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IDAB: Role and area of work

The Statutory Position

1. The Industrial Development Advisory Board (‘the Board’) is appointed under Section 10 of the Industrial Development Act 1982 to advise the Secretary of State, when asked to do so, on the exercise of his/her functions under Sections 7 and 8 of that Act. Those sections empower the Secretary of State to provide selective financial assistance, respectively for industry in Assisted Areas and for industry generally. Should its recommendation not be followed, the Board is entitled to require the Secretary of State “to lay a statement as to the matter before Parliament”.

Composition of the Board

2. By virtue of Sections 10 (2) and (3) of the Act the Board is to consist of a Chairman and not less than six nor more than twelve other members and is to include “persons who appear to the Secretary of State to have wide experience of and to have shown capacity in industry, banking, accounting and finance”. Present practice is to appoint a Board of a Chairman and eleven or twelve other Members. Each Member will usually serve for a period of three years. It may be jointly agreed that Members serve a second term of up to three years.

Work of the Board

3. The main work of the Board is to advise on individual applications under the Grant for Business Investment (GBI) scheme where the grant sought is £2m or more. Smaller cases of GBI are considered by the non-statutory English Regional Industrial Development Boards. Occasionally the Board may also be asked to advise on: applications for:

selective financial assistance that fall outside current forms of support;
proposals to make major modifications to existing forms of support;
proposals to introduce new forms of support under Section 8 of the Industrial Development Act 1982;
administrative aspects of the GBI product and other schemes.

4. The intention is that the Board when giving advice should make a distinctive contribution by drawing on their industrial and commercial experience within the private sector.

GBI Criteria

5 The criteria against which applications for assistance are to be judged are laid down in legislation. Details are published on the Regional Investment part of the Department for Business, Innovation & Skills (BIS) web site, and in the Industrial Development Act 1982 Annual Report in addition to internal guidelines for those administering the assistance.

6. There are seven principal criteria, which must be met if assistance is to be awarded:

Quality/Productivity
It is intended that the majority of support should be focussed on high-quality, innovative, knowledge based projects that provide skilled jobs. Apart from a small proportion of cases that have significant employment benefits, the emphasis is on raising productivity and improvement in the skills base.
Skills
The more the project increases skills and involves investment in the skills base, the more value will be placed upon it in grant consideration.
Employment
All large projects must create new jobs or safeguard existing employment within an Assisted Area. The more the project increases skills and involves investment in the skills base the more value will be placed on the project (see also paragraph 7 below). Projects likely to create overcapacity, or which simply displace jobs elsewhere in the UK, or aim to relocate the same jobs from one part of the country to another, are not eligible for assistance.
Viability
The business should be viable and the project should help the business become more competitive. The project will normally be expected to become profitable within three years.
Need (Additionality)
The proposed assistance must be necessary for the project to go ahead as planned. Each case is considered on its merits. It may be a matter of its going ahead at all. It can also be a matter of scale or timing. It may be to reduce the risks associated with the project, or to influence the choice of a mobile project’s location. It might also be to obtain parent company or shareholder approval by meeting established investment criteria; or for some other reason.
Regional Benefit
All projects should contribute positive benefits to both the regional and national economy.
Economic Efficiency
All projects must contribute benefits to the national economy. For cases of £2m or more, this is assessed by considering the likely impact of the project on GDP.

7. GBI is a discretionary scheme subject in principle to a cash limited budget. Simply satisfying the criteria does not confer a right to assistance. Assistance must represent good value for money and the Board will be asked to advise on this, taking account of the industrial and regional benefits likely to flow from the project in addition to the overall quality (including training and development and R&D).

Amount and Form of Assistance

8. The Board is asked to advise on the amount and form of the assistance offered. Assistance is usually in the form of a grant, but may take another form. There is no fixed formula to determine the amount of assistance offered but it is related to the fixed capital costs. It is expected that most of the finance for a project should come from private sector sources. Aid ceilings, known as Net Grant Equivalent (NGE), which calculate the grant as a proportion of fixed capital expenditure are set by the European Commission.

9. Offers of assistance are subject by statute to the consent of the Treasury and under the Treaty of Rome, to the approval of the European Commission. As a matter of practical administration the Treasury and the EC have approved the forms of support on which the Board is asked to advise, and have delegated authority to the Secretary of State to make decisions on individual GBI applications subject to certain limitations. For Section 8 of the Industrial Development Act 1982, covering support outside the Assisted Areas, the Commission has stated that it requires notification of all plans to provide financial assistance to individual companies outside of the specific schemes laying down detailed criteria and eligibility conditions which have been duly notified and approved by the Commission.

Conduct of Board Meetings

10. The Board is scheduled to meet monthly at:
The Department for Business, Innovation & Skills (BIS), Conference Centre, 1 Victoria Stree,t London, SW1H 0ET

A list of meeting dates for the following year is usually circulated in June. Members are notified a week in advance if there are no cases for discussion. Meetings begin at 4.00 p.m. and last between one and two hours.

11. The Department plans to handle cases to fit the Board’s meetings schedule. Occasionally, however, it is necessary to call meetings at short notice.

12. Normally the Board is asked to advise on individual applications for assistance towards the end of the appraisal process when they are called on to give a formal recommendation. Occasionally the Board’s views may be sought at the preliminary stage when discussions with the applicants are continuing.

13. The Board is asked to give its advice on the basis of detailed case papers, circulated in advance, and short oral presentations by the appraisal team. The team comprises the Director and a Case Officer from the Industrial Development Unit who are for the most part on secondment to the Department for Business, Innovation & Skills from banks and accountancy firms. Following the presentation, the Board are given the opportunity to discuss the case and ask questions of the appraisal team and other officials from BIS and the relevant Regional Development Agency. The Chairman then sums up the results of the discussion, highlighting those factors, which have led the Board to reach its recommendation on whether assistance should or should not be given, and at what level it should be given

14. If the Chairman is unable to be present, the meeting is taken by a senior, long serving Member present. The Chairman of the meeting and four other Members constitute the minimum number necessary to consider a case.

GBI Case Sensitivity

15. Much sensitive information is provided to the Board in connection with applications for financial assistance. All negotiations with companies, including the fact that they have made an application for assistance, are protected information. Case papers are given the Government privacy marking “RESTRICTED – COMMERCIAL".

16. Details of the Board are in the public domain: new appointments or re-appointments are accompanied by a BIS press release, and the register of interests is not published but is open to public inspection. The Chairman’s summary of the Board’s work is published in the Industrial Development Act 1982 Annual Report. However, the detail of individual GBI cases remain confidential between the Board, BIS and applicant companies.