Department of Trade and Industry

Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)

The New Regional Policy

Investing in the Regions Conference, London

Wednesday, November 15, 2000

Other speeches

This is a good time to consider how we can invest in our regions and also the role that Government can play.

We are at a very significant stage in the economic development of the United Kingdom. The latest figures published this morning show that over 1.1 million more men and women are in work than in 1997. Claimant unemployment is now at its lowest rate since October 1975.

Long term youth unemployment has halved in every region of our country.

And in the pre-budget report last week the Chancellor confirmed that we have now laid the foundations for steady long term economic growth and stability.

Inflation is at its lowest level for thirty years.

We have a higher level of business investment as a share of our economy than at any time in forty years. And long term interest rates are around the lowest for thirty years.

Full employment is a realistic target. We have moved away from the old 'stop go'economy of the past.

And that means we have a once in a generation opportunity now that we have laid those foundations for economic stability. An opportunity to establish lasting economic success.

The task of Government is to ensure that success filters into all parts of the country.

History teaches us that greater prosperity does not automatically lead to greater sharing of wealth across regions, cities or communities.

Even where poverty is on the decrease as it is in the United Kingdom, there can be areas of deprivation where people are excluded from the benefits of that economic growth.

This is unfair and divisive. It also represents a huge waste of economic and human potential.

The issues are complex. Within each region we can often see prosperity alongside areas of poverty.

Different communities face different local problems. The challenges facing inner cities, our rural communities and areas of industrial decline are shared between regions and not exclusively within one or a number of regions.

We are tackling these problems through targeted schemes, to improve health, education, housing and employment in areas with particular need.

No two places are the same. There is no single solution that can be applied across the United Kingdom. What we need therefore are policies which empower communities so they can determine their own future and co-ordinate action at the neighbourhood, local, regional and national level.

Finding local solutions to local problems is what we need to do. And that means focused support on the needs of communities. So within regions we have to adopt an approach that addresses the differences which exist.

But we need to look beyond these local problems and consider the broader regional picture.

The speech I am giving today is one of three which will outline new thinking and a new approach to regional economic policy and in particular the role Government and specifically the Department of Trade and Industry can play in this important area.

In the speech I want to make this morning I am going to describe the situation we have at the moment and the reasons why having an active regional industrial policy is crucial.

I begin by acknowledging that the description north-south divide is an over simplification. We just need to look at Cornwall in the South West that has such a low level of GDP that it now qualifies for objective 1 funding. It clearly demonstrates that the north-south divide description is an over-simplification.

But having said that, it is clear that there are disparities between regions.

The employment figures published today show that there are more people in work than ever before. That is good news.

It's also good news that claimant-count unemployment has gone down by more than 37% since April 1997. A more detailed look at today's figures show that whilst claimant count has gone down by 26% in the North East this compares with 48% in the South East and South West.

Since 1990 the share of GDP within the UK has declined significantly in the North East, the North West, the West Midlands, Wales and Scotland. It has increased significantly in the Eastern Region, London and the South East.

These are symptoms of something fundamental. We don't have to look far for some of the causes.

In 1998 manufacturing businesses invested over ten times as much in research and development in the South East - 1.9 billion - than in the North East - 164 million.

And in the North East and West Midlands there are nearly twice as many people of working age with no qualifications compared to the South East; nearly 20 percent of working people in the North East and West Midlands have no qualifications compared to just over 11 per cent in the South East.

Lack of investment, poor skills and education qualifications, these are some of the underlying causes we need to tackle.

In the modern economy we can not build a strong economy, a strong nation, if we have a tail of under performing regions. We need all our regions firing on all cylinders.

The needs of our regions cannot be ignored.

This is imperative for a government elected to govern for all our people.

A strong economy of the United Kingdom is the sum of its parts. In order to enjoy increasing prosperity in our country we need strong economic growth in all our regions.

In the North East as well as the South East. In the East Midlands as well as the East of England.

Regional disparities are not new. Unemployment in the North East has been more than double that in the South East throughout most of the last century.

What we need is a new regional policy which not only tackles the historic regional disparities but which also responds to the challenges of the modern knowledge economy.

A radical regional policy. Simply tinkering at the edges will not be enough.

Our regions need to be renewed. They were at the heart of our first industrial revolution and we must now ensure that they can play their part in the knowledge based economic revolution which is now taking place.

In this modern economy, wealth creation and rising prosperity depend increasingly upon the application of knowledge.

Location, raw materials and availability of capital used to be the main sources of competitive advantage. Now it is skills, knowledge and creativity which make the difference.

We are beginning to see the benefits of this new economy but there is a widespread perception that what we have is a "winners circle" limited to certain people, geographical areas and sectors of our economy.

The challenge for government is not to deny this winners circle but to expand it. In the knowledge economy it is vital that we do so otherwise talent will be wasted, opportunities restricted and our economy held back as a result.

Too many areas are still underperforming. The existing disparities have serious economic cost implications which lead to disturbing social costs - poverty, crime, poor education, ill health and social exclusion.

Taking action to address the causes of this economic under-performance must be a top priority.

This is the only way to tackle the deep-seated disparities which exist.

Past policies have failed to resolve the underlying weakness and the least successful regions have failed to capitalise on their own strengths.

Looking at what we should do, I am clear we can't return to the failed approach to regional policy.

That of trying from Whitehall to identify regional winners or subsidise businesses which are failing. But we can't go back to the centralised planning approach which ended up stifling growth in successful regions.

Both approaches have been tried and have not been successful which is one of the reasons why we have regional disparities today.

We should also reject the approach of the last Government: laissez faire indifference, making regional problems worse through neglect.

Standing to one side and letting the market dictate is not a role Government should play in the 21st century. We need an active Government which responds to people's needs.

We need a new regional policy to make regions fit to compete in the knowledge economy. Building up the strength of the weakest regions.

The hard choices taken on the economy mean we now have the financial resources to invest in our regions. To tackle underperforming regions and areas.

Not a short term approach but one which begins the process of turning round our regions.

Our approach has to be forward looking. To enable regions to meet the challenges of the 21st century.

This new regional policy is based on two clear principles.

  • First, we need to strengthen the building blocks for economic growth in all regions: enterprise, skills, innovation, higher education and scientific excellence.
  • And second, our approach must be bottom up, not top down. The role of Government should be to enable regional and local initiatives to work.

What strikes me is that in every region there are great strengths. The challenge for Government is to make sure those strengths are brought to the fore. This is not a quick fix. But a long term, sustainable approach.

Global competition for capital means that labour skills and knowledge - not labour costs - will become increasingly important in attracting investment in the UK.

That's why last week David Blunkett announced that the new Learning and Skills Councils will receive funding of over five and a half billion pounds next year.

A key part of our regional policy is to work with the Skills and Learning Council, with Regional Development Agencies and businesses to raise the level of skills in our regions.

We also need to encourage the entrepreneurial activity which creates further demand for skills.

Enterprise is the engine of this new knowledge economy. All companies, whether large or small need to be enterprising - they need to be part of the enterprise culture.

Twenty years ago the companies in the FTSE 100 rarely changed. Now there is a constant rate of change - as new companies grow and overtake, or take over, established companies.

The challenge we face is how do we create more business start-ups and more high growth firms in every region.

We want Britain to be, in every area, every region, a creative, skilled and enterprising economy. That is not the case at the moment.

In the new economy, regional success will come through responding to competition, boosting enterprise and entrepreneurship, strengthening and harnessing the skills of our people, and getting the public and private sectors to work together.

We need to build the national framework for this to happen. We've established economic stability. Low inflation and interest rates.

We've introduced tax incentives for investment. Strengthened competition. Boosted science funding. And established effective national support for training and small businesses.

And the introduction of the National Minimum Wage, a national policy, has had particular benefits in certain regions. Looking at the figures for last year's earnings growth the two regions that saw the biggest average increase in earnings growth were the North East and Wales. And that came about not least as a result of the introduction of the National Minimum Wage.

But making the most of this is up to people in the regions - led by the Regional Development Agencies.

We have already begun the modernisation and reform needed to achieve this.

We have established Regional Development Agencies to improve the economic performance of their regions.

We did so after consulting widely and finding strong support for our proposals.

Some people are opposed to RDAs seeing them as an additional layer of bureaucracy.

This is an odd criticism to make. We actually reduced bureaucracy by setting up RDAs - by bringing together, in one agency, various activities previously delivered by a number of different bodies in each region.

Such criticism is also at odds with the views of business - as was evident at the CBI conference last week.

Business has encouraged us to strengthen RDAs. And we have responded. The package announced in July is a positive commitment to the regional agenda.

And, as the Chancellor announced last week, we are giving them much greater flexibility to shift resources to local priorities. This will further assist RDAs to achieve their objectives.

In return, the RDAs will have to demonstrate top class leadership. And to agree tough targets and objectives for improving the competitive position of their region.

And my department needs to change as well in the way in which we consider the needs of our regions.

In the past most policies did not take account of regional differences. That will change.

We will now look at the regional dimension to our policies on issues like innovation, science, trade, industrial sectors, small firms, electronic commerce and venture capital. All of them have a regional element we need to address.

We will build on the work of the RDAs to address regional weaknesses in the key drivers of the modern economy.

To ensure that all our regions share in the nation's wealth and prosperity.

To break down those barriers that deny opportunity and hold people back. Which have held some of our regions back for too long.

We do so out of a sense of social justice but also because our future economic success as a country depends on all parts and all people of the United Kingdom achieving their full potential.

This is an ambitious target. I make no apology for that.

Government alone can not create vibrant, prosperous regions.

To do so requires a partnership between business, universities, regional development agencies and local government.

The regional agenda is one which is crucial to our future well-being. Our regions were at the heart of our first industrial revolution - they now need to be at the forefront of our new economy. We need to see our regions renewed.

That is the challenge that we face. But I am confident that by working together we can meet that challenge and ensure all our regions and all our people can benefit from increasing prosperity.

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