HC Deb 07 January 2003 vol 397 cc23-45WH

11.4 am

Adam Price (East Carmarthen and Dinefwr)

Before I begin my speech, I wish to draw hon. Members' attention to the fact that I am a director of an economics consultancy, as is set out in the Register of Members' Interests.

Regional issues have moved up the political agenda over the past two years, so it is fitting that we are discussing regional policy so early in the new Parliamentary year. Since the previous Parliament the Government have radically redefined their position on regional policy. Three years ago the Prime Minister, armed with a Cabinet Office report, declared that the very idea of a north-south divide was misleading and misplaced—but since then the Government have had to accept the undeniable evidence that there are significant regional economic disparities, and they have even set themselves the target of reducing those disparities over the long term. It therefore came as a surprise to read that Mr. Ed Balls of the Treasury was back in regional divide denial mode. Just before Christmas, he told a conference in Leeds that there were vacancies in every part of the country: in Sheffield, Wakefield and Bradford—and, no doubt, in Pontefract and Castleford. However, I hazard a guess that the vacancies in Leeds, North-West, Halifax and Hull, North were at the forefront of his mind.

Most Members present would accept—at least in private—that the United Kingdom economy is deeply divided and that those divisions are widening. That was all but admitted in a remarkably candid Treasury publication produced at the time of the pre-Budget report of 2001, which set out what the Government have dubbed their new regional policy. The Government are more honest about the regional divide than ever before, and more focused on it. They have even talked about bridging the growth gap by the time of the next general election. However, the problem is that the policies that have so far been espoused neither bear any relation to the scale of the problem nor offer any realistic hope of providing a solution to it. In other words, the Government have willed the ends without willing the means, and I wish to explore that contradiction.

To put the matter in the simplest terms, the northern half of the UK is poorer than the south, and it is getting still poorer. According to the OECD, the UK has a higher level of inequality of prosperity between its territories than every other OECD country except Mexico. That prompted the TUC to claim that the UK was suffering greater regional equality than parts of the third world. Even the Government's own figures, from the Office of the Deputy Prime Minister's state of the region tables, the Department for the Environment, Food and Rural Affairs' regional quality of life indicators and the Department of Trade and Industry's regional competitive index, all point to a persistent gap between the economic performance of northern regions and the UK as a whole.

Until the mid 1970s regional inequality was diminishing. However, that gap has grown again over the past 25 years, and has become a gulf. The figures are startling: in the mid 1970s no British region had GDP levels lower than four fifths of the south-east average, but by 1999 no British region outside the prosperous inner core had value added levels as high as four fifths of those in the south-east. In the north—the north-east and north-west taken together—GDP per head fell from 86 per cent. of the south-eastern level in 1975 to only 70 per cent. in 1999; in Wales it fell from 81 per cent. to 66 per cent.

In 1997 it was widely thought that the incoming Labour Administration would adopt a more redistributionist approach to economic policy that would help to slow, if not arrest, the growing disparities in wealth and economic performance between south-east England and the rest of the UK—but the opposite has been the case. A recently published competitiveness index for the UK shows that the three best performing regions—London and the south-eastern and eastern regions—have widened their lead over the three worst by more than 30 per cent. since 1997, and that the gap between London and the north-east has grown by more than 35 per cent.

It is true that regional differences in claimant count unemployment have narrowed, and they are now at their lowest levels for 30 years. Ministers have often used that as evidence that the UK has solved its regional problem, and the north-south divide is dead. That is a deeply flawed and dishonest argument, because, as Labour knew all too well in opposition, the claimant count data seriously underestimate the true extent of joblessness in the economy as a whole, and in the weaker regions in particular.

As the recent study by researchers at Sheffield Hallam university and the university of Warwick has shown, the official unemployment count excludes about 2 million people who were parked on sickness benefit, pushed into retirement or prevented from claiming jobseeker's allowance. Hidden unemployment masks a more severe north-south divide than that which shows up in the official figures. The rate of real unemployment in Liverpool, Glasgow, and parts of the north-east and south Wales is running at more than 20 per cent., compared to about 3 per cent. in the south. The scale of the challenge is clear. The question remains whether the policies are sufficient to the task.

The so-called new regional policy is based on the idea of indigenous development and at its core has been the creation, in England, of the regional development agencies, which have been given the task of raising the regions from below. However, regional policy was not, classically, a matter of raising regions from below, or of their lifting themselves up by their bootstraps. It was a matter of redistributing wealth and activity between regions. If the new regional policy is based on what Ed Balls famously dubbed post-neoclassical endogenous growth theory, the old regional policy was social democratic and Keynesian. Its focus was on the ideal of territorial equity.

The Government's commitment to that ideal remains unclear, because they reject classical regional policy, which they say was based on subsidy and failure. It may have been crude, and it was certainly expensive, but regional policy in the 1960s and 1970s was certainly no failure. In a relatively short time a new layer of industry was grafted on to places such as the north-east of England, south Wales and central Scotland, along with motorways, new towns and other infrastructure to support them. That process created hundreds of thousands of jobs in the areas of greatest need.

Many of the firms that were diverted into the assisted areas in the late 1940s, or in the 1960s and 1970s, are still there today. Morgan Marine in my constituency was attracted to Llandybie in 1967 and is now the largest private sector employer in the area. The end—or, as I like to think of it, the beginning—of the M4 is the last place where a supplier of prefabricated sheds for utility companies, often requiring a police escort for delivery, should be located. It is there as a direct result of what Mr. Balls has disparagingly called ambulance chasing, but I prefer to see as intelligent intervention.

Unfortunately, the policy of active relocation of industry was one of the early victims of the oil crisis, and latterly of Thatcherism. Between 1975 and 1995 the real value of UK regional aid was reduced to less than one ninth of its 1975 level, and it has remained at that level ever since. Solving the regional problem outright would have required three times the number of jobs that were actually created in the 1960s. However, at least a serious attempt at convergence was made, with funding on a scale far better than anything in new Labour's new regional policy. It worked for a while—but then the mechanisms were dismantled and the north-south divided opened up again.

The Government have set themselves a target of closing the growth gap, but, apart from the rhetoric, no formal policy or sustainable strategy is in place for achieving that ambitious objective. The new regional policy does not deal with the north-south divide. It could well exacerbate, rather than alleviate, the disparities, precisely because it is designed to raise regional growth across the board, rather than to make improvements in the north relative to the south. If the new regional policy were really intended to bridge the divide, regional development agencies would have been created only in the north. The same would be true of the regional venture capital funds.

The fact is that the Government will not acknowledge in clear and unambiguous terms the need for explicitly discriminatory measures to encourage development in regions that are lagging behind. If the issue were not so serious, it would be comical to suggest that depressed regions could somehow regenerate themselves from within, against the backdrop of the overwhelming economic dominance of the south-east.

London and its dormitory regions have captured the science base and the trained human capital that are the key drivers of competitiveness in the knowledge economy. Proportionately, London has three times as many graduates as the north-east. In the east and south-east, spending on research and development is about 3 per cent. of regional GDP, but in the north-east it is only 1 per cent. That is partly due to the fact that there is currently no Government research and development expenditure in the north-east. Wales fares little better.

This is a "winner takes all" economy. Successful regions in the south can continually add to their existing advantage by attracting more, and better-qualified, workers, while poorly performing regions are locked into a vicious circle of underdevelopment. Adopting a policy of refusing to intervene in the location decisions of firms condemns those of us who live in the separate countries and the regions of the north, not to the status quo, but to a worsening spiral of decline.

Mr. Wayne David (Caerphilly)

The hon. Gentleman is developing his thesis. Is it not a problem that the competition rules of the European Union, of which Britain is an integral part, work against the kind of strategy that he suggests?

Adam Price

There is a debate at the moment about renationalising regional policy, but that would bring its own set of problems. During the Thatcherite period, European regional policy provided us with an alternative and some degree of alleviation, and I am keen to protect that possibility. As I understand it, we are way below the level of state aid to regions that would be allowed under European rules. There is significant scope for the budget available for regional aid to be increased radically. I will return to European competition policy later.

My case may be dismissed in some quarters as special pleading, but the reality is that regional disparities hurt us all. As the Treasury has pointed out in its report on the new regional policy, regional inequalities can exacerbate macro-economic volatility. With economic growth so heavily focused in the south-east, firms run into bottlenecks and that leads to inflationary pressures. That happened in the United Kingdom in the late 1980s, when an inflated property market and high levels of debt in the south-east and London turned an expansion into a severe recession. Hon. Members will be forgiven for feeling a frisson of déjà vu.

The same spatial disparity explains the two-speed economy of service boom and manufacturing bust that we have experienced over the past six or seven years. Inflationary pressures generated in the overheating south-east have prompted higher interest rates and a higher exchange rate, which have limited output in the under-heated northern economy. We all remember the public relations gaffe made by the retiring Governor of the Bank of England, who said that higher unemployment in the north was a price worth paying to keep inflation in the south under control.

London itself has a price to pay. The capital may have cornered the market in top-paying jobs, but it cannot provide a matching quality of life. The rising cost of accommodation forces people to make longer and longer journeys, and staff shortages in the public sector have an impact on the general quality of life. Without an active regional policy, there will continue to be an inexorable tilt of population and resources towards an already overcrowded region in the south. That in turn will add to congestion, increase the pressures for greenfield development, push up house prices even further and overload an already overstretched public sector.

Mr. David Drew (Stroud)

That is the crux of the matter. The difficulty with traditional regional policy is that it does not take account of the fact that regions are not homogeneous. My region, the south-west, which on paper is one of the better-off regions, contains Cornwall, which has the lowest GDP per head in the country. Surely regional policy has to reflect that situation by moving resources within regions. I accept that the south east is a particular problem because its economy is overheated, but because we cannot move resources from the south-east to the north we need to be more sophisticated within the regions. Surely that is what the hon. Gentleman should be talking about.

Adam Price

Those options are not mutually exclusive. I agree with the hon. Gentleman that the data prove that disparities both between regions—the north-south divide—and within regions are growing. That is why we need a combination of regional economic planning and local economic development strategies. Wales is a national microcosm of exactly the same problems. The overheating in the south-east of Wales, which is caused by a concentration of economic activity, is to the detriment of other regions. Disparities occur between regions and within regions, and we need both sets of policies.

Throughout the history of regional policy, it has been axiomatic that the problems of underdevelopment and overdevelopment are two sides of the same coin. The Barlow commission was set up just before the second world war to prevent unbalanced development and to investigate those issues. It concluded that the congestion problems in London and the south-east and the limited opportunities in other regions were two parts of the same problem. Its core concept, which provided the rationale for the regional policies that had such an impact in later years, was to control growth in the south-east and to direct it to other areas. Barlow was to territorial equity what Beveridge was to social justice. It is arguable that the present Government have killed off both Beveridge and Barlow—but at least Beveridge, unlike Barlow, has been given a decent burial.

The Crow report on regional planning guidance in south-east England, which set out the agenda to let growth rip regardless of the consequences for either sustainability in the south or deprivation in the north, is the praxis for regional policy to date. It is scandalous that the Government are considering building more than 1 million houses in southern England when cities such as Liverpool and Manchester are clearly underpopulated. Building houses to ease house prices in the south-east is like easing traffic by building extra lanes on the M25: in the end, one ends up with greater congestion, greater environmental destruction as new homes are built on the green belt, and traffic nudging closer to gridlock. In George Monbiot's words, the Government seem to have resigned themselves to setting Britain's regional inequalities in stone by letting the south-east build the towns required to house the north's economic refugees.

The argument for redistribution is as strong today as it was in the 1940s because unequal economic growth across the UK regions is a major factor in economic instability and environmental damage. Balanced growth is the key to achieving the Government's stated aim of sustainable growth, but that assumes that they practise joined-up thinking as well as preaching it. The chances of denting the north-south divide are remote when they are planning to build a fifth terminal at Heathrow, and those chances will be remoter still if their regional policy sticks to the principle of treating unequal regions equally. The key issues are whether they are prepared to embrace a policy of positive discrimination in favour of the most deprived regions, and the form that such a policy would take.

The Government's defence is that we operate in a global economy, so if one contains growth in Brighton it will go not to Bridlington but Barcelona. Nobody is suggesting, however, a return to the old policy of doling out licences and industrial development certificates. We advocate a policy of inducing business investment away from the affluent south-east to outer Britain through a powerful package of incentives.

In response to the point made by the hon. Member for Caerphilly (Mr. David), I might add that Britain is near the bottom of the European league for regional spending aid, to which we devote half as much money as France and one sixth of the sum spent by Germany. In the heyday of regional aid, which was 25 years ago, more than £3 billion a year at today's prices went in regional aid to the poorer regions, but regional selective assistance is now down to about £400 million a year. We need to ratchet it up to what it was under Labour Governments in the 1960s and 1970s. We also need to return to a system of automatic rather than discretionary grants, in order to send a clear signal to firms that they will receive financial support for investing in certain areas.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

I am following the hon. Gentleman's argument with great interest and with feelings of solidarity, if I may use a social democratic term. Does he agree that the public sector should provide an example? One of the most important consequences of the Barlow report was the relocation of public sector activity to less favoured regions. My own region is one of the greatest recruiting grounds for the British armed forces, yet it has no civilian Ministry of Defence employment. That is a very good example of something that could be done without worrying about what the European Union might say.

Adam Price

Absolutely. The hon. Gentleman anticipates my concluding point very well. Government is a key driver, through employment and procurement policy.

Mr. Roger Williams (Brecon and Radnorshire)

If that is the hon. Gentleman's final point, perhaps I might raise an issue that he has not mentioned. He talked about service boom and manufacturing bust. Surely the cause of that is an uncompetitive exchange rate. Would not some of the problems be solved if we were to adopt the single currency?

Adam Price

I am not minded to test the patience of the Chair by delving into that debate.

Before I deal with the issue that the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) raised, I wish to discuss tax incentives. The Chancellor can play an important role. He created the stamp duty exemption and the community investment tax credit, but they are fairly small measures, given the current state of play. The Basque country and Navarre very effectively use their power to lower corporation tax rates, as part of the regional economic strategy for regions in north-west Spain. There is no reason why the nations—and, in time, the northern regions of Britain—should not be allowed to do the same, provided that the powers are devolved to meet European Union competition rules.

Automatic grant aid on the scale of the 1970s, together with the use of tax incentives, would have a dramatic effect on jobs and investment. However, such measures are designed to compensate for one thing: the hugely distorting effects of the concentration of wealth in London and the south-east. No other European state is as centralised as Britain. London is not only the administrative capital but the financial, media and corporate capital as well. In almost every field of endeavour, people have to come to London to reach the peak of their profession. London is by far the largest net gainer of graduates, and it is draining the brains from the rest of Britain.

In such circumstances, it is astonishing that instead of using public funding as a counterweight to the concentration of private capital, we do precisely the opposite. An army of half a million civil servants, as well as the headquarters of virtually every public body, are based in London.

Another example is provided by the media, as Phil Redmond argued recently. Channel 4 and Channel 5 could have been set up in the regions, as could satellite broadcasting and facilities for the recently awarded BBC digital licences. Without directives from the Government, it is always more convenient for such companies to centre themselves in London, close to the rest of the media. At the same time, ITV, which is the one truly regional broadcasting structure, has been allowed to merge into what is virtually a national broadcaster. If the Government cannot come up with an answer to the north-south divide, at the very least they should not compound the problem.

I have a very simple—some would say simplistic—and radical suggestion. Let us move the capital north. Economists suggested it 30 years ago, so it is clearly long overdue. Moving out of London would be the greatest single contribution to the regeneration of the regions that the Government could make.

Mr. David

Will the hon. Gentleman give way?

Adam Price

I would like to make some progress, if I may.

All other major English-speaking states have their political capitals away from their biggest cities, and the Japanese and South Koreans are currently discussing moving their capitals. If the capital moved from London, property prices there would become more realistic, and roads and railways a little less clogged. London would still be a great global city—indeed, it is arguable that it would become an even greater one, because it would work better. It could remain the capital of England, and Westminster might one day become an English Parliament. There would be costs, but they would be dwarfed by long-term savings such as lower office costs, cheaper housing, cheaper child care, no need for London weighting and next to no commuting.

Liverpool has nine of the 20 poorest postcodes in the UK, so let us reverse life's location lottery and put the UK Parliament there, in an anglo-celtic city that is ethnically diverse and infectiously inclusive. The Treasury could do its bit by relocating to Bootle. Jobs would spread, as they have in the south, from the north-west to other regions, including Wales and the midlands. And why stop there? What better way to enshrine the independence of the Bank of England than to send it to Newcastle? We might then get policy decisions that hurt the north a little less and help manufacturing a good deal more.

Moving the capital would signal unequivocally that the Government take the north-south divide seriously. It would regenerate the north, take pressure off the south and symbolise a reformed and genuinely decentralised Britain. It would do nothing but good—which is why it will probably never happen.

The Government must do something in their power to break the southern-centric bias. As has been mentioned, they could give serious consideration to relocating quangos and whole Departments, as part of an explicit policy of redistributing Government employment to the regions.

Mr. David

The hon. Gentleman talks about moving the capital of the United Kingdom. Would he extend his thesis and suggest moving the capital of Wales north from Cardiff? In particular, I can think of no better place for it than the valleys of Caerphilly.

Adam Price

There are those who would call Caerphilly an outer suburb of Cardiff—but I am certainly not one of them.

The Wilson Government adopted just such a policy following the 1963 Flemming report and the 1973 Hardman review. As a result, the Driver and Vehicle Licensing Agency went to Swansea, the Department of Employment to Sheffield, the social security records office to Washington—[Interruption.] Washington in the north-east of England, that is. The administrative functions of the Inland Revenue moved to Cumbernauld and Bradford. So far, new Labour's major achievement in that regard is the relocation of its offices from Millbank to Sheffield—although one wonders whether necessity was the mother of reinvention in that case.

History and international experience show us that regional economies are not entirely at the mercy of the market. Policies of regional redistribution, whether of private or public sector employment, can and have had positive effects. Central Government's role is crucial. Although local needs for regeneration are best determined locally, and regional development agencies and the devolved Administrations have a vital role, we can start to tackle regional disparities only if we have a judicious mixture of top-down and bottom-up policies.

Regional inequalities are substantial, and reversing them will require considerably more than the new regional policy currently offers. As the recent Institute for Public Policy Research report argued, the fact that these disparities have persisted for decades, and have been ignored and even denied by UK-wide institutions, exacerbates the sense of injustice. Those to whom injustice has been done now look to the Government to discover how the wrongs of the last century can be righted in this century.

Several hon. Members

rose—

Mr. Edward O'Hara (in the Chair)

Order. It might help Members if I say that it is desirable for the winding-up speeches to start at 12 o'clock. Members wishing to speak may gauge their contributions accordingly.

11.33 am
Hywel Williams (Caernarfon)

I congratulate my hon. Friend the Member for East Carmarthen and Dinefwr (Adam Price) on securing this debate on regional policy. As nationalists, we are rather more interested in national policies for economic equity, but let us not quibble over nomenclature this morning.

This debate is not on regional policy only as it relates to Wales, although the situation in Wales is especially instructive, but on regional policy per se. My hon. Friend has already referred to the Government's welcome, if belated, recognition of the deep regional economic divisions in the UK, divisions that extend to all manner of fields—wealth, housing, health and employment as well as economic activity. No one would deny that there are divisions within, as well as between, the regions as the hon. Member for Caerphilly (Mr. David) mentioned earlier. One reason why the "region" of Wales has cause to be glad that it has a National Assembly is that body's early decision to produce a proper index of multiple deprivation in Wales. Using measures that are appropriate to Wales—especially rural Wales—that index has exposed disparities that were previously masked or disregarded. They include accessibility of services, quality of housing and proper appreciation of the drain on family finances that running one car can cause, let alone two, as is often the case in rural areas.

Areas in my constituency hitherto regarded as rural idylls have emerged as areas of deep and real deprivation. That was dramatically exposed recently by research undertaken by Gwynedd county council. It showed that in the Llŷn peninsula, which has some of the worst housing conditions in Wales, there is pressure on prices in housing markets from comparatively rich outsiders from the overheated regions mentioned by my hon. Friend the Member for East Carmarthen and Dinefwr. The price pressures combined with low local incomes meant that no one on an average wage could buy any property that was advertised locally. Some 20,000 local people on average wages could not access the local housing market.

Mr. Philip Hammond (Runnymede and Weybridge)

Does the hon. Gentleman recognise that that is also a problem in London and large areas of the south-east? It is not confined to rural Wales.

Hywel Williams

I agree with the hon. Gentleman. However, the point I am making is that prior to that small piece of research, the problem was not as apparent as it now is.

One of the most telling lessons of that thorough examination of deprivation in Wales is that regional disparity within our country has lessons for us. It startlingly mirrors divisions in the United Kingdom. Many of the south Wales valleys and the south-west and north-west of Wales are in an objective 1 area, so defined by the European Union because of the low GDP in the area. The areas that do not come under that definition are the south-east and the north-east, which are the areas that have experienced huge Government investment in infrastructure, industry, research and development, and in the case of Cardiff a glut of Government jobs and a growth in GDP.

The effects of that direct investment are clear: the overheating of the local economy, labour shortages, huge house price inflation and pressure on infrastructure. The investment is directed—and I use the term "directed" advisedly. The choice is not between regional investment or no such investment, but between investing in the poorer regions or investing in the rich south-east. That is, in part, an economic decision, and the effect of relying on the economic imperative is quite clear. For example, I was interested in the autumn to see a report from the Venture Capital Association that revealed that 48 per cent. of all venture capital investments were in the south-east of England. Wales, Scotland, Northern Ireland and the regions of England did not get the share that they would expect on a per capita basis, let alone on a needs basis.

Investing in the poorer regions or in the rich south-east is a political choice. As in all political matters it is a question of priorities and, as my hon. Friend has shown, the Government's priority is far from redistributionist. The case of Wales is instructive for the UK as a whole, where the not-so-hidden hand of Government favours the rich south-east of England. The south-east of England is massively rich and has a declining environment, making it difficult for people on average incomes to live there.

To move on to a further constructive point, politicians from Wales and Scotland—and elsewhere in the UK—are often accused of whinging, complaining and always rattling the tin, so I want to describe the positive effect of a proper regional policy. The regions have something positive to offer to the great pensions debate in addressing the so-called demographic time bomb. We all get very worked up in the pensions debate about the dependency ratio—the proportion of those in work to support those in benefits. That ratio has been falling for many years and is one of the grounds cited in the arguments for pensions reform. However, the contribution of regional policy to that debate has been largely ignored.

I refer to an interesting exception: the recently published Catalyst report, "The Challenge of a Longer Life—Economic Burden or Social Opportunity" published in December 2002. Briefly, it points out the scope for increasing economic activity rates among older people. The regional element is clearly illustrated by the fact that in the period March to May 2000, the activity rates among men aged 50 to 64 and women aged 50 to 59 was 61.3 per cent. in Wales compared with 76.8 per cent. in the south-east of England. That suggests that any effects of greater prosperity leading to earlier retirement are outweighed by the strong demand for labour, which keeps older people in jobs. The report concludes that: Given a strong demand for labour and the greater willingness to employ older people, it is not difficult to envisage sufficient increase in activity rates to maintain the current ratio of workers to non-workers across the population as a whole". Not only would a proper and successful regional policy tackle regional inequality, the gross waste of human resources and the issues of poverty, health and housing that I referred to, but it would have the utility of being part of the answer to one of the most pressing problems of social policy.

11.40 am
Mr. Wayne David (Caerphilly)

I begin by congratulating the hon. Member for East Carmarthen and Dinefwr (Adam Price) on securing this debate. It is vital that we focus on the development of a coherent regional policy in this country, and I agree that that has not attracted sufficient attention, at least in the recent past. I am delighted that he supports my campaign to have the capital city of Wales moved north from Cardiff into Caerphilly. That would be a positive step forward for the economic development not only of Britain, but of Wales.

I have some reservations about some aspects of the thesis that the hon. Gentleman developed at length. There are no absolutes in this debate—it is not a question of black and white alternatives. Regional policies are, of their very nature, complex economic instruments, and it is often a question of where one places the emphasis. I have reservations about the notion that regional policy can be based on the idea of redistributing resources from rich regions to poor regions—today's world is far too complex to allow a policy based on such a premise. We are in a new situation, with the development of the internal market, which will increasingly become more integrated, especially if we join the single currency. In addition, the process of globalisation is having a profound effect on the nature of our economies, and that effect will become even more profound in the near future. It is therefore essential that we develop new policies, not simply policies that are based on the assumptions of the past.

I agree with the hon. Member for East Carmarthen and Dinefwr that regional policies such as those pursued by Labour Governments in the 1960s and 1970s were effective, but it is wrong to assume that such policies can work in this new century. Rather than a strategy that is based solely on redistribution and on the idea of attracting footloose investment into less prosperous areas, we need a new kind of regional policy. Emphasis must be placed on developing indigenous entrepreneurship. The hon. Gentleman might be dismissive of such terms as "endogenous economic growth", but it is nevertheless true that the poorest regions in the United Kingdom lack entrepreneurial activity. That is an historic problem that cannot be solved overnight, but it must be addressed in our regional policy.

The development of the entrepreneurial action plan in Wales points the way forward. It is vital that we pursue a cultural change in many of our older industrial regions, but our approach to economic development is rooted in our educational system and lifelong learning. It has as its end result a change in the cultural attitude to growth and economic development.

Mr. Roger Williams

Does the hon. Gentleman agree that the poorer regions of Great Britain and of Wales in particular have often been sold to potential investors as low-wage economies with low unit costs? We should take a more positive approach by improving skills and infrastructure, so that they are better places in which to do business, rather than places with low wage rates.

Mr. David

I agree absolutely—in fact, that was my next point. Rather than rely simply on attracting inward investment to less well-off regions on the basis of low wages and, often, poor health and safety standards, we should aim to create an economy that is based on high added value and high skills—on the quality of the people and the work force. That is where the emphasis of regional policy should lie.

Following on from that is the need for a regional policy that addresses fundamental weaknesses not only in the economy, but in the nature of our societies. The hon. Member for East Carmarthen and Dinefwr referred to the high levels of economic inactivity in many of the poorest areas and he was absolutely right. The question facing us is one not only of unemployment levels, but of how many people are economically active.

A great problem in many of the older industrial areas is the large number of people who are physically ill. It is vital that that issue is linked to the welfare to work debate. As part of the regional policy concept, we must consider ways of improving the health of large sections of the population. In some wards in parts of south Wales, for example, as many as one in four of the working age population is economically inactive owing to illness. If we are serious about increasing the GDP of such areas, we must improve the health and well-being of those people, so that they are potentially able to enter the labour market and eventually secure employment. That is one crucial element that we must consider.

Such ideas were not seriously considered 20 or 30 years ago. It is vital that we are not concerned simply with turning the clock back and looking at what Barlow said or what previous Labour Governments did. We must address the situation as it exists in our country today and plan for the future. As I said, this is not an either/or question. We need an holistic approach that pulls together the best of our experience and creates a vision for the future. That is what I hope our regional policy will consist of in this new century.

11.48 am
Mr. John Grogan (Selby)

I congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) not only on securing the debate, but on an outstanding speech. In its breadth, it was a model of its kind. My contribution will be more modest, but given that the debate has a distinctive Welsh flavour, and in the week that Michael Vaughan was voted the man of the Ashes tour, I thought that a contribution from God's own county would be appropriate—[Interruption.]—especially in view of the constituency represented by the Minister.

I shall take as my text just one line from the regional economic strategy document prepared by Yorkshire Forward. This year's report says: The over-arching target of above European average growth in Gross Domestic Product per head is being achieved, but the gap with London and the South East is widening and strong growth in services contrasts with a shrinking manufacturing base. I am a fan of Yorkshire Forward's work, but I shall point out three different issues relating to Yorkshire—there may also be implications for countrywide policy—on which a difference could be made in respect of reducing the gap.

First, one of the big challenges in regional policy in Yorkshire over the next year will be the closure of the Selby coalfield in my constituency. That has implications not only for my constituency, but for the whole of Yorkshire. According to the report by Lord Haskins, it will involve 2,000 jobs directly and about 5,000 indirectly, spread out across 600 firms in West, South and North Yorkshire. One of the great challenges in formulating Yorkshire's regional policy is to see whether the coalfield can close in a different way from the way in which coalfields closed in Yorkshire and throughout the country in the 1980s and 1990s.

I briefly draw hon. Members' attention to Lord Haskins' report, in which he says that the economic "shock" of the closure of the Selby coalfield, which was due in spring 2004 but now looks as though it could happen at the end of the year, will amount to £160 million. Lord Haskins has produced a package of measures and asked for £11 million of new Government money to attract inward investment, retraining and so on. I urge the Minister—a young man with good connections—to urge the Secretary of State for Trade and Industry to reply quickly to the report. The matter is urgent and we want the taskforce's recommendations to be implemented speedily.

The hon. Member for East Carmarthen and Dinefwr characterised the Government's regional policy well when he said that, rightly or wrongly, it built on the strengths of the existing economy. He talked about the importance of science in reducing regional disparities. I bring to the Minister's attention an example in the grain of the regional policy in Yorkshire—the European spallation source project. I will not go into great detail, but the project is currently Europe's leading scientific project. It involves a neutron particle separator that will be the Hubble telescope of condensed matter.

Last year, it was my duty to ask a local parish councillor in Selby whether they fancied a European spallation source next door to them, as there is a site in Burn in my constituency. Yorkshire Forward's No. 1 project is to attract that facility to Yorkshire, which will build on the strengths of the White Rose Consortium of Leeds, Sheffield and York universities. As I said, the Minister is a young man of impeccable contacts, and I urge him to secure a meeting between the Yorkshire universities, Yorkshire Forward and Lord Sainsbury to discuss the project. At the moment, Lord Sainsbury says that it is too early to determine how the process would work throughout Europe, but it is never too early to discuss such matters. The bid for the project is the equivalent for Yorkshire of an Olympic bid, and I hope that we can secure a meeting to discuss it.

I add to the comments made by the hon. Member for East Carmarthen and Dinefwr by stressing the importance of regional media. In a debate on regional assemblies, the right hon. Member for Richmond, Yorks (Mr. Hague) said that we did not need a regional assembly in Yorkshire as we had a cricket team and an attitude. I do not agree with his conclusion about regional assemblies, but the remark about the cricket team and the attitude is true. However, we also have Yorkshire Television. Regional media are terribly important to a sense of identity and to the economy, and Yorkshire Television has produced a fascinating document outlining all its contributions to the local economy.

I draw hon. Members' attention to early-day motion 260 in my name, to which there are almost 80 signatories, to strengthen the Communications Bill by strengthening regional television. According to the Producers Alliance for Cinema and Television, the number of regional opt-out slots on ITV has decreased from 8,700 hours to approximately 6,600 hours over the past year. The number of regional productions on the BBC has increased slightly to a total of 5,300 hours. My early-day motion would strengthen the requirements for regional production on the ITV network and allow the ITV companies to be regarded for the first time as independent companies in bidding for the BBC's independent quota. London luvvies—companies based around London—currently dominate that quota. ITV companies such as Border and Yorkshire should be able to bid for that national quota.

Finally, the Regional Assemblies (Preparations) Bill is now in the House of Lords. It would be enormously strengthened if transport were placed entirely under the auspices of the new regional assemblies. There is much strategic planning in the Bill, but the regional assemblies do not have a sufficient job to do. Transport is the most obvious sector with which regional assemblies should deal. We should not continue with passenger transport executives and authorities in Yorkshire. It is ridiculous to have a passenger transport authority in both West and South Yorkshire and a regional assembly to deal with the strategic planning of transport. Only one body is required across the region, which would allow a regional travel pass and perhaps a concessionary pass for pensioners. We should popularise the idea of having a regional assembly.

Finally, the Minister referred to consultation on the timing of referendums. I am a supporter of regional government and I know that the level of support in Yorkshire is different from the level in the north-east, for example. Business supports a regional assembly more in the north-east and the north-west than in Yorkshire, so the county should not be in the first wave of referendums for regional government: the other regions should go first.

11.55 am
Mr. David Drew (Stroud)

I came here for the previous debate and initially had no intention of participating in this one. However, I am moved by the excellent contribution of the hon. Member for East Carmarthen and Dinefwr (Adam Price) to make my own contribution.

My hon. Friend the Member for Selby (Mr. Grogan) rightly stressed the importance of contextualising regional policy within the wider debate. Greater interest might follow from understanding the importance of the economic redevelopment of regions. People might see more clearly the need for political and administrative improvement. I have always supported some form of regional government because otherwise we end up with unelected quangos freewheeling and taking decisions off their own back, which is neither acceptable nor fair. We can advance the regional debate only when we reconnect economic decision making to the political aspect of governance, which is the proper starting-point. I disagree with the hon. Member for East Carmarthen and Dinefwr on his historical analysis of regional policy. We need to look within regions as well as between them.

Rural deprivation is strongly connected with agricultural decline. It is difficult to see in terms of the aggregation of numbers, because the agricultural industry in this country is small, but many Labour Members are worried about agricultural decline. We must not just talk about diversification, but make sensible and cogent arguments for it. Rural decline is nothing new: it has been with us virtually for ever, dating back to the agricultural revolution. It has been heightened by the more difficult and rapidly accumulating problems that the industry faces today.

I am a little surprised that the decline in manufacturing has not been emphasised. I would link regional decline clearly with the decline of our manufacturing base. It will be felt more harshly in regions where manufacturing has traditionally been more important. We may be clouding the issue too much. A proper regional policy should be running alongside a proper manufacturing policy. Whereas I am critical of our inability to deal with our agricultural decline, at least we have a policy across Europe, through which resources are channelled into the industry—perhaps in the wrong way and insufficiently, but we are trying to deal with the problem.

It is one of the European Union's greatest weaknesses that it has a policy supposedly based entirely around competition rather than support. That is foolhardy in various ways, most clearly because it is not working—if it is working, why is manufacturing decline taking place throughout this country, Europe and the developed world? Some may say that such decline is inevitable because, as my hon. Friend the Member for Selby mentioned, companies will always seek out low-wage economies whether we like it or not. However, that does not excuse us from examining policies to deal with manufacturing.

The daftest element of all the daft things done by the EU is the idea that we cannot intervene in manufacturing decline because it would be a form of state aid, which is contrary to competition policy. We know that that is blatantly unrealistic and dishonest. All countries intervene, but some do it more covertly and cleverly than my own Government. I wish that we were more overt and said that we were going to intervene, and why and how we would do that. My argument is that the regional policy debate cannot be masked by one that avoids the inevitable need for a proper debate on where we want manufacturing in this country and the rest of western Europe to go. Surrendering and saying that the decline is all down to the market is not acceptable. It is time that we recognised that sensible, strategic planning, proper use of infrastructure investment, and support for what could be called losers, as well as the winners, to turn them into more successful companies can achieve our aims.

Regional development agencies can help in that process. I speak highly of the South West of England Regional Development Agency, because it has intervened in my constituency in a big way by taking on a site in Dursley in which to reinvest and regenerate. That is a model for action that could be taken elsewhere, although it is always against the background of the threat of the European Commission's declaring such action to be unacceptable and anti-competitive. However, we cannot pretend that we can run a country with any manufacturing basis unless we have that level of intervention. We should be open and honest. We should encourage the debate initially and then encourage action; otherwise, regional policy will become irrelevant as we see a massive decline of core employment. I am not a believer that an economy can be run on that basis. That was the greatest fallacy of Thatcherism—

Mr. Bill O'Brien (in the Chair)

Order. I understand that the hon. Gentleman is aware that the winding-up speeches start at 12 noon.

12.2 pm

Matthew Green (Ludlow)

I, too, congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on securing the debate and giving a wide-ranging and entertaining speech. Hon. Members should be made aware that he has been sharing his views on moving Parliament to Liverpool with Derek Hatton on Radio Wales in recent days, so he has some interesting allies for his proposals.

The hon. Gentleman spent a long time highlighting the problems, and although his solution has some attraction in principle, it is a little simple. He avoided some of the more obvious problems that are creating the disparities that he highlighted so well. I will not try to repeat what he said about those, but one subject that he avoided, which is pertinent to the issue, is the comparative strength of the pound and euro. The disparity has hit manufacturing, farming and tourism, which are key component industries of the north, Wales and Cornwall.

We cannot escape the fact that the disparity exists, and if we were in the euro, we would not assume the same disparity in economic growth between London and the south-east and the rest of the country. The hon. Gentleman's party has the problem that it would probably prefer a separate Welsh currency—a Glyndwr, or something similar—which would have problems of its own. He omitted to mention the exchange rate, which is a key component of the debate, and which has probably resulted in the loss of about half a million manufacturing jobs since Labour came to power. Much of the blame for that can be laid at the door of the Government's reluctance to call a referendum on the single currency.

The hon. Member for East Carmarthen and Dinefwr rightly highlighted a number of other problems, and I will draw attention to a couple more of the issues. The hon. Gentleman spoke about housing, and there is no doubt that there is a great housing problem in London and the south-east. However, a housing needs survey that has just been carried out in my own constituency, in South Shropshire district, just on the English side of the Welsh border, revealed that for anyone on average local wages, there have been no houses available to buy for the past six months. The reason why that situation is different from that in the south-east is that we are punished by the property values in the south-east. People retire to Shropshire, and that drives up the house prices, so people who work in the area can no longer afford to live there. As has been highlighted, Cornwall and other areas face the same problem.

More worryingly, there is an acceleration of the regional divide in issues such as broadband. Because there is a high population density in London and the south-east, as well as many businesses that use a great deal of money, organisations such as BT will fall over themselves to provide broadband in those areas. However, in the less economically active and more sparsely populated areas, the unit cost of installing broadband is greater, and BT will be reluctant to do so. In my own area, Advantage West Midlands is doing wonderful work in trying to get broadband into rural areas, but it remains a struggle, and we are years behind. The availability of broadband will encourage business growth in London, the south-east and the major economic centres, and the Government must address that issue in a way that will help the other regions of the United Kingdom.

The hon. Member for East Carmarthen and Dinefwr mentioned that there was some attraction in moving parts of government out of the south-east. I will not discuss further what those parts of government might be. There are, however, other solutions that must be considered.

A key issue is the need for a proper regional government policy for England, and the need to strengthen regional government in Wales. One of the ironies of the proposals being put forward for regional government in England is that the regional governments will in effect have a tax-varying power. Wales would then be the only place in the UK that did not have such a power. The Government have not commented on that, but I assume that they will eventually realise that that situation cannot continue, and will address it—but there are different views within the Government as to how they might deal with the issue.

If regional government is to be set up in England, the lesson to be learned from Wales, compared with Scotland, is interesting. The Scottish Parliament was given substantially more powers than the Welsh Assembly, and has probably been more successful because of that. I support the Welsh Assembly and the work that it does, but it has not performed as well as the Scottish Parliament, probably because it does not have the same powers. The same thing will happen in England. The proposed regional assemblies will have almost no powers at all. They will have an overview of the quangos that already exist, but will not be able to control them.

I will give two examples. The regional assembly will be able to decide on its preferred regional transport strategy, but the decision whether that strategy will be implemented will be made at the centre, because central Government will decide which schemes are funded. The money will not go into a big pot for the regions to decide where to fund schemes. The regions will come up with the idea, and Ministers will make the final decisions on whether to proceed. The same will be true for health: there will be a regional health adviser, but he or she will be appointed by the Minister.

The regional assemblies are in danger of being toothless—a fact that was touched on many times in Committee on the preparatory legislation. I do not want to go into too much detail, but there is an issue in some parts of England about the boundaries of the regions, which were set by the Conservatives for administrative purposes. We tease them about "their" regions—but that is why they were set up, and they are now being used to set up regional elected assemblies. There are problems in parts of the south-west, the south-east and the west midlands, which do not feel that they belong in the Government's current regions. We must address the boundary issue before we are likely to get a popular, referendum-winning solution.

The hon. Member for East Carmarthen and Dinefwr avoided mentioning the Barnett formula, which is 20 years out of date. We cannot carry on pretending that it does not exist; it needs to be properly reviewed by a commission, although I do not pretend to know all the answers that may come out of such a review. We need radical housing policies in the south-east and in other parts of the country, to allow houses to be built by means of shared equity, renting or golden share schemes to keep them out of the open market. That is what is needed to keep the economy going.

The problem is that the Government do not have a firm idea of their regional policy—that is the title of the debate. They have a tentative approach to regional assemblies; they do not understand that they mean decentralising from Westminster, moving civil servants away from London to the regions and giving those regions power over things that are currently decided in Westminster. That is what real regional policy would do; that is what would help to drive the economy in the regions and bring lasting benefit to people throughout the United Kingdom, including those in London and the south-east who suffer from the negative aspects of the Boom—the housing and transport problems, and the congestion. A positive rather than a tentative approach from the Government would be welcome.

12.12 pm
Mr. Philip Hammond (Runnymede and Weybridge)

I, too, congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on securing the debate. I confess to having been puzzled when I saw the title "Regional Policy" standing in the name of a Welsh nationalist Member. I wondered whether the debate would be about English regional policy, or what I might call old-fashioned regional economic policy. I congratulate the hon. Gentleman on having carefully crafted his arguments to keep the debate in order.

I have much sympathy for the hon. Gentleman's argument about the north-south divide, and I see it as two sides of the same problem, as my constituency is in a part of the country that suffers from the problems of economic overdevelopment. However, the hon. Gentleman and I are not likely to agree on the solution. Neither my party nor I are attracted to the Gosplan approach that he favours, of redirecting investment. One or two hon. Members fell into the trap of talking as if the vast bulk of investment were public investment, whereas in our economy most investment is private. Private investment can be coaxed, persuaded and incentivised, but it cannot be directed.

The hon. Gentleman looked back with nostalgia to the '60s and '70s and proclaimed that the era of direct subsidies was "no failure". However, he readily acknowledged that when the direct subsidies dried up in the '80s and '90s, the regional economic disparities reappeared—thus neatly putting his finger on the problem with using direct subsidy as a solution. I would argue that the measure of the success of regional economic development funding is the achievement of long-term, sustainable, self-generating growth within a region.

I would argue, too, that as we move from an economy with a regional pattern largely based on the existence of natural resources to one overwhelmingly based on human resources, the infrastructure and skill deficit must be addressed in any effective long-term regional policy. We must ensure that we improve transport infrastructure in a way that delivers immediate effects. This is a chicken-and-egg problem. Although everyone would like railways and airports in their regions that will help to generate economic development, such transport investments depend on volume and critical mass to deliver effective services. I am afraid to say—because it flies in the face of much Government thinking—that only roads, as a form of transport infrastructure, are likely to deliver the short-term immediate benefits to the regions where economic development needs kick-starting.

The hon. Member for Ludlow (Matthew Green) picked up on one of the most important issues—communications infrastructure. As our economy is transforming into a human resource and service-based economy, the broadband revolution held out the prospect of removing the problems of isolation and remoteness, and creating an equality that could not have been dreamt of even 30 or 40 years ago. Unfortunately, the Government failed to deliver on their ambitious targets for the introduction of broadband. Local loop unbundling has been a miserable failure, with the result that genuine broadband is a big city phenomenon and ADSL is a large town and suburban phenomenon. Even where I live, just 26 miles from the Palace of Westminster, we do not have ADSL, and there is no prospect of getting it in the near future. The Government have compounded the problem by taking £20 billion that would otherwise have been available for investment out of the telecom sector, through the third generation telephone licensing round. That has meant that technologies that might be able to deliver in remoter areas, such as wireless local loop technologies, remain undeveloped.

Mr. Cousins

Does the hon. Gentleman propose that the Government should give some of that money back?

Mr. Hammond

I do not suppose that the Chancellor of the Exchequer would be keen to do so, given the predicament in which he currently finds himself, having adopted a tax-and-spend policy and then discovered that tax receipts will be somewhat lower than expected. That is certainly an interesting suggestion, however. Perhaps the Minister would care to put it to his colleagues at the Treasury.

The hon. Member for Caerphilly (Mr. David) identified one of the key issues that must be addressed in any effective regional strategy: the development of entrepreneurship in regions that, because of their industrial past, do not have strong traditions of entrepreneurial development. I hope that regions, both in England and beyond, in the devolved Administrations, will build on their advantages and regional strengths and promote clustering as a way of developing self-sustaining local indigenous growth. The EU-funded science project in Selby is just such an example, which has a genuine prospect of securing an effective self-sustaining local cluster.

Of course, the Government's approach is that elected regional assemblies are a vital part of securing regional economic growth and balancing regional economic development. We see no evidence of that. Indeed, the Scottish example seems to suggest the opposite. Since devolution, growth in Scotland has lagged behind growth in the United Kingdom. There is no evidence that an extra tier of politicians and bureaucracy will narrow regional differentials, and throughout the European Union, inequalities between regions have been growing during the past 15 years, despite the fact that many EU countries have strong traditions of regional economic growth.

Even the director general of the CBI is sceptical. He says: Business doesn't believe that regional assemblies will deliver. We feel that they won't make people's lives better. If anything, we believe that there is a real danger they could make a bad situation even worse. The Government are politicising the current RDAs by grafting a tier of elected oversight on to them. They hope that that will provide a panacea, but it will have the opposite of the desired effect.

If I am to give the Minister 10 minutes in which to reply, I can speak for only one more minute, so I shall make just one more point. I rather expected a Welsh Member to mention the availability of match funding, but no one has done so. Such funding would allow full use to be made of the EU structural funds that are allocated to Wales for 2001–06. Where do the Government, and in particular the Deputy Prime Minister, stand as regards the Barnett formula?

In an interview under the heading "Scots and Welsh face subsidy axe", which was published in The Guardian just before the last general election, the Deputy Prime Minister said that the forthcoming review of local government finance, which was promised soon after the election, would include a detailed examination of funding throughout the UK. He promised that there would be "blood on the carpet" as a result of the review. Are the Government committed to retaining the Barnett formula, which might be seen as disadvantaging Wales, given the measures of genuine deprivation there? On the other hand, are they now prepared, as the Deputy Prime Minister suggested, to take on the Scottish lobby and risk the tartan backlash by revisiting the formula as part of their review of regional distribution in England?

12.21 pm
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Mr. Christopher Leslie)

I have only a short time to respond to the debate, which has generated several intriguing ideas. First, I congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on proposing the subject. The debate has been very wide-ranging, moving from an exposition on the single European currency by the hon. Member for Ludlow (Matthew Green) to issues such as broadband communications. All those issues are relevant, but I shall try to restrict my contribution to matters that fall within my ministerial responsibilities, and those that relate more directly to regional policy.

The Government take regional policy very seriously. We recognise that the need to increase our regional focus on economic development is not only about fairness and prosperity but about ensuring that there is strong cohesion between all parts of the United Kingdom. We want to work hard to ensure that that objective is taken forward and that regional and national prosperity goals are fully integrated into all our delivery mechanisms.

The hon. Member for East Carmarthen and Dinefwr recognised that the Office of the Deputy Prime Minister, together with the Treasury and the Department of Trade and Industry, has responsibility for a public service agreement target specifically on regional economic performance. Our target is to make sustainable improvements in the economic performance of the English regions and, over the longer term, to reduce the persistent gap in growth rates between them.

My hon. Friend the Member for Selby (Mr. Grogan) highlighted the fact that that would be a particular challenge in certain parts of the country, including our home territory of Yorkshire, which we are both proud to come from. He mentioned the coal industry, and said that the Government's response to the taskforce must be strong and relevant. He also mentioned the campaign on the location of the spallation facility in Yorkshire, and I will examine any representations closely.

The gap in economic growth rates has persisted for many years and under all Governments. Now, for the first time in a generation or more, we must focus on tackling some of the disparities in economic performance between the regions and nations of the United Kingdom. We must all focus on creating the conditions for growth. The Welsh Assembly, the Scottish Executive—I will make sure that I get my brownie points by being the first person to mention that—and the Northern Ireland Administration, similarly, focus on economic performance.

I am not entirely convinced by the solutions that the hon. Member for East Carmarthen and Dinefwr would pursue. He mentioned, for example, his opposition to building new homes in areas where pressures are high and workers—particularly public sector workers—face significant difficulties. When he talks about redistribution, I suspect that he really means telling people where they should and should not live. I am not sure that that approach is possible. We cannot have an approach that constrains, smothers or suppresses prosperity. My hon. Friend the Member for Caerphilly (Mr. David) rightly highlighted the need for a more sophisticated approach appropriate for today's environment, rather than looking back at previous policies. We need to stimulate demand and growth where those are lower than their full potential.

The hon. Member for East Carmarthen and Dinefwr and others touched on the issue of location in the public sector. His argument was about moving the capital to Carmarthen. Some may argue that the capital should be in Bradford—but although I might see the moral argument for that, it is not the Government's policy.

We will take further steps to improve our regional policy, such as ensuring that awareness of regional devolution features strongly in civil service training and development, with the aim of increasing the mobility of civil servants between headquarters and regional offices. Whitehall Departments will also be encouraged to consider the balance of their staff between the centre and the regions, in terms of effective policy design and implementation. In particular, Departments will have to demonstrate the case for not locating new streams of work outside London and the south-east.

Hon. Members are familiar with the idea of the north-south divide, but they should not be surprised to hear me say that that notion is a rather simplistic and possibly inaccurate way to describe the imbalances in economic performance in the UK. I do not deny that there are such imbalances between regions, although it should not be forgotten that differences in economic performance within regions can be even more marked than those between them. We are committed to tackling disparities wherever they occur. We must make sure that we consider the imbalances both between and within regions, and create the conditions that reduce the gap in growth rates between the south-east and the east, and the other six regions. We must tackle disparity and disadvantage wherever they occur.

The office of the Deputy Prime Minister is not the only Department that has the objective of reducing such disparities; that objective is built into the whole range of the Government's policies. The Government set the framework, but from the centre, we can only do so much. When it comes to revitalising a region, we accept that Whitehall and Westminster do not necessarily know best. We were elected on a platform that included bringing devolution to Scotland and Wales, and we set up regional development agencies as strategic drivers of economic development in England. Their work has been successful so far. They are already tackling the causes of low economic development in regions. Firms are being helped, neglected neighbourhoods are being regenerated, and regional strengths are being augmented. Hon. Members may have seen, for example, the contribution of the North West Development Agency in transforming east Manchester, during the recent coverage of the Commonwealth games.

Many hon. Members representing Wales have spoken. Although it is outside my ministerial responsibility, I think that we have a proud record of devolving responsibility for economic development to the National Assembly for Wales. That has helped the successful economic approach that the Welsh Assembly Administration have taken. The First Minister has taken a personal role in assuming responsibility for northern Wales. Such approaches have helped to lead to success in a number of ways.

Much as I would love to talk about the Conservative party's record on regional government, I am running out of time, and it would not be right to let the debate pass without mentioning the move towards elected regional assemblies for England, to which my hon. Friend the Member for Stroud (Mr. Drew) alluded. They could be crucial to the success of the regions by making sure that the politics links with the economic policies for the future. Our vision is that the UK will perform more strongly; all our regions and nations will have to improve their economic performance if we are to succeed. The Deputy Prime Minister has consistently championed regional policy, and I am proud to have the opportunity to work alongside him.