The Spending Review

Now there is time to reflect on Alistair Darling's CSR, after the initial media rush and comment on headline grabbing topics such as inheritance tax (read my thoughts here), non-doms, and capital gains tax, it's interesting to focus on the areas which cross-over into ippr north's work and recommendations.

Of particular interest to me, as it ties heavily into our work around A Northern Economic Agenda, was the Government's approach to Public Service Agreements (PSAs).  For the uninitiated, PSAs (of which there are 30) set out the Government's 'key priority outcomes' for the next spending round and are underpinned by Delivery Agreements with the relevant departments. 

Unlike previously, when PSA targets had been assigned to specific departments, from now on they will be delivered jointly by all responsible departments (with occasional, entirely reasonable exceptions).  This is a welcome step in ensuring strategic, cross-departmental work and may even give greater flexibility to local service providers.

One of these targets aims to 'Improve the economic performance of all English regions and reduce the gap in economic growth rates between regions'.  This is underpinned by an increased number of measurements including growth rates of Gross Value Added per head (GVA – an economics tool to measure output), GDP per head compared to the average from the 15 old EU member states, GVA per hour, and – importantly for the North East – regional employment rates.

This approach gives a far truer picture of disparities and is in line with our recommendations this summer. We also recommended a change in the headline aspiration as we believe Government should be aiming to reduce the absolute gap in economic output between regions, rather than just slowing the relative gap in regional growth rates as the current PSA target specifies.  If this is not tackled we may end up with some regions improving performance, but forever lagging behind others.