are doing too little in anticipating their skills requirements and ensuring that the training and enterprise councils respond to them.

Mrs. Ellman

Will the hon. Gentleman give way?

Mr. Lansley

I have already given way to the hon. Lady, but I am happy to do so again.

Mrs. Ellman

Does the hon. Gentleman agree that the training needs of an area include the need to retrain and diversify in some regions? Diversification of some sectors of industry in the north-west—for example, the aerospace industry, which is very militarily based—may require a retraining policy that is sectoral and not limited to localised areas. Does the hon. Gentleman not think that it makes sense for a regional skills strategy to relate to a regional economic strategy, which would be determined by the RDA? That does not mean that it would all have to be carried out—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. That is a very long intervention. I remind hon. Members that this is a very brief debate.

Mr. Lansley

Indeed, Mr. Deputy Speaker. I was concluding, but I shall respond to the comments of the hon. Member for Liverpool, Riverside (Mrs. Ellman). My point about inward investment—which applies also to something as grand as a regional economic strategy— is that there are circumstances in which the respective resources of training and enterprise councils should be adjusted in relation to a broader perspective. For example, no one would dispute the fact that a training and enterprise council should respond to requirements for retraining and different skills when there have been large-scale redundancies in a particular area.

However, I believe that the general training and enterprise council budget should be driven essentially by the business community's priorities. There is one important reason for that: the amount spent by Government on training, as the hon. Member for Riverside and other hon. Members know, is probably less, by an order of magnitude, than the amount that businesses spend on training on their own behalf. If training and enterprise councils are to work effectively, it is right that they should interact with businesses directly in order not only to provide training but to act as a lever on those businesses and provide relevant training and meet the wider skills needs of the area.

The TECs should understand that, essentially, they act at the margins of the training philosophy of an area. If the regional development agencies assume that responsibility, it will detract from the business focus, which should be the proper direction for TECs in the future.

Mr. Derek Foster (Bishop Auckland)

I am glad to follow the hon. Member for South Cambridgeshire (Mr. Lansley), whose contributions to our debates are always thoughtful and well informed. I am even more pleased to follow my hon. Friend the Member for Denton and Reddish (Mr. Bennett), whose brief contribution was so powerful that I cannot pretend to try to better it. As a consequence, I shall be brief.

I have been a great enthusiast for regional development agencies for 25 years. I was chairman of the North of England Development Council in the mid-1970s, when it was clear that the northern region was at a competitive disadvantage compared with the Scots and the Welsh because they already had development agencies. It is quite remarkable that the Education and Employment Committee and the Environment, Transport and Regional Affairs Committee should examine that issue and reach similar and unanimous conclusions.

7.45 pm

The Committees were very impressed by what I call the "Scottish model". It has been working for some time, and the Welsh model has been working for even longer. The latter model has some attractions, which I may have the chance to explore a little later. We were struck by the fact that the rather patchy record of training and enterprise councils throughout the English regions was not replicated in Scotland. That is because the money for training and enterprise councils went to Scottish Enterprise and then to the local enterprise councils, as they are called in Scotland. Scottish Enterprise has considerable power to monitor the performance of LECs and, for that reason alone, those bodies have performed far more evenly.

The two Select Committees cannot possibly conceive that an economic and development strategy should not include a skills strategy. That fact is absolutely clear, and it will become increasingly important as we approach the information age. The real wealth of regions and of enterprises will be found in the skills and the creativity of their people. Therefore, a coherent economic and development strategy must include a skills strategy.

If we are to concede to the regional development agencies the need to develop a strategy that includes a skills strategy—which may include lifelong learning as well as the TECs—it is inconceivable that the RDAs should not be able to ensure that that strategy is implemented. There is no point having a strategy if there are no powers to ensure its implementation. If the money flows through the RDAs, they will have the power to ensure that the strategy is implemented.

We reached that conclusion after very careful consideration. We were concerned that we might institute a body that was just another regional agency—there are already too many—which did not have the power to pull the various strands together. In other words, we feared that we might confuse and complicate rather than simplify the arrangements. We concluded that the Select Committee proposals would give greater power to the development agency not to act bureaucratically, but to empower other organisations beneath its strategic level. We are not looking for bureaucracy; we are looking for empowerment of other bodies within the agency, and of the people themselves.

That was our proposal, reached unanimously. There was all-party agreement on both Select Committees. If the Government are unable to agree to our proposals—we hope that they are—I remind them that, in our report, we suggested that they might consider pilot areas. We suggested that the North East and the North West would be good regions for such pilot areas to be put in hand. We did so because co-operation and collaboration are well developed in those two regions. Others might consider that the Yorkshire and the Humber region would equally merit such consideration, and I am sure that other colleagues may add their penn'orth for their own region, but that was our proposal. If the Government cannot agree to new clause 5, perhaps they could make sympathetic noises to the idea of having a pilot area—I would say in the north.

Mr. Breed

It will come as no surprise to the Minister that we support new clause 5, as it is very similar to one that we tabled in Committee. It seemed to us that the RDAs were there to sweep up an awful lot of the existing agencies that were operating in various ways in support of the economic progress and development of their areas, and that it was genuinely expected that the TECs would be subsumed into the new RDAs. There is an obvious case for that to happen, and I concur with all that the hon. Member for Denton and Reddish (Mr. Bennett) and the right hon. Member for Bishop Auckland (Mr. Foster) said.

Some TECs have been more successful than others; some have become more accountable recently. However, there is an overwhelming case for them to be included in the RDAs. They could then be involved in the strategic operation of a regional development agency, enabling them to be part of a package for new investors into regions. They could provide an enhanced business links operation for existing businesses, and also provide the business advice and support that RDAs will need.

For those reasons, I entirely support the sentiments behind new clause 5.

Mr. Caborn

New clause 5 would make provision in the Bill for the Secretary of State, by direction, to transfer to the regional development agency responsibility for any training and enterprise council in England. It would provide that, where any such transfer took place, the RDA should monitor and seek to improve the performance of that TEC, and should ensure that the TEC is contributing to the RDA's objective. The new clause specifies that, if such a direction did not apply to all TECs, the Secretary of State would be required to explain the reason to both Houses.

The new clause has impressive support. My hon. Friend the Member for Denton and Reddish (Mr. Bennett) is Chairman of the Select Committee on the Environment, Transport and Regional Affairs. I believe that my right hon. Friend the Member for Bishop Auckland (Mr. Foster) is Chairman of the Select Committee on Education and Employment. As an ex-Chairman of the Select Committee on Trade and Industry, I know what powerful positions they are.

Both those Committees held inquiries into the work of the RDAs. Unusually—perhaps uniquely—both reached the same conclusion on the subject of the RDAs' role in relation to the TECs. They have both made recommendations to the Government that they should transfer to RDAs the current role of Government offices for the regions in contracting with TECs for training provision in their region.

The Government are grateful for the work that those two Committees have done in considering our proposals for RDAs. We welcome the interest that they have taken in an important initiative and in the Government's regional agenda in general. We share many of the Committees' key objectives. For example, we agree that the RDAs must play a central role in formulating the regional skills strategy. We agree that RDAs should have a meaningful role in relation to the work of the TECs. The essential difference between us is that, whereas the Committees have taken the view that influence derives essentially from the control of budgets, the Government believe that the necessary influence and direction can be achieved by RDAs with the role and functions that we have given them from the outset.

For the time being at least, we do not consider it appropriate to transfer to RDAs the role of the Department for Education and Employment in TECs' contracts. We believe that the package of functions that we have already given RDAs is the right one, and that it provides the right critical mass to start from. However, I can assure the House that the Bill provides for us to take a different view some time. It is—

Mr. Barry Sheerman (Huddersfield)

Will the Minister give way?

Mr. Caborn

I am sorry; I cannot gave way because I have five minutes and I know that my hon. Friend the Member for Denton and Reddish wants to say a few words.

The Bill also enables us to require RDAs to monitor and seek to improve the performance of TECs—which is important—and to ensure that TECs are contributing to the RDAs' objectives, as provided for in the new clause. As I shall explain later, we do intend that the RDAs should have that responsibility.

As I said in my response to the Environment, Transport and Regional Affairs Committee, published on 30 March, the Government believe that it is important to be realistic about what we ask RDAs to do. They will be new bodies, and will have much to do to establish themselves and to develop their work programme. As I have explained, there will be scope to extend the role in time, as their experience develops: further functions will be delegated to them if that is desirable.

The package of functions that we have proposed for the RDAs will afford them considerable influence throughout their region. The wide-ranging nature of the role means that that influence will not be limited to areas and organisations for which the RDAs hold budgets. RDAs will certainly be influential in the provision of training in their regions. Regional skills needs will be a key component of the RDAs' strategy, and that strategy will inform decision taking in the regions, including the decisions taken by Government offices in the allocation of TECs' budgets.

I recognise that my hon. Friends feel strongly that training budgets should be controlled by RDAs. I have explained why, in the Government's view, it is not the right time for such a step. Nevertheless, there is no reason why the role of the RDAs should not develop over time, as that of the Scottish and the Welsh Development Agencies did. The Bill will allow that to be done without the need for further legislation.

Although we do not accept new clause 5, we accept that the RDAs should play a big part in monitoring and improving TECs' performance. The Government want to drive up the performance of all TECs to the standard of the best. The details of the RDAs' role are still being worked up, but we expect them to take a hard look at the performance of TECs in their regions and recommend how they might make a greater contribution to regional objectives. In managing TEC contracts, Government offices will take account of the strategic framework developed by RDAs.

The provisions of the new clause are clearly designed to encourage the Secretary of State, should he choose to make a direction, to transfer responsibilities for TECs to RDAs in all regions simultaneously. Although I do not accept the new clause, I see that that would appear to be, in principle, a sensible way of proceeding.

Although the English regions are all different, with different needs, I believe that there should be a limit to the level of regional variation in the system. As I said in Committee, I do not believe that one region should be given different functions and responsibilities from another. In the case of TECs, the need for the DFEE to oversee different arrangements in different parts of the country would be very likely to add to bureaucracy, and therefore costs.

With that explanation, I ask my hon. Friend the Member for Denton and Reddish to withdraw the new clause.

Mr. Bennett

The Minister's response is singularly disappointing. At least he could have shown a little enthusiasm for some experiments. However, I do not see that there is a great deal of point in having Divisions unless one can win them, so I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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