Speech by John Healey MP

The Sub-National Review and future economic reform: Strengthening people and prosperity

Draft text of the speech - may differ from the delivered version.

Let me say that I welcome the Local Government Chronicle's interest in the Sub National Review of Economic Development and Regeneration (SNR). And I must say that I admire your pulling power - to bring such high level participants together at this summit of CEOs.

If we want to discuss the economy and economic reform, we have to begin with the current economic pressures.

These are unprecedented.

I believe that we will look back and see the crisis in American sub-prime lending, leading to credit consequences in financial systems around the world, as the first fundamental shock in the newly globalized economy.

At the same time, we also have the twin shock of stronger rises in world oil prices than in the 1970s, with the knock-on impact throughout worldwide energy markets and economies.

And beyond this, China is building 100 new airports, 1,000 new cities and has a billion people with eyes on the West wanting an escalating standard of living.

Whilst in India, they're now launching the first car costing under £1,000.

We in Government will help people through the present pressures: Increasing the winter fuel allowance, freezing fuel duty, helping people with housing and mortgages. Announcing help for people with energy costs today and putting an extra £60 in next month's pay packet for low and middle earners from the 10p tax rebate.

But it will certainly be a tough 12 months or so ahead.

After this morning's session, I'm returning home to Rotherham to deal with 200 redundancies in the constituency - although this is at odds with the record we've seen locally over the last decade.

The next year will be hard, but oil prices have fallen off from almost $150 a barrel to around $100, inflation is likely to ease next year, and demand in the economy, not least for housing, remains.

And the economic fundamentals for Britain are still strong. It's a different story from past periods of downturn with double digit interest rates, 3 million unemployed and runaway inflation.

However, I draw a deeper lesson. The credit crunch crisis is a specific failure of markets. Responding - especially in the US - has required government action of unprecedented nature and scale. And an ideology which drives arguments about a smaller state that does less in the modern world would fail the country and fail the people who need support now and who need confidence for the future.

Instead, what the present problems underline is the need for active government and an active public sector to protect the poorest, correct flaws in the market, and exert the leverage to secure the proper role and contribution required from our private sector.

This is true for now - in the current economic difficulties.

And this is true for the future - for the long term success of our economy, in all parts of the country, in all your areas.

This is - if you like - also the political and economic approach underpinning the SNR.

So, just as any discussion of the economy and economic reform must begin with the credit crunch, it must also move beyond the credit crunch. which policy and media commentators seem currently unable to do.

This is why I welcome the timing as well as the subject of today's Summit about the SNR.

If you hadn't read the SNR report I led work on at Treasury and launched at Communities and Local Government, or if you had been to policy seminars and summits - other than this one - over last year, you could be forgiven for thinking that the SNR is simply about redrawing the regional organogram.

In fact, the SNR has always been a much bigger picture.

It sets a new framework for economic leadership.

This is not a conventional central government prescription for England's 'every town'. But principles to support the progressive evolution and devolution of new powers and freedoms for regions, cities and local authorities.

Since last summer, you can see a range of areas of government in which this progressive reform is taking place:

• 14-19 year old skills funding;
• City strategies on employment;
• The new Working Neighbourhoods Fund;
• Train to Gain brokers moved to business link;
• Multi Area Agreements;
• The new transport bill;
• Powers for local authorities to introduce new planning levies and business rates supplements; as well as
• Consultation on a new economic development duty for Councils and streamlined new regional arrangements.

This last part of the progressive changes is important - especially to those who work in and through the organisations affected - but it is not the be all and end all of the SNR.

And we see this in what many of you are doing, if not what you are debating.

For years I've wanted to see a stronger emphasis on supporting economic success in local government thinking.

Now, with the new LAAs you've picked priorities - economic priorities - essential to the future prosperity of your areas:

• Three out of four local authorities place that priority on reducing the 16-18 year-olds not in education, jobs or training;
• Two out of three have selected skills levels and more homes for action;
• Half of you now look to increase the numbers of new businesses and reduce the numbers of adults on benefits in your areas

Now, with the new MAAs you are also responding to the economic reality that skills, jobs, housing and inward investment markets or transport systems and planning spheres are not constrained by council boundaries.

To lead or act effectively on the economy means doing so in collaboration with other authorities and other agencies, as well as with business.

The introduction of MAAs is not a policy for cities - though they are often the most important economic engine for the wider region.

We have signed seven MAAs so far. We have signed them in the South and in the North; in rural and in urban areas; on the coast and in cities.

I'm looking to extend the scope for sub regions, but we'll do so both with local authorities as the base and within a wider regional policy.

I know some doubt the value of regional level policy and strategy.

But regional economies of around 5 million people are as big as many EU member states.

Our own in Yorkshire is a bigger economy that Ireland or Norway or Singapore.

We will lose out with serious investment if we don't have clear economic priorities at this level.

And we need such policy in all regions. In the '80s and early '90s too much was focussed on the Greater South East, while the potential and the problems of the North and Midlands were largely overlooked from London.

Now, despite the economic slowdown we still have more people in work than ever before and eight out of the nine English regions have grown faster than Europe.

With economic shocks - like Longbridge, the Selby pit closures, foot and mouth and last summer's floods - RDAs have proved that they can respond more rapidly than Whitehall and with more clout than a single council could bring.

Regional policy should claim some - though not all - credit for this.

The alternative is either national decisions, taken by people in London without the local knowledge needed, or big councils holding sway, with smaller towns and cities losing out.

Without a regional level strategy and a regional development agency both committed to seeing every area - especially the disadvantaged - fulfil its economic potential:

• Great Yarmouth would not be looking forward to the completion of Eastport this Autumn, bringing an extra 1,000 jobs and 120,000 visitors to the area;
• Hastings and Bexhill would not have the new university centre, the new business district, 700 students in town and a household income that has risen 9 per cent above the regional average
• Plymouth, Falmouth and Poole would not have networked marine skills centres that have already trained over 16,000 people in marine engineering and manufacturing.

Given the breadth of the SNR, I'm disappointed by how narrow the recent debate has been.

It has been dominated by institutional self-interest; by a preoccupation with process, not purpose; by organisational positioning, not the outcomes we need to bring more jobs and prosperity to all our regions and local areas.

Nevertheless, the SNR has provoked some good work as well - regions not waiting for us in Whitehall, but making their own decisions.

As we heard from Steve Broomhead, in the North West they've already established a Leaders' forum which has started preparations, with the RDA, for the first single strategy.

In Yorkshire, agreements have been reached on sharing responsibilities and on structures.

Nationally, the LGA and RDAs have agreed a concordat on how they will work together in future.

These are strong first steps, which I welcome.

What we want in place is what will work to bring together the expertise, the will and the decision-making to plan the priorities that can increase sustainable economic growth in all our English regions.

This is the purpose of the SNR.

We talk of the SNR. We talk of RDAs, RSS review, non departmental public bodies, regional funding allocations, LAAs and MAAs. This is all important. but it is irrelevant and impenetrable to others outside public policy circles. Ministers are often as bad and I don't exempt us from the point, but we must all make an effort to talk in plainer terms; to talk to the public and to business about our ambitions through the SNR.

I was in Stevenage earlier this month. The East of England has plans for:

• Half a million more homes;
• 450,000 new jobs;
• More controlled water use and recycling;
• No landfill waste within 13 years;
• Supporting world-beating biotech, ICT and telecoms companies; and
• Developing coastal ports, growing airports and improving the A12 and A14.

All these need to be planned together and the priorities for limited public money thrashed out together in the region.

In simple terms, this is the SNR