Commons Gate

The impact of the current economic situation on the North West and the Government’s response (HC 696-ii)

North West Regional Committee 8 Jul 2009

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Evidence presented by North West Development Agency, Business Link North West, Steve Broomhead, Chief Executive, Northwest Regional Development Agency, Mark Hughes, Executive Director, Economic Development, Northwest Regional Development Agency, and Vanda Murray, Deputy Chair, Northwest Regional Development Agency, and Chair, Business Link Northwest, Phil Woolas MP, Government Office for the North West.

Chairman: Eric Martlew will ask some questions about Business Link.

Q93 Mr. Eric Martlew (Carlisle): We have heard differing reports about Business Link, which surprised me to be honest, because we have known Business Link for a long time. I think the CBI was particularly complimentary about it. Is it your view that it is working very well with industry at this time?

Steve Broomhead: I will make a quick comment and then I will pass over to Vanda.

Certainly the Business Link brand, which has been around for a number of years, is somewhat tarnished, as we have said. However, we have refreshed the organisation and put it on a regional footing. Actually, we do a strategic review with our sponsors in Parliament every year, and they recently gave us the welcome news that they thought, from the contacts that they have in BIS, that things had improved quite considerably. However, there is an issue about the brand, and perhaps I should pass to Vanda.

Vanda Murray: I think that the section Business Link has improved enormously, and there is a real understanding that, while improving, we still have some way to go. We measure that independently. In terms of all the evidence and measures, we are making real progress. Calls to the universal service are 60% up year on year; our intensive assists are achieving our targets; and our GVA targets are all being hit, so we are making real progress.

More importantly, the service has responded very quickly to adapt to the needs of business, particularly over the past 12 months. When it became clear that businesses were having real problems accessing finance, we reshaped and refocused the organisation so that all the brokers were fully briefed on the issues that businesses were facing and on the products as they were coming out. We set up a dedicated access to finance team with professional people who could work very closely with, and intensively assist, businesses. We have intensively assisted 6,000 businesses over the past year. We have been running Thrive and Survive road shows around the region with partners such as the Institute of Chartered Accountants and the Manufacturing Institute, which, as you know, offers the manufacturing advisory service.

We have therefore been working really closely with businesses to address the issues that they face now. The evidence so far is that that is starting to have an effect. We have helped businesses secure finance, and we are working closely with partners, such as local authorities and others.

Q94 Mr. Eric Martlew (Carlisle): You have answered all of the questions that I asked. However, we have information that 50% of businesses go to the bank before they approach Business Link. Why is that?

Vanda Murray: They do, and we have started to work very closely with the banks over the past year, both at NWDA level, with Steve and Mark, and in Business Link. Businesses have close relationships with their banks, and they have often been their first port of call. We have worked very hard with the banks to try to educate them about what Business Link can do. Interestingly, 10% of referrals to Business Link now come from the banks, which shows that we are making progress, but there is still more to be done. Often, when we have case studies that support that, when the banks can't help and businesses come to us, we can often help them, if they have a good business plan of course.

Q95 Mr. Eric Martlew (Carlisle): You mentioned local authorities. Are you working well with them, or are they duplicating what you are doing? I wonder how you can work well with local authorities in Cumbria, for example. It is a very difficult situation.

Steve Broomhead: Perhaps I should ask Mark to answer that.

Mark Hughes: Within the Business Link service, each of the five sub-regions has a particular relationship manager. We have about 70 office drop-in locations across the region where Business Link brokers can use local partner offices, such as local authorities. We have spent the last 18 months working with local authorities to integrate the Business Link service. So, for example, Blackpool council's business support website information is supplied by Business Link. It was going to spend £500,000 on its website, but Business Link now supplies it free of charge, so it has been able to redirect that money elsewhere.

In the Pennine Lancashire area we have Business Link brokers based in a number of the local authorities on the ground. We have regular review meetings with each of the local authorities. The landscape has moved enormously in the last 18 months, and in terms of the third party review of that, we recently had the 4NW scrutiny of the Business Link service in the region. Again, in terms of relationships with local authorities, it gave us seven out of 10, recognising the improvement that had been made, but that there is still some way to go. Wirral now finances some Business Link brokers in its area as well, so we have a different model in different local areas, but things have massively improved over the last 18 months.

Q96 Mr. Eric Martlew (Carlisle): I am very conscious that Cumbria never passed your lips with regard to good practice. Is that right?

Steve Broomhead: That was my mistake, Eric. If I may continue, with Cumbria, we have struck up a relationship on business and business support with the chamber of commerce, which is based in Carlisle, and through the vision board of Barrow and the vision board that has now been established for Copeland and Allerdale. While it is a regionally managed service-we put together the five Business Links three years ago-I am convinced that we have local delivery on the ground. We dealt with a lot of businesses who were very disappointed, particularly before Christmas, about the conversations they had had with banks when the pressure was on. Business Link was a safety net, particularly for those businesses that found they had to present different types of business plans back to the banks, especially with regard to some of the loans, overdrafts and facilities fees that they were experiencing. It is not surprising that businesses have a relationship with the banks, and the relationship with Business Link is, indeed, adding value.

Mark Hughes: On Cumbria, the Thrive and Survive events that Vanda mentioned have also taken place with the Cumbria chamber of commerce and CREA. I was cantering across the region, as it were.

Steve Broomhead: Don't forget Cumbria.


Q102 Mr. Eric Martlew (Carlisle): Do you wish you had had more input into the Government initiatives? Are you getting people who are coming along with very good cases but the Government scheme doesn't cater for them? Is that the case? Or are Government initiatives targeted properly?

Mark Hughes: The problem with this recession that we are still in is that it's so multi-faceted. I think the Government have put in a good suite of initiatives. We have never seen a recession like this, and we have never seen a response like this-if you look from the auto sector, if you look from the loans-but there will always be people and businesses that will fall through those gaps. It is very difficult to say that there should be another big initiative. We have had discussions with different parts of Government on the detail of the schemes. In response to your question, some of those discussions could have been had earlier to benefit from experience on the ground of the type of businesses that will come through. Going forward, we have had the new industry new jobs announcement relatively recently. We have seen a much more positive and early engagement from Government with RDAs around what kind of initiatives might come through that policy document.

Q103 Mr. Eric Martlew (Carlisle): Do I take it, Mr. Hughes, that you are talking to Government and that Government are listening?

Mark Hughes: They are. Obviously, they have their own constraints, but they are now talking to us earlier than in the past, because the work that we have done over the past six months in responding to the recession has been positively received.

Q104 Mr. Eric Martlew (Carlisle): The issue of the venture capital scheme, which we were told by the CBI created great frustration-not that it wasn't a good scheme, but that it should have come in in January. Is it in now, from the end of last month? What problems did that create for you?

Steve Broomhead: The venture capital loan scheme was announced initially, as a matter of principle, by the Prime Minister last September on the Cabinet's visit to Liverpool. We have had considerable discussion with Government, DCLG, BIS and the Treasury. The issue is the business model and whether it compromises in any way the public borrowing requirement. We are still considering that model. However, last Monday, we had a major event with 300 people from the financial sector within the region, and we made certain announcements about other schemes which will provide support in the shorter term, while the Government-in particular, the Treasury-look at some of the risks on the model. That sounds a bit of a bureaucratic answer, Eric, but the model that was being looked at did not meet certain tests of the Treasury. We have had a very strong dialogue with Government about it. I will ask Mark to say a little more.

Mark Hughes: Okay. The announcement that Steve was referring to is a £20 million fund, using agency money and ERDF money, which will give us enough until the end of the financial year-April 2010-to keep the flow of venture capital for existing businesses that are looking for that. That effectively buys us time to resolve the issues that we have with the Treasury around the main scheme, which was the intention to create a £140 million fund for a seven-year investment period in the region. We are still locked into those discussions, which, as Steve mentioned, are around the impact on the public sector borrowing requirement. There is also some discussion around the legal structure.

Q105 Mr. Eric Martlew (Carlisle): So, basically, it was a scheme that wasn't thought out when it was announced. You say you are using £20 million, when that £20 million should have been earmarked for something else, I presume.

Mark Hughes: The scheme was well thought out. It was announced that we would deliver the scheme subject to approval of it, which we subsequently did not get. The money that we are using has not been taken from somewhere else, because we would have wanted to spend that money, had it been approved within the time scale. The money was allocated, and we just found another temporary mechanism to deliver the money that was allocated to the scheme. We have not had to take money from somewhere else.

Steve Broomhead: And we will be taking up the matter with Phil Woolas, the Regional Minister. Perhaps one of his early areas for consideration was to see whether we can get movement on the scheme, as it was first presented.


Q142 Mr. Eric Martlew (Carlisle): On the Learning and Skills Council, the Government have been lucky, in a perverse way I think, because we have had all the problems with the FE colleges. The Learning and Skills Council has not got many friends out there, but, in reality, if you take it away, there is an argument that it was doing a good job. Surely, this is the wrong time to be altering the structures; we are in a recession. Shouldn't the Government have said, "We're going to put it back."?

Mr. Woolas: From the point of view of the North-West?

Mr. Eric Martlew (Carlisle): Well, you can affect the North-West-you are the Minister for the North West.

Mr. Woolas: I support the policies of my colleagues in Her Majesty's Government. The restructuring of the LSC is designed to provide a better focus on skill provision, and the fact that the student or the recipient of the skills training is perhaps not that aware of, and perhaps not worried about, the structures in Government means that I do not think that it matters that much.

Q143 Mr. Eric Martlew (Carlisle): I don't expect you to say that the Government have got it wrong, and I do not even expect you to say, "If we knew we were going to have this recession, we wouldn't have done it now," but what efforts are being made in the North-West to see that the demise of the LSC will not affect the quality of service that is going to be given?

Liz Meek: I chair, jointly with Steven Broomhead, a group that is about the transition for 16 to 19-sixth forms-which is basically being transferred to local authorities.

Mr. Eric Martlew (Carlisle): Where they used to be, of course.

Mr. Woolas: Twenty years ago.

Liz Meek: Our job is to make Government policy work. I am very encouraged by the progress that is being made and by the enthusiasm and commitment of local authorities on that one. The region is doing very well on apprenticeships, both in the private sector and also we have a programme of public sector apprenticeships. We are all working together to make the new arrangements work. That is what we are paid to do.

Q144 Mr. Eric Martlew (Carlisle): We have considered the question of Jobcentre Plus and the evidence we have is that it has been doing a very good job and has been working with the LSC. Do you think it worked effectively with the LSC? What provision has been made to ensure that Jobcentre Plus works with the successors?

Liz Meek: The organisations both sit on the JEC, and they have worked together with the development agency on the rapid response arrangements, for example. That wouldn't have happened several years ago. I really think there has been a step change in collaboration at the highest level between these organisations. It is our job to ensure that that collaboration survives the transition. We know it's a risk. We are very much on the case and will ensure that no effort is spared to ensure that the new structures work with us, as well as the old ones have been doing in recent times.

Q145 Mr. Eric Martlew (Carlisle): My last question is about apprentices. I hear my Government saying everything is fine with regard to apprentices and that they are being looked after in the recession. Unfortunately, when a constituent rings me up and says that her son who was an apprentice plumber has lost his job and when I try to find out what practical help there is, it is very difficult to find what the Government are doing. Can someone tell me what is happening?

Liz Meek: One of the early things that the JEC did, as a personal initiative led by Bev Hughes, was to ask the LSC to contract a programme that was about that very thing-where apprentices were going to lose their position because their firms were threatened, to find and pay for ways in which they could continue their training. That contract was let and has been operational, I think, since February or March. As I understand it, the aim of it was to do that very thing. I am not aware of any problems with it.

Q146 Mr. Eric Martlew (Carlisle): Nobody seems to be aware of this particular programme-Jobcentre Plus didn't, the FE college didn't. Where is it going wrong?

Liz Meek: I will take that away and see what we can do. The LSC is aware of it.

Q147 Mr. Eric Martlew (Carlisle): I hear my Government saying that we have taken this action and hear the chief civil servant from the north west saying that if an apprentice loses a job there is a system to allow them to finish the training. When I actually tried this with the Jobcentre Plus and the FE college, nobody seemed to know about this particular scheme. The apprentice I am talking about is now unemployed.

Mr. Woolas: That is not acceptable, Chairman. The national apprenticeship service is coming into being-we have 350 staff transferred over. We will take that away and ensure that that is fed through the FE and Jobcentre Plus sectors.

Q148 Mr. Eric Martlew (Carlisle): That is obviously a bad case, but there is actually a national scheme that is operating regionally, which should stop this waste of future skills happening.

Mr. Woolas: The Prime Minister has made it very clear what our priorities are in real help for people in hard times. He made it clear in the policy launch last week that our goal is that we will not allow for a generation of unemployed. Therefore, the point that Mr. Martlew is making is extremely important. If there are structural problems that are resulting in this particular case, we will solve them. If it is a matter of political will, I will take that up. It is very clear that the Prime Minister's instruction to his Ministers is to prioritise this area.

Mr. Eric Martlew (Carlisle): That is very comforting to us. Thank you.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.

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On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB